ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company’s historical performance and financial condition should be read together with the consolidated financial statements and related notes in the section entitled “ Item 8. Financial Statements and Supplemental Data ” of this Annual Report. This discussion contains forward-looking statements based on the views and beliefs of our management, as well as assumptions and estimates made by our management. See the section entitled “ Cautionary Statement Regarding Forward-Looking Information ” above. These statements by their nature are subject to risks and uncertainties and are influenced by various factors. As a consequence, actual results may differ materially from those in the forward-looking statements. See “ Item 1A. Risk Factors ” of this Annual Report for the discussion of risk factors. For all periods presented, the consolidated statements of income and consolidated balance sheet data have been adjusted for the reclassification of discontinued operations information, unless otherwise noted. All references to years relate to the calendar year ended December 31 of the particular year.
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.
Recent Events . Summary of material transactions occurring during year ended December 31, 2025.
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 years ended December 31, 2025 and 2024.
Critical Accounting Policies . Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
Company Overview
On July 25, 2024, we acquired a wholly-owned subsidiary, Scienture LLC. Scienture LLC is a specialty pharmaceutical company focused on the commercialization and development of products for the treatment of Cardiovascular (CVS) and Central Nervous System (CNS) diseases. Scienture LLC launched its first commercial product for hypertension and is in the process of commercializing its second product for the treatment of opioid overdose. Its development pipeline consists of a broad range of novel product candidates including new potential treatments for migraine, thrombosis, pain and other related disorders. Scienture LLC’s mission is to bring to market innovative technology-based products to address unmet medical needs. Its targeted portfolio consists of short term and long-term opportunities with efficient development, regulatory, and go to market strategies.
Dispositions
SOSRx, LLC
SOSRx, was formed on February 15, 2022. The Company entered into a relationship with Exchange Health, LLC (“Exchange Health”), a technology company providing an online platform for manufacturers and suppliers to sell and purchase pharmaceuticals, pursuant to which SOSRx, a Delaware limited liability company, was formed, which was owned 51% by the Company and 49% by Exchange Health. SOSRx did not generate material revenue and in February 2023 the Company voluntarily withdrew from the joint venture agreement.
Community Specialty Pharmacy, LLC and Alliance Pharma Solutions, LLC
On January 20, 2023, the Company entered into Membership Interest Purchase Agreements to sell 100% of the outstanding membership interests of the Company’s former subsidiaries, Community Specialty Pharmacy, LLC and Alliance Pharma Solutions, LLC (d.b.a DelivMeds). The Company also agreed to enter into a Master Service Agreement to operate the businesses prior to closing. The transactions contemplated by the Membership Interest Purchase Agreements closed on August 22, 2023.
Superlatus Inc.
On July 14, 2023, the Company entered into the Superlatus Merger Agreement with Superlatus Inc., a diversified food technology company, and Merger Sub.
On July 31, 2023, the Company completed its acquisition of Superlatus in accordance with the terms and conditions of the Superlatus Merger Agreement, pursuant to which the Company acquired Superlatus by way of a merger of the Merger Sub with and into Superlatus, with Superlatus being a wholly owned subsidiary of the Company and the surviving entity in the Superlatus Merger.
Under the terms of the Superlatus Merger Agreement, at the Closing, shareholders of Superlatus received an aggregate of 136,441 shares of the Company’s common stock and 306,855 shares of the Company’s Series B Preferred Stock, convertible into 100 shares of the Company’s common stock. At Closing, the value of the Company’s common stock was $7.30 per share, resulting in a total value of $225,000,169.
On October 13, 2023, the Company announced that Superlatus PD Holding Company, Inc., a purported subsidiary of Superlatus, entered into a supplier agreement with Rainforest, pursuant to which Superlatus allegedly appointed Rainforest as its exclusive distributor for Superlatus’ portfolio of consumer packaged goods brands in certain markets. The Company later learned and announced that neither the Company’s management nor the Company’s Board of Directors authorized or approved the organization of Superlatus PD Holding Company, Inc. or the entry into the supplier agreement. Instead, the Company’s management determined that certain representatives of a former subsidiary of the Company likely unilaterally took actions related to the supplier agreement.
