Scienture Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Balance Sheets As of March 31, 2025 and December 31, 2024 (Unaudited) March 31, December 31, 2025 2024 ASSETS Current assets: Cash $ 2,049,638 $ 308,096 Accounts receivable, net 3,734 11,106 Prepaid expenses 419,939 4,560 Notes receivable - related party 1,300,000 1,300,000 Other receivables 4,043,769 4,138,770 Deferred offering costs - 534,800 Current assets of discontinued operations 8,145 8,145 Total current assets 7,825,226 6,305,477 Property, plant and equipment, net 17,000 17,500 Deposits 22,039 22,039 Intangible assets, net 76,400,000 76,400,000 Goodwill 21,372,960 21,372,960 Operating lease right-of-use assets 186,909 201,433 Deferred tax asset 534,396 534,396 Total assets $ 106,358,530 $ 104,853,805 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 3,184,771 $ 2,898,683 Accrued liabilities 1,411,315 1,313,731 Other current liabilities 5,441 5,441 Loan payable, related party 515,000 415,000 Convertible note, net of debt discount - current portion 2,000,000 2,285,423 Operating lease liability - current 65,843 63,334 Warrant liability 273,949 919,935 Current liabilities of discontinued operations 5,346 5,346 Total current liabilities 7,461,665 7,906,893 Convertible notes, net of debt discount 1,092,461 612,275 Derivative liability 1,693,512 2,296,834 Operating lease liability - net of current portion 138,919 156,469 Development agreement liability 1,285,000 1,285,000 Deferred tax liability 13,524,213 13,524,213 Total liabilities 25,195,770 25,781,684 Commitments and contingencies (Note 12) - - Stockholders’ equity (deficit): Series A preferred stock, $ 0.00001 par value; 0 and 9,211,246 shares authorized; 0 shares issued and outstanding as of both March 31, 2025 and December 31, 2024 - - Series B preferred stock, $ 0.00001 par value; 787,754 shares authorized; 15,759 shares issued and outstanding as of both March 31, 2025 and December 31, 2024 - - Series C preferred stock, $ 0.00001 par value; 1,000 shares authorized; 0 shares issued and outstanding as of both March 31, 2025 and December 31, 2024 - - Series X preferred stock, $ 0.00001 par value; 9,211,246 shares authorized; 0 shares issued and outstanding as of both March 31, 2025 and December 31, 2024 - - preferred stock, value - - Common stock, $ 0.00001 par value; 100,000,000 shares authorized; 12,515,019 and 8,750,582 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 125 87 Additional paid-in capital 123,265,605 118,111,007 Accumulated deficit ( 42,102,970 ) ( 39,038,973 ) Total stockholders’ equity 81,162,760 79,072,121 Total liabilities and stockholders’ equity $ 106,358,530 $ 104,853,805 The accompanying notes are an integral part of the unaudited consolidated financial statements. 4 Table of Contents Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Statements Of Operations For the Three Months Ended March 31, 2025 and 2024 (Unaudited) 2025 2024 Three Months Ended March 31, 2025 2024 Revenues $ 10,258 $ - Cost of sales 9,585 - Gross profit 673 - Operating expenses: Wage and salary expense 696,068 222,594 Professional fees 412,850 179,553 Accounting and legal expense 470,825 339,047 Technology expense 61,620 51,615 General and administrative 1,355,948 4,700,162 Research and development 574,679 - Total operating expenses 3,571,990 5,492,971 Operating loss ( 3,571,317 ) ( 5,492,971 ) Other income (expense): Change in fair value of warrant liability 645,986 ( 729,889 ) Change in fair value of derivative liability 603,322 - Loss on conversion of note payable ( 96,646 ) - Interest income 25,442 62,921 Loss on disposal of asset - ( 374,968 ) Interest expense ( 670,784 ) ( 98,515 ) Total other income (expense) 507,320 ( 1,140,451 ) Net loss from continuing operations ( 3,063,997 ) ( 6,633,422 ) Benefit / (provision) for income taxes - - Net loss from continuing operations, net of tax ( 3,063,997 ) ( 6,633,422 ) Net income from discontinued operations, net of tax - 27,879,455 Net (loss) income $ ( 3,063,997 ) $ 21,246,033 Net loss per common share from continuing operations Basic $ ( 0.33 ) $ ( 6.40 ) Diluted $ ( 0.33 ) $ ( 6.40 ) Net income per common share from discontinued operations Basic $ - $ 26.89 Diluted $ - $ 22.00 Net (loss) income per common share Basic $ ( 0.33 ) $ 20.49 Diluted $ ( 0.33 ) $ 16.77 Weighted average common shares outstanding Basic 9,425,751 1,036,756 Diluted 9,425,751 1,266,977 The accompanying notes are an integral part of the unaudited consolidated financial statements. 5 Table of Contents Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Shares Amount Shares Amount Shares Amount Capital Deficit Equity Series B Series C Common Additional Total Preferred Stock Preferred Stock Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balances at December 31, 2023 15,759 $ - 290 $ - 905,008 $ 9 $ 33,788,284 $ ( 33,245,940 ) $ 542,353 Common stock issued for services - - - - 470,482 5 4,450,914 - 4,450,919 Options exercised for common shares - - - - 2,371 - 9,840 - 9,840 Warrants exercised for cash - - - - 28,487 - 16,567 - 16,567 Options expense - - - - - - 24,266 - 24,266 Cash dividends paid ($ 8 per share) - - - - - - - ( 12,671,072 ) ( 12,671,072 ) Net income - - - - - - - 21,246,033 21,246,033 Balances at March 31, 2024 15,759 $ - 290 $ - 1,406,348 $ 14 $ 38,289,871 $ ( 24,670,979 ) $ 13,618,906 Balances at December 31, 2024 15,759 $ - - $ - 8,750,582 $ 87 $ 118,111,007 $ ( 39,038,973 ) $ 79,072,121 Balance 15,759 $ - - $ - 8,750,582 $ 87 $ 118,111,007 $ ( 39,038,973 ) $ 79,072,121 Common stock issued for services - - - - 240,000 2 1,079,998 - 1,080,000 Common stock issued for cash pursuant to ELOC agreement, net of offering costs - - - - 2,800,000 28 2,691,439 - 2,691,467 Equity line of commitment shares issued - - - - 450,437 5 971,727 - 971,732 Conversion of note payable into common stock - - - - 274,000 3 410,997 - 411,000 Options expense - - - - - - 437 - 437 Net loss - - - - - - - ( 3,063,997 ) ( 3,063,997 ) Net income (loss) - - - - - - - ( 3,063,997 ) ( 3,063,997 ) Balances at March 31, 2025 15,759 $ - - $ - 12,515,019 $ 125 $ 123,265,605 $ ( 42,102,970 ) $ 81,162,760 Balance 15,759 $ - - $ - 12,515,019 $ 125 $ 123,265,605 $ ( 42,102,970 ) $ 81,162,760 The accompanying notes are an integral part of the unaudited consolidated financial statements 6 Table of Contents Scienture Holdings, Inc. formerly TRxADE HEALTH, INC. Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2025 and 2024 (Unaudited) 2025 2024 Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net loss from continuing operations $ ( 3,063,997 ) $ ( 6,633,422 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 500 500 Change in fair value of warrant liability ( 645,986 ) 729,889 Change in fair value of derivative liability ( 603,322 ) - Loss on conversion of note payable 96,646 - Options expense 437 24,266 Common stock issued for services 1,080,000 4,450,919 Amortization of debt discount 509,118 - Amortization of right-of-use assets 14,524 7,803 Changes in operating assets and liabilities: Accounts receivable, net 7,371 1,555 Prepaid expenses and deposits ( 415,379 ) ( 135,013 ) Inventory - ( 4,404 ) Other receivables 95,001 ( 7,816,763 ) Lease liability ( 15,041 ) ( 7,920 ) Accounts payable ( 113,913 ) ( 544,127 ) Accrued liabilities 97,584 329,876 Current liabilities - ( 62,390 ) Net cash used in operating activities from continuing operations ( 2,956,457 ) ( 9,659,231 ) Net cash used in operating activities from discontinued operations - ( 530,442 ) Net cash used in operating activities ( 2,956,457 ) ( 10,189,673 ) Cash flows from investing activities: Investment in securities - ( 2,500,000 ) Net cash used in investing activities from continuing operations - ( 2,500,000 ) Net cash provided by investing activities from discontinued operations - 29,932,589 Net cash provided by investing activities - 27,432,589 Cash flows from financing activities: Repayment of contingent liability - ( 1,246,346 ) Proceeds from loan payable, related party 100,000 - Gross proceeds from issuance of common stock 4,597,999 - Cash dividends paid - ( 12,671,072 ) Proceeds from exercise of warrants - 16,567 Proceeds from exercise of options - 9,840 Net cash provided by (used in) financing activities from continuing operations 4,697,999 ( 13,891,011 ) Net cash used in financing activities from discontinued operations - ( 5,000 ) Net cash provided by (used in) financing activities 4,697,999 ( 13,896,011 ) Net change in cash 1,741,542 3,346,905 Cash at beginning of period 308,096 151,907 Cash at end of period $ 2,049,638 $ 3,498,812 Supplemental disclosure of cash flow information: Cash paid for interest $ - $ 733,694 Cash paid for taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Conversion of note payable into common stock $ 411,000 $ - Equity line of commitment shares issued as offering costs $ 971,732 $ - Insurance premium financed $ - $ 306,152 Note issued as SOSRx contribution $ - $ 500,000 Disposition of assets, related party $ - $ 492,030 Issuance of note receivable $ - $ 1,300,000 The accompanying notes are an integral part of the unaudited consolidated financial statements. 