On January 8, 2024, the Company entered into the Superlatus Amendment as not all of the closing conditions of the Superlatus Merger Agreement were met. Under the terms of the Superlatus Amendment, the merger consideration to the shareholders of Superlatus was adjusted to the aggregate of 136,441 shares of the Company’s common stock and 15,759 shares of the Company’s Series B Preferred Stock, resulting in a total value of $12,500,089. Additionally, the shareholders of Superlatus agreed to surrender back to the Company 291,096 shares of the Company’s Series B Preferred Stock.
On March 5, 2024, the Company entered into the Superlatus SPA with the Buyer, Superlatus Foods Inc. Pursuant to the Superlatus SPA, the Company sold all of the issued and outstanding stock of Superlatus to the Buyer. A $1.00 purchase price was delivered to the Company at the closing, which occurred simultaneously with the execution of the Superlatus SPA. As a result of the transaction Superlatus is no longer a subsidiary of the Company, and the rights and assets of Superlatus together with various liabilities and obligations that were specific to Superlatus became rights and obligations of the Buyer.
Other Legacy Subsidiaries
The Company also previously owned 100% of Softell, IPS, Bonum Health, Inc., and Bonum Health, LLC.
Softell & IPS Entities
On October 4, 2024, the Company and Softell entered into the IPS Assignment Agreement, pursuant to which the Company transferred, and Softell accepted, 100% of the membership interests of IPS. As a result, IPS became a wholly-owned subsidiary of Softell.
On April 8, 2025, the Company entered into the IPS MIPA with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed to sell all of the Company’s membership interests in IPS. Suren Ajjarapu, the Company’s former Chief Executive Officer, and Prashant Patel, the Company’s former President and Chief Operating Officer, each have a beneficial interest in Tollo.
On April 8, 2025, the Company also entered into the Softell SPA with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed to sell all issued and outstanding shares of common stock of Softell.
Bonum Health Entities
On April 8, 2025, the Company also entered into the Bonum SPA with Tollo, pursuant to which Tollo agreed to purchase and the Company agreed to sell all issued and outstanding shares of common stock of Bonum Health, Inc.
In November 2025, the Company dissolved Bonum Health, LLC.
The divestitures described above are part of a broader strategic realignment at the Company designed to sharpen operational focus and unlock long-term value. It is aligned with the Company’s commitment to streamline its core operations, optimize its portfolio, and accelerate growth in the Branded and Specialty Pharma markets. The Company intends to use the proceeds obtained from the divestment to facilitate the high-growth commercial and strategic product development activities at its Scienture LLC subsidiary.
The Company believes that the key benefits of the divestitures include:
Increased Operational Efficiency : Streamlining the Company’s structure aimed at strengthening its balance sheet, providing for leaner operations and a more agile decision-making framework.
Realize Synergies : Consolidating overlapping functions and eliminating redundancies intended to cause annualized cost savings.
Dedicated Focus : Affording the full focus and deployment of resources to the commercial products and the high value product pipeline in development at its Scienture subsidiary.
Liquidity Outlook Cash Explanation
Cash Requirements
As of December 31, 2025, the Company’s primary source of liquidity consisted of $6,662,008 in cash and cash equivalents and the Tollo promissory note with a principal balance of $5,000,000 (bearing interest at the prime rate and maturing June 30, 2030). The Company has financed its operations primarily through equity issuances under its equity line of credit (“ELOC”) and convertible note arrangements. During the year ended December 31, 2025, the Company raised approximately $26.3 million in gross equity proceeds through ELOC and other equity transactions. The Company’s principal uses of cash are commercialization of ARBLI™ and REZENOPY TM research and development, general and administrative costs, and debt service. The Company expects to fund its operations for at least the next twelve months from its existing cash balance and revenues generated from ARBLI™ commercialization, which commenced in the third quarter of 2025 and is expected to grow in 2026. The company also expects to generate revenue from REZENOPY TM which is anticipated to commence in the third quarter of 2026. The Company may also raise additional funding through the sale of debt or equity to fund accelerated pipeline development activities; however, there can be no assurance that such funding will be available on favorable terms, or at all.
The Company’s ability to continue to fund operations beyond the next twelve months will depend on its ability to grow revenues from the commercialization of ARBLI™ and REZENOPY TM and, if needed, to access additional capital markets. Management continues to evaluate potential strategic transactions and partnerships to accelerate product development and commercialization across the pipeline.
Going Concern
The consolidated financial statements have been prepared on a going concern basis. As of December 31, 2025, the Company had cash and cash equivalents of $6,662,008, positive working capital of approximately $5,181,000, and current liabilities of approximately $2,735,000. Management evaluated conditions and events in accordance with ASC 205-40 and determined that, based on the factors described below, there is no substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date these financial statements are issued. See also “Note 2 – Going Concern” in the Notes to Consolidated Financial Statements for further discussion.
As of December 31, 2025, the Company had an accumulated deficit of $80,551,237 and cash and cash equivalents of $6,662,008. The Company had current liabilities of $2,735,351 and working capital of approximately $5,181,000, an improvement of approximately $6,782,000 from the working capital deficit of $(1,601,416) as of December 31, 2024.
Management believes that the Company’s existing cash of $6,662,008, combined with growing revenues from ARBLI™ and REZENOPY TM commercialization and its plans to access additional capital as needed, will be sufficient to fund operations and meet its obligations for at least the twelve months following the issuance of these financial statements. Key factors supporting this assessment include: (i) cash on hand of $6.7 million, which management believes is sufficient to cover current operating requirements; (ii) positive working capital of approximately $5.2 million as of December 31, 2025, compared to a working capital deficit of approximately $(1.6) million as of December 31, 2024; (iii) initial revenues from ARBLI™ commencing in the third quarter of 2025, with projected revenue growth in 2026; (iv) initial revenues from REZENOPY™ commencing in the third quarter of 2026, with projected revenue growth in 2027 and (v) the Company’s ability to modulate discretionary spending and access equity markets, as demonstrated by raising approximately $26.3 million in gross equity proceeds during 2025.
Cash Flows
The following table summarizes the Company’s Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024:
Year Ended December 31, 2025
Year Ended December 31, 2024
Change
% Change
Net cash used in operating activities from continuing operations
Net cash provided by (used in) operating activities from discontinued operations
Operating Activities
Net cash used in investing activities from continuing operations
Net cash provided by investing activities from discontinued operations
Investing Activities
Net cash provided by (used in) financing activities from continuing operations
Net cash used in financing activities from discontinued operations
Financing Activities
Net change in cash
Net cash used in operating activities from continuing operations for the year ended December 31, 2025 was $13,382,482, compared to net cash used in operating activities of approximately $13,286,163 for the year ended December 31, 2024. The net loss of $43,507,142 was the primary driver of cash used in operations in 2025, partially offset by significant non-cash charges including $26,346,050 of impairment losses, $3,161,100 of debt discount amortization, $2,068,892 of stock-based compensation expense, $4,310,090 of common stock issued for services, $453,846 of amortization of intangible assets, and gains on warrant and derivative fair value changes of $3,205,854. Changes in working capital used cash of approximately $6,782,427, primarily driven by increases in accounts receivable and inventory associated with the ARBLI™ commercialization launch.
Net cash provided by (used in) investing activities from continuing operations was $0 for the year ended December 31, 2025 and $2,379,024 net cash used in investing activities from continuing operations for the year ended December 31, 2024. Net cash provided by investing activities from discontinued operations was $0 for 2025, compared to $29,931,815 in 2024, which primarily reflected proceeds from the disposition of Micro Merchant Systems assets and other asset sales completed in the first and second quarters of 2024.