7 Table of Contents NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION Overview On September 20, 2024, the Company filed with the Secretary of State of the State of Delaware an amendment to its Second Amended and Restated Certificate of Incorporation to change the legal name of the Company from “TRxADE HEALTH, Inc.” to “Scienture Holdings, Inc.” The Company owned, as of March 31, 2025, 100 % of Softell Inc. (f/k/a Trxade Inc.), Integra Pharma Solutions, LLC, and Scienture, LLC (f/k/a Scienture, Inc.), which was acquired in July 2024. On October 4, 2024, the Company and Softell Inc. (f/k/a Trxade Inc.) (“Softell”) entered into an Assignment and Assumption of Membership Interests (the “IPS Assignment Agreement”), pursuant to which the Company transferred, and Softell accepted, 100 % of the membership interests of Integra Pharma Solutions, LLC (“IPS”). As a result, IPS is now a wholly-owned subsidiary of Softell. During the year ended December 31, 2023 and a portion of the quarter ended March 31, 2024, Softell, operated a web-based market platform that enabled commerce among healthcare buyers and sellers of pharmaceuticals, accessories and services. Softell’s current primary operations are conducted through IPS. IPS is a licensed pharmaceutical wholesaler and sells brand, generic and non-drug products to customers. IPS’ customers include all healthcare markets including government organizations, hospitals, clinics and independent pharmacies nationwide. Bonum Health, LLC was formed to hold certain telehealth assets acquired in October 2019. The “Bonum Health Hub” was launched in February 2020; however, the Company does not anticipate installations moving forward. The Company anticipates dissolving Bonum Health, Inc. and Bonum Health, LLC. Scienture, LLC (f/k/a Scienture, Inc.) (“Scienture”) is a New York based branded, specialty pharmaceutical research company which is engaged in the research and development of branded pharmaceutical products. The intellectual property application process was initiated in November 2019 and the product development activities commenced in January 2020. Scienture also plans to foray into commercialization of innovative and branded pharmaceutical products in the US market. Scienture’s assets in development are across therapeutics areas and indications and cater to different market segments. Scienture’s mission is to identify, develop and bring to market innovative technology-based products to address unmet medical needs. Its targeted portfolio consists of short term and long-term opportunities with efficient development, regulatory, and go to market strategies. Disposition of Legacy Subsidiaries On April 8, 2025, the Company entered into a Membership Interest Purchase Agreement (the “IPS MIPA”) with Tollo Health, Inc. (“Tollo”), pursuant to which Tollo agreed to purchase and the Company agreed to sell all of the Company’s membership interests in IPS. Suren Ajjarapu, the Company’s Chief Executive Officer, and Prashant Patel, the Company’s President and Chief Operating Officer, each have a beneficial interest in Tollo. On April 8, 2025, the Company also entered into a Stock Purchase Agreement (the “Bonum 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. In connection with each of the Agreements, the Company agreed to retain certain excluded liabilities of IPS and Bonum 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 or Bonum, 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 or Bonum, respectively; and (v) related to tax returns or tax matters of the Company, IPS, or Bonum, respectively, for any periods prior to closing under the applicable Agreement. The Company and Tollo have agreed to consummate the closing of each of the Agreements on June 30, 2025, or such other time as the Company and Tollo may agree. As consideration for acquiring IPS and Bonum, Tollo has agreed to pay the Company $ 5 million 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. 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, LLC subsidiary (see Note 15). Basis of Presentation and Principles of Consolidation The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the SEC and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 26, 2025. 8 Table of Contents In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2024, as reported in the Company’s Annual Report on Form 10-K have been omitted. Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from its estimates. Significant estimates for the three months ended March 31, 2025 and 2024 include the valuation of intangible assets, including goodwill, and gain (losses) on dispositions. Fair Value of Financial Instruments Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: ● Level 1—Quoted prices in active markets for identical assets or liabilities. ● Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. ● Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying amounts for cash, accounts receivable, accounts payable, accrued liabilities, and other current liabilities approximate their fair value because of their short-term maturity. The Company’s notes payables approximate the fair value of such instruments as the notes bear interest rates that are consistent with current market rates. The Company’s derivative liability is a Level 3 liability measured at fair value on a recurring basis (see Note 8). Concentration of Credit Risks and Major Customers Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and receivables. The Company places its cash and cash equivalents with financial institutions. Deposits are insured to Federal Deposit Insurance Corp limits. During the three months ended March 31, 2025 and 2024, no sales to customers represented greater than 10 % of revenue. Accounts Receivable, net The Company’s receivables are from customers and are typically collected within 90 days. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. Other Receivables As of March 31, 2025 and December 31, 2024, other receivables are $ 4,043,769 and $ 4,138,770 , respectively. As of March 31, 2025, other receivables primarily consist of short-term advances to Wellgistics Health, Inc. (f/k/a Danam Health Inc.) and Tollo Health, Inc. The Company expects to be repaid on all related party receivables in 2025. 9 Table of Contents Deferred Offering Costs The Company complies with the requirements of Accounting Standards Codification (“ASC”) 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed. As of March 31, 2025, the Company has not capitalized any amount in deferred offering costs. During the three months ended March 31, 2025, $ 534,800 of deferred offering costs capitalized as of December 31, 2024 were charged to additional paid-in capital upon the Company’s equity offering. 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 allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the Company’s financial statements may be exposed to potential impairment of the intangible assets and goodwill. If the Company’s investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill. On July 25, 2024, the Company acquired intangible assets of $ 76,400,000 and recognized goodwill of $ 21,372,960 pursuant to the Scienture acquisition (see Note 3). The acquired goodwill represents the value in excess of the net assets and liabilities acquired at the acquisition date. Goodwill Goodwill is an asset representing the excess cost over the fair market value of net assets acquired in business combinations. In accordance with Intangibles - Goodwill and Other (Topic 350), goodwill is not amortized but is tested annually for impairment or on an interim basis when indicators of potential impairment exist. Goodwill is tested for impairment at the reporting unit level. The Company’s reporting units discrete financial information is available and management regularly reviews the operating results. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the reporting structure. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the applicable reporting units include, but are not limited to, changes in macroeconomic conditions, industry and market considerations, cost factors, discount rates, competitive environments and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required. The Company also has the option to proceed directly to the quantitative test. Under the quantitative impairment test, the estimated fair value of each reporting unit is compared to its carrying value, including goodwill. If the carrying value of the reporting unit including goodwill exceeds its fair value, an impairment charge equal to the excess would be recognized, up to a maximum amount of goodwill allocated to that reporting unit. Management can resume the qualitative assessment in any subsequent period for any reporting unit. As of March 31, 2025, management performed a qualitative impairment assessment of our reporting units, of which there were no indications that it was more likely than not that the fair value of our reporting units were less than their respective carrying values. As such, a quantitative goodwill test was not required, and no goodwill impairment was recognized during the three months ended March 31, 2025 and 2024. Intangible Assets In connection with the Scienture acquisition, the Company identified product technologies assets. The product technologies represent a broad range of novel product candidates including new potential treatments for hypertension, migraine, pain and thrombosis and other related disorders. Each of the product technologies are in various phases of development and had not achieved regulatory approval as of the valuation date. 10 Table of Contents The product technologies are 505(b)(2) products and represent modifications and new delivery methods of already approved drugs (rather than novel drug compounds/formulations/treatments which require significant regulatory approvals and testing). These assets should be amortized over their expected remaining economic life. The product technology assets will remain unamortized, subject to potential impairment testing, until the assets are placed in service, which is when commercialization of the product commences. At that point, the assets will be amortized over their expected remaining life (likely a period of 15 - 20 years based on the patent lives). Impairment of Long-Lived Assets The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. The Company did not record an impairment charge for the three months ended March 31, 2025 and 2024. 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 Accounting Standards Update (“ASU”) 2018-07 for the accounting of share-based payments granted to non-employees for goods and services. Leases The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. In calculating the right of use asset and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. Research & Development Expenses Research and development costs are expensed in the period incurred in accordance with ASC 730, Research and Development. These expenses consist of independent contractor costs, costs for outsourced analytical research and development activities, batch manufacturing cost and, advisory costs as a part of research, market research costs and other regulatory consulting costs. Income (loss) Per Common Share Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed similar to basic net income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Company’s options and warrants is computed using the treasury stock method. As of March 31, 2025, we had 238,594 outstanding warrants to purchase shares of common stock, 15,759 shares of Series B preferred stock and 23,930 options to purchase shares of common stock. The following table sets forth the computation of basic and diluted loss per share: SCHEDULE OF BASIC AND DILUTIVE LOSS PER SHARE 2025 2024 Three Months Ended March 31, 2025 2024 Numerator: Net loss from continuing operations $ ( 3,063,997 ) $ ( 6,633,422 ) Net income on discontinued operations - 27,879,455 Net (loss) income $ ( 3,063,997 ) $ 21,246,033 Denominator: Denominator for EPS – weighted average shares Basic 9,425,751 1,036,756 Diluted 9,425,751 1,266,977 Net loss per common share from continuing operations Basic $ ( 0.33 ) $ ( 6.40 ) Diluted $ ( 0.33 ) $ ( 6.40 ) Net income per common share from discontinued operations Basic $ - $ 26.89 Diluted $ - $ 22.00 Net (loss) income Basic $ ( 0.33 ) $ 20.49 Diluted $ ( 0.33 ) $ 16.77 11 Table of Contents Income Taxes The Company’s provision for income taxes was $ 0 for the three months ended March 31, 2025 and 2024. The income tax provisions for these periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which the Company operates. For all periods presented, the Company utilized net operating loss carryforwards to offset the impact of any taxable income. The Company’s tax rate differs from the applicable statutory rates due primarily to the establishment of a valuation allowance, utilization of deferred and the effect of permanent differences and adjustments. Recently Issued Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances. NOTE 2 – GOING CONCERN The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. As of March 31, 2025, the Company had an accumulated deficit of $ 42,102,970 . As of March 31, 2025, the Company had $ 2,049,638 in cash. The Company will need to raise additional capital or secure debt funding to support on-going operations, and to fund the assets and operations of any businesses or assets we acquire. The sources of this capital are expected to be the sale of equity and debt, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues, our financial position, and liquidity. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless management is able to obtain additional financing, it is unlikely that the Company will be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 3 – ACQUISITIONS AND DISPOSITIONS Acquisitions Scienture, Inc. The Company evaluated the Scienture Merger Agreement pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The Company first determined that Scienture met the definition of a business as it includes inputs and a substantive process that together significantly contribute to the ability to create outputs. Scienture’s results of operations are included in the Company’s consolidated financial statements from the date of acquisition. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. The purchase price allocation is preliminary and could be significantly revised as a result of additional information obtained regarding assets acquired and liabilities assumed and revisions of estimates of fair values of tangible assets and related deferred tax assets and liabilities. The Company will finalize its valuation and the allocation of the purchase price, along with required retrospective adjustments, if any, within a year following the acquisition date. On July 25, 2024, the Company issued 291,536 shares of common stock and 6,826,753 shares of Series X Preferred Stock pursuant to the Scienture Merger Agreement. The aggregate fair value of the purchase price consideration was $ 78,646,184 . The fair value was determined by the underlying stock price of the common stock on the date of the Scienture Merger, which was $ 11.63 per share, which was utilized for both the issuance of common and preferred stock after evaluating the terms of the Series X Preferred Stock. The Company also applied a discount for lack of marketability of 5% due to certain lock-up terms on the shares issued. The following summarizes the purchase price consideration and the preliminary purchase price allocation as of the acquisition date: SCHEDULE OF PURCHASE PRICE ALLOCATION July 25, 2024 Purchase consideration: Common stock $ 3,221,245 Series X preferred stock 75,424,939 Total purchase consideration $ 78,646,184 Purchase price allocation: Cash $ 132,976 Operating lease right-of-use assets 61,578 Goodwill 21,372,960 Intangible assets - product technologies 76,400,000 Accounts payable ( 987,097 ) Accrued liabilities ( 1,198,134 ) Loan payable, related party ( 265,000 ) Lease liability ( 61,886 ) Development agreement liability ( 1,285,000 ) Long-term convertible notes ( 2,000,000 ) Deferred tax liability ( 13,524,213 ) Net assets acquired $ 78,646,184 Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Scienture Merger had occurred as of January 1, 2024. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: SCHEDULE OF PRO FORMA FINANCIAL INFORMATION Three Months Ended March 31, 2024 Revenue $ 1,863,830 Net loss from continuing operations $ ( 9,698,339 ) Net loss from continuing operations per share $ ( 9.35 ) 12 Table of Contents Dispositions and Divestitures MMS APA On February 16, 2024, the Company, together with Softell and MMS, entered into the MMS APA under which MMS agreed to purchase for cash substantially all of the assets of Softell. On February 16, 2024, the parties consummated the closing of the transactions contemplated by the MMS APA. The purchase price paid at closing was $ 22,660,182 . Subject to the terms and conditions of the MMS APA, because MMS received $ 1,600,000 or greater in certain collections from third parties resulting from any products or services sold, or provided, by the business assets and operations acquired from Softell during the period ending on the four-month anniversary of the closing date, the Company was due an additional $ 7,500,000 payment from MMS. The Company received the payment in May 2024. The MMS APA was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of February 16, 2024, the Company no longer consolidated the assets, liabilities, revenues and expenses of Softell. The components of the disposition are as follows: SCHEDULE OF BUSINESS ACQUISITIONS ASSETS AND LIABILITIES Cash received from MMS $ 22,660,182 Other receivable from MMS 7,500,000 Total fair value of consideration received $ 30,160,182 Carrying amount of assets and liabilities Cash $ 76,821 Accounts receivable, net 719,876 Prepaid expenses 55,397 Property, plant and equipment, net 45,655 Operating lease right-of-use assets 12,277 Accounts payable ( 347,000 ) Accrued liabilities ( 5,269 ) Other current liabilities ( 26,244 ) Lease liability, current ( 1,556 ) Notes payable, current portion ( 45,000 ) Lease liability, net of current portion ( 10,720 ) Total carrying amount of assets and liabilities 474,236 Gain on disposition of business $ 29,685,946 The gain on disposition of business of $ 29,685,946 was included in income from discontinued operations, net of tax in the consolidated statements of operations of the year ended December 31, 2024. Superlatus SPA On March 5, 2024, the Company entered into the Superlatus SPA with the Buyer. Pursuant to the Superlatus SPA, the Company sold all of the issued and outstanding stock of Superlatus to the Buyer. The $ 1.00 purchase price for the stock was delivered to the Company at the closing, which occurred simultaneously with the execution of the Superlatus SPA. As a result of the transaction, Superlatus ceased to be a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of the Buyer. The transaction was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of March 5, 2024, the Company no longer consolidated the assets, liabilities, revenues and expenses of Superlatus. The components of the disposition are as follows: SCHEDULE OF BUSINESS ACQUISITIONS ASSETS AND LIABILITIES Fair value of consideration received $ 1 Total fair value of consideration received $ 1 Carrying amount of assets and liabilities Cash $ 151,546 Property, plant and equipment, net 223,080 Intangible assets, net 8,962,688 Operating lease right-of-use assets 325,995 Purchase price payable ( 350,000 ) Accounts payable ( 224,137 ) Accrued liabilities ( 173,436 ) Notes payable, current portion ( 6,480,000 ) Lease liability - current ( 105,567 ) Lease liability - net of current portion ( 221,428 ) Notes payable ( 25,000 ) Total carrying amount of assets and liabilities 2,083,743 Loss on disposition of business $ ( 2,083,742 ) The loss of disposition of business of $ 2,083,742 was included in income from discontinued operations, net of tax in the consolidated statements of operations of the year ended December 31, 2024. 13 Table of Contents Discontinued Operations In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying consolidated statements of operations for the three months ended March 31, 2025 and 2024. The results of the discontinued operations for the three months ended March 31, 2025 and 2024 consist of the following: SCHEDULE OF DISCONTINUED OPERATIONS TRX Bonum Superlatus Total Three Months Ended Three Months Ended Three Months Ended Three Months Ended March 31, March 31, March 31, March 31, 2025 2024 2025 2024 2025 2024 2025 2024 Revenues $ - $ 970,808 $ - $ - $ - $ - $ - $ 970,808 Cost of sales - - - - - - - - Gross profit - 970,808 - - - - - 970,808 Operating expenses: Wage and salary expense - 551,983 - 578 - - - 552,561 Professional fees - 15,385 - - - - - 15,385 Technology expense - 86,660 - 2,245 - - - 88,905 General and administrative - 36,029 - 678 - - - 36,706 Total operating expenses - 690,057 - 3,500 - - - 693,557 Operating income - 280,751 - ( 3,500 ) - - - 277,251 Other income (expense): Goodwill impairment - - - - - - - - Gain on dispositions - 29,685,946 - - - ( 2,083,742 ) - 27,602,205 Other expense - - - - - - - 0 Other income - - - - - - - - Interest expense - - - - - - - - Total other income(expense) - 29,685,946 - - - ( 2,083,742 ) - 27,602,204 Provision for income taxes - - - - - - - Net income(loss) on discontinued operations $ - $ 29,966,697 $ - $ ( 3,500 ) $ - $ ( 2,083,742 ) $ - $ 27,879,455 In the second quarter of 2024, the Company determined to dissolve Bonum Health, Inc. and Bonum Health, LLC, and have presented the results of operations in net income (loss) from discontinued operations. 14 Table of Contents NOTE 4- RELATED PARTY TRANSACTIONS Wellgistics Health and Tollo Health On November 21, 2023, but effective September 14, 2023, the Company issued a promissory note (the “Wellgistics Note”) to Wellgistics Health, Inc. (f/k/a Danam Health Inc.) (“Wellgistics”) in the amount of $ 300,000 . Wellgistics prepaid $ 250,000 prior to the execution date. The Wellgistics Note did not accrue interest. As of December 31, 2023, the balance of the Wellgistics Note was $ 50,000 . The Wellgistics Note was fully paid off in February 2024. As of March 31, 2025, other receivables include a $ 3,828,769 receivable from Wellgistics and $ 215,000 receivable from Tollo Health. The advances are unsecured, non-interest bearing and due on demand. See Note 6 for detail on the note receivable from Wood Sage. Both Wellgistics Health and Tollo Health have common ownership and management with the Company. Scienture In July 2024, the executives of Scienture issued a short-term loan to Scienture for an aggregate amount of $ 265,000 . The loans are unsecured, non-interest bearing and due on demand. The loans were still outstanding as of March 31, 2025. In November 2024, the executives of Scienture issued a short-term loan to Scienture for $ 150,000 . The loans is unsecured, non-interest bearing and due on demand. The loan was outstanding as of March 31, 2025. In February 2025, the executives of Scienture issued a short-term loan to Scienture for $ 100,000 . The loan is unsecured, non-interest bearing and due on demand. The loan was outstanding as of March 31, 2025. NOTE 5 – REVENUE RECOGNITION The Company derives revenue from two primary sources—product revenue and service revenue. Product revenue consists of shipments of: ● Resale of pharmaceutical products to pharmacies; and ● Revenues for our products are recognized and invoiced when the product is shipped to the customer. Revenues for one-time services are recognized at the point in time when services are rendered. Payment terms for products and services are generally 0 to 60 days and the Company has no contract assets or liabilities. Revenues for the three months ended March 31, 2025 and 2024 were $ 10,258 and $ 0 , respectively. In 2025, all revenue was product revenue. NOTE 6 – NOTES RECEIVABLE – RELATED PARTY On August 22, 2023, the Company received a Promissory Note (the “Wood Sage Note”) in the amount of $ 1,300,000 from Wood Sage. The Wood Sage Note bears no interest and is currently due and payable. As of both March 31, 2025 and December 31, 2024, the outstanding balance of the Wood Sage Note was $ 1,300,000 . 15 Table of Contents NOTE 7 – GOODWILL AND INTANGIBLE ASSETS In connection with the Scienture Merger on July 25, 2024, the Company recorded goodwill of $ 21,372,960 and intangible assets of $ 76,400,000 . The purchase price allocation of intangible assets was evaluated under ASC 805. The identified intangible assets were determined to be product technologies, and were valued accordingly by each product candidate: SCHEDULE OF INTANGIBLE ASSETS WERE DETERMINED TO BE PRODUCT TECHNOLOGIES Product Candidate Fair Value SCN-102 (a) $ 23,600,000 SCN-104 (b) 25,000,000 SCN-106 (c) 15,000,000 SCN-107 (d) 12,800,000 Intangible Assets $ 76,400,000 (a) Management expects SCN-102 to achieve regulatory approval in mid 2025, with product commercialization projected to begin in late 2025. (b) Management expects SCN-104 to achieve regulatory approval in late 2025 or early 2026, with product commercialization projected to begin in 2026. (c) Management expects SCN-106 to achieve regulatory approval in 2027 or 2028, with product commercialization projected to begin in 2028. (d) Management expects SCN-107 to achieve regulatory approval in 2028 or 2029, with product commercialization projected to begin in 2029. The fair value of the product technologies was determined by the Income Approach: Multi-Period Excess Earnings Methods (“MPEEM”). The MPEEM measures economic benefits by calculating the cash flows attributable to an asset after deducting appropriate returns for contributory assets used by the business in generating the asset’s revenue and earnings. The MPEEM utilized revenue and cash flow projections through 2030 based on each product candidate’s phase of development. Key assumptions include a 2% long-term revenue growth rate and 3% contributory asset charge rate. The Company discounted the expected future cash flows at a 53.0% rate of return, equal to the weighted-average cost of capital (“WACC”) plus 10%, to reflect the risk of the cash flows related to the product technologies. The Company then summed the present values of the estimated future cash flows and included an amortization tax benefit to the value indication of each of the product technologies. As of March 31, 2025, the Company has not begun amortizing any of the product technology intangible assets. 16 Table of Contents NOTE 8 – CONVERTIBLE DEBT AND NOTES PAYABLE Convertible Debenture – Arena On November 22, 2024, the Company entered into a Securities Purchase Agreement with the Arena Finance Markets, LP (“Arena Finance”), Arena Special Opportunities Partners III, LP (“ASOP” and, together with Arena Finance, the “Arena Investors”). Under the Securities Purchase Agreement, the Company will issue 10 % original issue discount secured convertible debentures (“Debentures”) in a principal amount of up to $ 12,222,222 , divided into up to three separate tranches that are each subject to certain closing conditions. The conversion price per share of each Debenture is equal to 92.5 % of the lowest daily VWAP (as defined in the Debentures) of the Company’s shares of common stock during the five trading day period ending on the trading day immediately prior to delivery or deemed delivery of the applicable conversion notice, subject to adjustments related to the trading price of the Company’s common stock. The closing of the first tranche was consummated on November 25, 2024 (the “First Closing”) and the Company issued to the Arena Investors Debentures in an aggregate principal amount of $ 3,333,333 (the “First Closing Debentures”). The First Closing Debentures were sold to the Arena Investors for a purchase price of $ 3,000,000 , representing an original issue discount of ten percent ( 10 %). The convertible debenture will be matured eighteen months from the date first closing. The First Closing Debentures contain customary events of default. If an event of default occurs, until it is cured, the holder may increase the interest rate applicable to the First Closing Debentures to two percent ( 2 %) per annum and accelerate the full indebtedness under the First Closing Debentures, in an amount equal to 125 % of the outstanding principal amount and accrued and unpaid interest. Subject to limited exceptions set forth in the First Closing Debentures, the First Closing Debentures prohibit the Company and, as applicable, its subsidiaries from incurring any new indebtedness that is not subordinated to the Arena Investors and, as applicable, any subsidiary’s obligations in respect of the First Closing Debentures until the First Closing Debentures are paid in full. As consideration for the Arena Investors’ consummation of the First Closing, concurrently with the First Closing, the Company issued to each Arena Investor participating in the First Closing its pro rata portion of the 55,000 shares of common stock (the “SPA Commitment Fee Shares”) issued to the Arena Investors as a commitment fee upon the execution of the Securities Purchase Agreement. Furthermore, as consideration for the Arena Investors’ consummation of subsequent closings, the Company shall issue to the Arena Investors participating in such closing a certain number of Company common stock as agreed upon among the Company and the Arena Investors participating. The fair value of the shares of common stock issued was $ 420,200 , which was included as a debt discount as noted below. The Company agreed, pursuant to a Security Agreement, dated November 25, 2024 (the “Security Agreement”), to grant the Arena Investors a security interest in all of its assets to secure the prompt payment, performance, and discharge in full of all of the Company’s obligations under the Debentures. In addition, the Company’s wholly-owned subsidiary, Scienture, LLC, entered into a Guarantee Agreement, dated November 25, 2024 (the “Guarantee”), with the Arena Investors, pursuant to which it agreed to guarantee the prompt payment, Interest shall accrue on the outstanding principal amount of this Debenture at a rate equal to 10.00 % per annum paid in kind (the “PIK Interest”) unless there is an Event of Default, in which case Default Interest shall accrue and be paid instead of PIK Interest. The PIK Interest shall be added to the outstanding principal amount of this Debenture on a monthly basis as additional principal obligations hereunder and shall automatically and thereafter constitute a part of the outstanding principal amount for all purposes hereof (including the accrual of interest thereon at the rates applicable to the principal amount generally). The Company will not issue additional debentures to represent the PIK Interest. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. During the three months ended March 31, 2025, the Company accrued $ 84,167 in interest expense pertaining to the Arena debentures. As a result of the debentures, the Company recognized an aggregate debt discount of $ 3,333,333 . Through December 31, 2024, $ 869,692 of the debt discount was amortized to interest expense. During the three months ended March 31, 2025, $ 480,186 of the debt discount was amortized to interest expense. At March 31, 2025, the outstanding balance of the debentures, including the outstanding principal of $ 3,333,333 less the unamortized discount of $ 2,240,872 , was $ 1,092,461 . The following is a summary of the Arena Debentures: SCHEDULE OF THE ARENA DEBENTURES Arena Note Convertible debenture - Arena Principal $ 3,333,333 Original issuance discount ( 333,333 ) Other issuance costs ( 360,000 ) Fair value of shares issued ( 420,200 ) Derivative liability recognized as debt discount ( 2,477,217 ) Excess debt discount amortization at issuance date 257,417 Amortization of debt discount 1,092,461 Arena note, net of unamortized debt discount, at March 31, 2025 $ 1,092,461 Derivative Liability The Company evaluated the terms of the conversion features of the debentures as noted above in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are not indexed to the Company’s common stock and that the conversion feature, which is akin to a redemption feature, meet the definition of a liability. The notes contain an indeterminate number of shares to settle with conversion options outside of the Company’s control. Therefore, the Company bifurcated the conversion feature and accounted for it as a separate derivative liability. Upon issuance of the convertible debenture, the Company recognized a derivative liability at a fair value of $ 2,477,217 , which is recorded as a debt discount and will be amortized over the life of the debentures. The Company measured the derivative liability at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the derivative liability uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the contingent consideration liability related to updated assumptions and estimates are recognized within the statements of operations. The Company valued the derivative liability using a Black-Scholes method using following assumptions: SCHEDULE OF DERIVATIVE LIABILITY March 31, December 31, 2025 2024 Risk-free interest rate 4.030 % 4.290 % Expected term (in years) 1.15 1.40 Expected volatility+A13 143.88 % 171.46 % Expected dividend yield 0.00 % 0.00 % 17 Table of Contents The following is a summary of the derivative liability: SCHEDULE OF THE DERIVATIVE LIABILITY LIABILITY Derivative Liability Outstanding as of December 31, 2024 $ 2,296,834 Change in fair value ( 603,322 ) Outstanding as of March 31, 2025 $ 1,693,512 Scienture Convertible Debt In September 2023, Scienture entered into a Loan and Security Agreement (the “NVK Loan Agreement”) with NVK Finance, LLC, a Nebraska Limited Liability Company (“NVK”) for $ 2,000,000 . The debt accrues interest at a per annum rate equal to the Prime Rate (as defined in the NVK Loan Agreement) plus 7 percent and the prime rates are adjusted quarterly. As of both March 31, 2025 and December 31, 2024, the interest rate was 15.50 %. The debt is collateralized by all of Scienture’s receivables, cash and cash equivalents and its right, title and interest in, to and under its Intellectual Property (as defined in the NVK Loan Agreement) and all proceeds thereof. The principal is entirely repayable on the maturity date in September 2025 and interest shall be paid monthly following a Qualified Financing (as defined in the NVK Loan Agreement). The NVK debt is convertible into common stock of Scienture at a fully-diluted Scienture valuation of $ 60,000,000 . The balance of the NVK debt upon the Scienture Merger and at March 31, 2025 was $ 2,000,000 . Interest expense on the NVK debt was $ 77,500 for the three months ended March 31, 2025. August 2024 Note In August 2024, the Company issued a convertible note of $ 360,000 , for which the Company received $ 314,000 in net proceeds. On the six-month anniversary of the issuance, the Company will be required to make a payment of $ 360,000 to the noteholder and each month thereafter the Company will be required to make a payment of $ 7,200 to the noteholder towards repayment of the note (each, an “Amortization Payment”). The note bears interest at 12 % per annum and shall be deemed earned in full and guaranteed as of the note issuance date. If the Company fails to pay any Amortization Payment, the noteholder will have the right to convert the outstanding principal and accrued interest at a conversion price equal to the Conversion Price (as defined below and subject to a floor price of $ 1.50 ). The Conversion Price is the lesser of i) $ 8.36 or (ii) 85 % of the lowest volume-weighted average prices of the preceding five trading days . The note matures on August 20, 2025 . In connection with the note, the Company issued 76,923 warrants to purchase common stock. The warrants have an exercise price of $ 9.36 per share, are immediately exercisable and have a term of 5 years. The fair value of the warrant was $ 71,332 , which was recognized as a debt discount and will be amortized to interest expense over the life of the note. Total debt discount recognized in connection with the note was $ 117,332 , with $ 42,755 amortized through December 31, 2024, and an additional $ 28,931 amortized during the three months ended March 31, 2025. The net carrying value of the note payable, after deducting the remaining unamortized discount of $ 45,646 , was $ 314,354 . On March 31, 2025, the Company converted the outstanding note into equity by issuing 274,000 shares of common stock at a fair value of $ 411,000 . As a result, it recognized a $ 96,646 loss on conversion, reported as a non-operating expense in the unaudited condensed consolidated statements of operations. Debt Summary The following is a summary of the Company’s debt as of March 31, 2025 and December 31, 2024: SCHEDULE OF DEBT As of March 31, 2025 Principal outstanding Unamortized debt discount Debt, net of unamortized debt discount Convertible debenture - Arena $ 3,333,333 $ ( 2,240,872 ) $ 1,092,461 Scienture convertible debt 2,000,000 - 2,000,000 Total debt 5,333,333 ( 2,240,872 ) 3,092,462 Current maturity of debt 2,000,000 - 2,000,000 Total long-term debt $ 3,333,333 $ ( 2,240,872 ) $ 1,092,461 As of December 31, 2024 Principal outstanding Unamortized debt discount Debt, net of unamortized debt discount Convertible debenture - Arena $ 3,333,333 $ ( 2,721,058 ) $ 612,275 August 2024 note 360,000 ( 74,577 ) 285,423 Scienture convertible debt 2,000,000 - 2,000,000 Total debt 5,693,333 ( 2,795,635 ) 2,897,698 Current maturity of debt 2,360,000 ( 74,577 ) 2,285,423 Total long-term debt $ 3,333,333 $ ( 2,721,058 ) $ 612,275 NOTE 9 – STOCKHOLDERS’ EQUITY Designation of Series X Preferred Stock On July 25, 2024, the Company revoked the authorization to issue shares of the Company’s Series A Preferred Stock, par value $ 0.00001 per share (the “Series A Preferred Stock”). Concurrently with revoking the Company’s authority to issue Series A Preferred Stock, the Company authorized the issuance of up to 9,211,246 shares of the Series X Preferred Stock, a new class of preferred stock. Holders of the Series X Preferred Stock are entitled to receive dividends on shares of the Series X Preferred Stock on an as-if-converted-to-Common-Stock basis, without regard to any beneficial ownership limitation described in a letter of transmittal, equal to and in the same form and manner as dividends are paid to holders of the shares of Common Stock. Subject to any requirements of the General Corporation Law of the State of Delaware, the Series X Preferred Stock has no voting rights. The Series X Preferred Stock ranks on parity with shares of Common Stock as to distributions of assets upon liquidation, dissolution, or winding up of the Company. As consideration for the Scienture Merger, at the Effective Time of First Merger, the shares of Scienture common stock issued and outstanding immediately prior to the Effective Time were converted into the right to receive, in the aggregate, (i) 291,536 shares of the Company’s common stock and (ii) 6,826,753 shares of the Company’s Series X Preferred Stock, each share of which is convertible into one share of common stock. On September 20, 2024, all previously issued shares of Series X Preferred Stock were converted into a total of 6,826,753 shares of common stock. 