Net cash provided by financing activities from continuing operations for the year ended December 31, 2025 was $19,733,595, compared to net cash used in financing activities of approximately $12,980,000 for the year ended December 31, 2024. Cash provided by financing activities in 2025 was primarily driven by gross proceeds of $26,293,039 from the issuance of common stock through the Company’s ELOC and other equity transactions, partially offset by repayment of convertible notes of $9,244,444, net repayment of related party loans of $415,000, and development liability payments of $400,000. The year ended December 31, 2024 reflected cash used in financing activities primarily due to the payment of special cash dividends of approximately $14,858,000 partially offset by proceeds from convertible note issuances.
Results of Operations
The following selected consolidated financial data should be read in conjunction with the audited consolidated financial statements and the notes to these statements included in this Annual Report.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Year Ended
December 31,
Percent
Change
Change
Revenues
Cost of sales
Gross profit
Operating expenses:
Wage and salary expense
Professional fees
Accounting and legal expense
Technology expense
General and administrative (including stock-based compensation expense)
Research and development
Impairment loss
Total operating expenses
Change in fair value of warrant liability
Change in fair value of derivative liability
Impairment of investment
Loss on conversion of note payable
Loss on disposition of subsidiaries
Interest income
Loss on disposal of asset
Interest expense
Net loss from continuing operations
Benefit / (provision) for income taxes
Net loss from continuing operations, net of tax
Income from discontinued operations, net of tax
Net (loss) income
Revenues and Gross Profit
Revenues for the year ended December 31, 2025 were $431,609, compared to $136,643 for the year ended December 31, 2024, an increase of $294,966, or approximately 216%. The increase reflects initial sales of ARBLI™ (SCN-102, Losartan Potassium Oral Suspension) through wholesale distribution channels, which commenced in the third quarter of 2025 following FDA approval in March 2025. Revenue in 2024 consisted primarily of residual pharmaceutical wholesale activity prior to the IPS disposition. Cost of sales for the year ended December 31, 2025 was $100,127, resulting in gross profit of $331,482 (gross margin: 76.8%), compared to cost of sales of $130,638 and gross profit of $6,005 (gross margin: 4.4%) for the year ended December 31, 2024. The improvement in gross margin reflects the shift to higher-margin branded pharmaceutical sales through ARBLI™ versus the prior-period lower-margin wholesale distribution activity.
Operating Expenses
Total operating expenses were $42,922,324 for the year ended December 31, 2025 compared to $14,707,020 for the year ended December 31, 2024. The increase of $28,215,304 was primarily driven by non-cash impairment charges of $26,346,050 recognized in 2025 (comprising a goodwill impairment of $21,372,960 and IPR&D impairment of $4,973,090), with no comparable charge in 2024. Excluding impairment charges, total operating expenses were $16,576,274 in 2025 compared to $14,707,020 in 2024. Key components of operating expenses were as follows:
Wage and salary expense was $2,118,568 for the year ended December 31, 2025, relatively flat compared to $2,111,066 for 2024. Professional fees increased $949,490 to $2,407,822 in 2025 from $1,458,332 in 2024, primarily due to higher external consulting costs related to commercialization activities, SEC compliance, and corporate actions. Accounting and legal expense was $2,070,337 in 2025 compared to $1,807,041 in 2024, an increase of $263,296, driven by incremental costs associated with the year-end audit, SEC filings, and legal matters. General and administrative expenses (including non-cash stock-based compensation) increased $1,248,436 to $7,926,016 in 2025 from $6,677,580 in 2024, primarily due to higher non-cash stock-based compensation expense and costs associated with ARBLI™ commercialization activities. Technology expense decreased $319,050 to $97,261 in 2025 from $416,311 in 2024, primarily reflecting the wind-down of legacy technology platform expenses following the IPS and Softell dispositions. Research and development expenses were $1,956,270 in 2025 compared to $2,236,690 in 2024, a decrease of $280,420, reflecting shifts in the timing of CRO, regulatory spending and partner milestone payments across our pipeline programs (SCN-102: $368K; SCN-104: $422K; SCN-106: $298K; SCN-110: $500K in 2025).