18 Table of Contents Common Stock During the three months ended March 31, 2025, the Company issued 240,000 shares of common stock for services. The fair value of shares issued for services was $ 1,080,000 and was included in general and administrative expenses in the unaudited condensed consolidated statements of operations. During the three months ended March 31, 2025, the Company issued 274,000 shares of common stock at a fair value of $ 411,000 pursuant to the conversion of the August 2024 convertible note of $ 314,354 . Accordingly, the Company recognized a $ 96,646 loss on conversion. Arena Note Commitment Shares As additional consideration for the Purchaser’s execution and delivery of this Agreement, (i) concurrently with the execution and delivery of this Agreement on the First Closing Date (as defined below), the Company shall cause the Transfer Agent, to issue to each Purchaser participating in the first Closing or its designee on the First Closing Date its pro rata portion of 55,000 of the shares of Common Stock being issued as Commitment Shares in connection with the First Closing, and (ii) in connection with any Closing following the First Closing, the Company shall cause its Transfer Agent to issue to each Purchaser participating in such Closing or its designee a certain number of Commitment Shares. The aggregate number of Commitment Shares owing to each Purchaser in connection with any Closing following the First Closing will be agreed among the Company and the Purchasers participating in such Closing, and shall be set forth in an allocation table prior to such Closing (each a “Commitment Shares Allocation Table.”) For the avoidance of doubt, all of the Commitment Shares issuable in connection with the First Closing on the First Closing Date shall be fully earned as of the First Closing Date regardless of whether a Subsequent Closing shall occur (see Note 8). In this connection, the Company issued to each Arena Investor participating in the First Closing its pro rata portion of 55,000 shares of the Company’s common stock. The fair value of shares issued was $ 420,200 was recognized as a debt discount, which was amortized to interest expense in full as commitment shares in connection with first closing was fully earned as of first closing date. Equity Line of Credit On November 25, 2024, the Company entered into a purchase agreement (“ELOC Agreement”) with Arena Business Solutions Global SPC II, Ltd (the “Investor”). Under the ELOC Agreement, the Company has the right, but not the obligation, to direct the Investor to purchase up to $ 50,000,000 in shares of the Company’s common stock (the “ELOC Shares”) upon satisfaction of certain terms and conditions contained in the ELOC Agreement, including, without limitation, and additional shares to be sold to the Investor from time to time under the ELOC Agreement. The term of the ELOC Agreement began on the date of execution and ends on the earlier of (i) the first day of the month following the 36-month anniversary of the execution date, (ii) the date on which the Investor shall have purchased the maximum amount of ELOC Shares, or (iii) the effective date of any written notice of termination delivered pursuant to the terms of the ELOC Agreement (the “Commitment Period”). 19 Table of Contents In consideration for the Investor’s execution and delivery of the ELOC Agreement, the Company agreed to issue to the Investor, as a commitment fee: (i) 70,000 shares of the Company’s Common Stock (“Initial Commitment Fee Shares”) and (ii) in two separate tranches, a number of additional shares of common stock (“Additional Commitment Fee Shares” and, together with the Initial Commitment Fee Shares, the “Commitment Fee Shares”) equal to (a) with respect to the first tranche, 500,000 divided by the simple average of the daily VWAP of our common stock during the five (5) trading days immediately preceding the effectiveness of the initial registration statement on which the Commitment Fee Shares are registered (the “Effectiveness Date”) and (b) with respect to the second tranche, 500,000 divided by the simple average of the daily VWAP of our common stock during the five (5) trading days immediately preceding the two (2) month anniversary of the Effectiveness Date. The Additional Commitment Fee Shares shall be subject to a true-up after each issuance pursuant to the terms of the ELOC Agreement. In consideration for the Investor’s execution and delivery of the ELOC Agreement, the Company issued to the Investor, as a commitment fee, 70,000 shares of the Company’s common stock on November 25, 2024. The fair value of shares issued was $ 534,800 and was included in deferred offering costs in the consolidated balance sheets. In March 2025, the deferred offering costs previously capitalized were offset against the gross proceeds from the ELOC share issuances (see below). In 2025, the Company issued to the Investor, as another commitment fee, in aggregate 450,437 shares of the Company’s common stock. The fair value of shares issued was $ 971,732 and was recognized as offering costs in connection with the related ELOC Agreement share issuances. Accordingly, the fair value of the shares issued were offset against the gross proceeds and there was no net effect to stockholders’ equity. In March 2025, the Company issued in aggregate 2,800,000 shares of common stock pursuant to the above ELOC Agreement for aggregate gross proceeds of $ 4,597,999 . After recognition of the related offering costs, the Company recognized a net increase to additional paid-in capital of $ 2,691,467 . Equity Compensation Awards Each independent member of the Company’s board of directors (the “Board”) is to receive an annual grant of restricted common stock of the Company equal to $ 55,000 in value on April 1st of each year (or such date thereafter as the awards are approved by the Board), and valued on such same date, based on the closing sales price on such date (or the first business day thereafter), which restricted stock awards will vest at the rate of 1/4th of such awards over the following four calendar quarters, subject to such directors continued service to the Company. The Company’s board of directors and stockholders approved an amendment to the Second Amended and Restated 2019 Equity Incentive Plan (Plan increasing the available shares under the Plan to 5,000,000 shares of the Common Stock as such common stock existed on July 24, 2024. 20 Table of Contents NOTE 10 – WARRANTS In connection with a note (see Note 8), in August 2024 the Company issued 76,923 warrants to purchase common stock. The warrants have an exercise price of $ 9.36 per share, are immediately exercisable and have a term of 5 years. In August 2024, the holder exercised 28,571 warrants for shares of commons stock on a cashless basis. As of March 31, 2025, the Company remeasured the fair value of warrants outstanding at $ 273,949 . In connection with remeasurement of warrants, a $ 645,986 gain and $ 729,889 loss was recognized during the three months ended March 31, 2025 and 2024, respectively, as the change in fair value of warrant liability. The Company’s outstanding and exercisable warrants, as of March 31, 2025, are presented below: SCHEDULE OF OUTSTANDING AND EXERCISABLE WARRANTS Number Outstanding Weighted Average Exercise Price Contractual Life In Years Intrinsic Value Warrants outstanding as of December 31, 2024 238,594 $ 19.02 3.20 $ - Warrants exercisable as of December 31, 2024 238,594 19.02 3.20 - Warrants granted - - - - Warrants forfeited, expired, cancelled - - - - Warrants exercised - - - - Warrants outstanding as of March 31, 2025 238,594 $ 19.02 2.95 - Warrants exercisable as of March 31, 2025 238,594 $ 19.02 2.95 - NOTE 11 – OPTIONS The Company maintains stock option plans under which certain employees are awarded option grants based on a combination of performance and tenure. The stock option plans provide for the grant of up to 155,556 shares, and the Plan provides for automatic increases in the number of shares available under such plan (currently 133,333 shares) on April 1 st of each calendar year, beginning in 2021 and ending in 2029 (each a “Date of Determination”), in each case subject to the approval and determination of the administrator of the plan (the Board of Directors or Compensation Committee) on or prior to the applicable Date of Determination, equal to the lesser of (A) ten percent (10%) of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the administrator. The administrator as a result of the annual meeting shareholder vote increased the number of shares available to grant to employees under the Plan by 2,000,000. The administrator did not approve an increase in the number of shares covered under the Plan as of April 1, 2022. The Company’s board of directors and stockholders approved an amendment to the Plan increasing the available shares under the Plan to 5,000,000 shares of the Common Stock as such common stock existed on July 24, 2024. Total compensation cost related to stock options granted was $ 437 and $ 24,266 for the three months ended March 31, 2025, and 2024, respectively. The following table represents stock option activity for the three-month period ended March 31, 2025: SCHEDULE OF STOCK OPTION ACTIVITY Number Outstanding Weighted-Average Exercise Price Weighted-Average Contractual Life in Years Intrinsic Value Options outstanding as of December 31, 2024 23,930 $ 42.16 2.73 $ - Options exercisable as of December 31, 2024 23,930 42.16 1.83 - Options granted - - - - Options adjusted - - - - Options expired - - - - Options exercised - - - - Options outstanding as of March 31, 2025 23,930 $ 42.16 2.43 - Options exercisable as of March 31, 2025 23,930 $ 42.16 1.64 - NOTE 12 – CONTINGENCIES Exclusive License and Commercial Agreements Scienture entered into an exclusive license and commercial agreement with Kesin Pharma Corporation (“Kesin”) whereby Scienture granted the exclusive license rights to commercialize SCN-102 in 2022 and SCN-104 in 2023 to Kesin (SCN-102 and SCN-104 are together referred to as “the Products”) for use in the United States of America. In March 2024, the parties have terminated the agreement, and the parties agreed that Scienture shall pay Kesin a total gross amount of $ 1,285,000 upon commercialization of product via a royalty arrangement This agreement also requires that if the full $1,285,900 has not been repaid within two years of the early of i) commercial launch or ii) 120 from FDA approval, then interest will accrue prospectively at a rate of 8% annually on unpaid balance. Accordingly, Scienture recorded a $1,285,000 termination fee liability. As of September 30, 2024, the entire amount is outstanding. In August 2024, Kesin demanded immediate payment of the full amount under the Kesin Termination Agreement, alleging the full amount is payable in connection with the consummation Scienture LLC’s business combination with the Company. Scienture LLC has disputed that the amount is payable, and the parties entered into discussions to resolve the issue. On March 11, 2025, Kesin filed a complaint against Scienture LLC in the United States District Court for the Eastern District of New York seeking payment of the disputed $ 1.285 million. There can be no assurance that an amicable resolution will be obtained. Scienture LLC intends to vigorously defend itself in the litigation. 21 Table of Contents NOTE 13 – LEASES The Company entered into a lease agreement for the period of October 2018 to November 2023. At inception, management had included the renewal period from November 2023 to November 2028 within the initial recognition of the related right of use assets and lease liabilities, as it was reasonably expected, at the time, that the renewal option would be exercised. The Company determined that the new lease required measurement and recognition of the lease liability and right-of-use assets of $ 313,301 . The lease is classified as an operating lease. No incentives were included in the lease. On July 25, 2024, the Company entered into and closed the Scienture Merger Agreement. Pursuant to the Scienture Merger Agreement, the Company acquired right of use asset value of $ 61,578 and right of use liability of $ 61,886 on the acquisition date together with all the assets and liabilities of Scienture. The table below reconciles the fixed component of the undiscounted cash flows for and the total remaining years to the lease liabilities recorded in the consolidated balance sheet as of March 31, 2025. Supplemental balance sheet information related to leases are as follows: SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES March 31, 2025 December 31, 2024 Weighted-average remaining lease term (in years) 3.23 3.48 Weighted-average discount rate 10.90 % 10.90 % SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR OPERATING LEASE LIABILITIES Future lease obligations 2025 remaining $ 62,777 2026 73,084 2027 56,919 2028 48,612 Total minimum lease payments 241,392 Less: effect of discounting ( 36,630 ) Present value of future minimum lease payments 204,762 Less: current obligation under lease 65,843 Long-term lease obligations $ 138,919 For the three months ended March 31, 2025, and 2024, total operating lease expense was $ 36,402 and $ 12,840 , respectively, which is included in general and administrative expenses in the unaudited condensed consolidated statements of operations. NOTE 14 – SEGMENT REPORTING Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates all reporting segments in one geographical area (the United States). The Company’s CEO is the chief operating decision-maker. The Company classifies its business interests into reportable segments which are: ● Integra - Licensed wholesaler of brand, generic and non-drug products – B2B sales ● Scienture – pharmaceutical research company which is engaged in the research and development of branded pharmaceutical products ● Unallocated - Other – corporate overhead expense and discontinued operations. SCHEDULE OF BUSINESS INTERESTS INTO REPORTABLE SEGMENTS Three Months Ended March 31, 2025 Integra Scienture Unallocated Total Revenues $ 10,258 $ - $ - $ 10,258 Cost of Sales 9,585 - - 9,585 Gross Profit 673 - - 673 Net income (loss) ( 298,401 ) ( 1,420,095 ) ( 1,345,501 ) ( 3,063,997 ) Interest expense - 77,500 593,284 670,784 Depreciation 500 - - 500 Total Assets as of March 31, 2025 $ 3,748,249 $ 99,377,296 $ 3,232,986 $ 106,358,530 Geographic information as of and for the three months ended March 31, 2025 is presented below:- SCHEDULE OF GEOGRAPHIC INFORMATION Revenues For The Three Months Ended March 31, 2025 Total Assets as of March 31, 2025 United States $ 10,258 $ 106,358,530 Three Months Ended March 31, 2024 Integra Scienture Unallocated Total Revenues $ - $ - $ - $ - Cost of Sales - - - - Gross Profit - - - - Net income (loss) ( 238,655 ) - 21,484,688 21,246,033 Interest expense - - 98,515 98,515 Depreciation 500 - - 500 Total Assets as of December 31, 2024 $ 3,260,532 $ 98,072,001 $ 3,521,272 $ 104,853,805 Geographic information as of and for the three months ended March 31, 2024 is presented below:- Revenues For The Three Months Ended March 31, 2024 Total Assets as of December 31, 2024 United States $ - $ 104,853,805 NOTE 15 – SUBSEQUENT EVENTS On April 8, 2025, the Company entered into a Membership Interest Purchase Agreement (the “IPS MIPA”) with Tollo Health, Inc. (“Tollo”), pursuant to which Tollo agreed to purchase and the Company agreed to sell all of the Company’s membership interests in IPS. Suren Ajjarapu, the Company’s Chief Executive Officer, and Prashant Patel, the Company’s President and Chief Operating Officer, each have a beneficial interest in Tollo. On April 8, 2025, the Company also entered into a Stock Purchase Agreement (the “Bonum 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. In connection with each of the Agreements, the Company agreed to retain certain excluded liabilities of IPS and Bonum 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 or Bonum, 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 or Bonum, respectively; and (v) related to tax returns or tax matters of the Company, IPS, or Bonum, respectively, for any periods prior to closing under the applicable Agreement. The Company and Tollo have agreed to consummate the closing of each of the Agreements on June 30, 2025, or such other time as the Company and Tollo may agree. As consideration for acquiring IPS and Bonum, Tollo has agreed to pay the Company $ 5 million 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. The parties closed on the transaction on April 30, 2025. 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, LLC subsidiary. On April 16, 2025, the Company issued to the Investor, as a commitment fee, 601,410 shares of the Company’s common stock, in consideration for the Investor’s execution, delivery of the ELOC Agreement and shares issued in quarter one of 2025 (see Note 9). 22 Table of Contents