Non-Operating Income (Expense)
Non-operating income (expense) for the year ended December 31, 2025 included: a gain on the change in fair value of warrant liability of $909,020 (2024: loss of $182,982), reflecting mark-to-market decreases in warrant fair value; a gain on the change in fair value of the derivative liability of $2,296,834 (2024: gain of $180,383), primarily related to the derecognition of the Arena convertible debenture derivative liability upon full repayment; interest income of $302,702 (2024: $135,337) on the Tollo promissory note; interest expense of $4,083,206 (2024: $1,335,631), reflecting a full year of amortization of debt discount and interest on the Arena debenture and other convertible notes; a loss on conversion of note payable of $53,446; and a loss on disposition of subsidiaries of $288,204, primarily related to the Bonum Health, Inc. and Softell transactions. The Company recognized an income tax benefit of $1,994,878 for the year ended December 31, 2025 (2024: $534,396), reflecting changes in deferred tax liabilities attributable to the intangible asset impairment charges recognized during the year.
Net Loss and Discontinued Operations
Net loss from continuing operations, net of tax, was $41,512,264 for the year ended December 31, 2025, compared to a net loss from continuing operations of $18,244,480 for the year ended December 31, 2024. The increase in net loss was primarily attributable to the $26,346,050 of non-cash impairment charges recognized in 2025, with no comparable charge in 2024. Excluding impairment, net loss from continuing operations improved by approximately $1,083,388 year over year. There was no income from discontinued operations in 2025. For the year ended December 31, 2024, income from discontinued operations, net of tax, was $27,310,278, primarily from the gain on the sale of MMS assets and the Softell disposition in the first half of 2024. Net loss for the year ended December 31, 2025 was $41,512,264, compared to net income of $9,065,798 for the year ended December 31, 2024.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Acquisitions
The Company accounts for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a variable interest entity and the Company is the target’s primary beneficiary, and therefore the Company must consolidate its financial statements, or (b) the Company acquires more than 50% of the voting interest of the target and it was not previously consolidated. The Company records business combinations using the acquisition method of accounting, which requires all the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.
The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly
Stock-Based Compensation
The Company accounts for stock-based compensation to employees in accordance with ASC 718, “ Compensation-Stock Compensation ”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period. Stock option forfeitures are recognized at the date of employee termination. Effective January 1, 2019, the Company adopted ASU 2018-07 for the accounting of share-based payments granted to non-employees for goods and services.
Revenue Recognition
In general, the Company accounts for revenue recognition in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.”
IPS is a licensed wholesaler of brand, generic and non-drug products to Customers. IPS takes orders for products, creates invoices for each order and recognizes revenue at the time the product is shipped to the Customer. IPS was divested on April 30, 2025, and its operations are presented as discontinued operations for all periods presented. Following the IPS disposition, the Company’s revenue is derived solely from the sale of pharmaceutical products through wholesale distribution channels. ARBLI™ (SCN-102, Losartan Potassium Oral Suspension) is the Company’s first commercially available product, with sales commencing in the third quarter of 2025. The Company sells its products to wholesale distributors, who in turn sell to retail pharmacies, hospitals, and other healthcare providers. Revenue is recognized at the point in time when control of the product transfers to the customer, which generally occurs upon delivery to the customer’s designated facility. Revenue is measured at the net transaction price, which reflects the gross invoice price reduced by estimated variable consideration, as described below.
Gross-to-Net Sales Adjustments. The Company records product revenue net of estimated variable consideration. Gross-to-net adjustments include: (i) chargebacks, representing the difference between the price charged to wholesale distributors and the lower contract price that distributors extend to their end-customers (including retail pharmacies, hospitals, and clinics under contracted pricing arrangements), estimated based on expected sell-through to qualifying end-customers and contractual terms; (ii) wholesaler rebates and distribution service fees, representing fees and rebates paid to wholesale distributors and, where applicable, group purchasing organizations (“GPOs”) under contractual arrangements, estimated based on contracted rates, expected sales volumes, and historical payment patterns; (iii) prompt pay discounts, representing discounts offered to wholesale distributors for timely payment, estimated based on contractual terms and expected payment timing; and (iv) product returns, estimated based on contractual return rights and available market data, which have not been material to date given the early stage of commercialization of ARBLI™. Estimates of variable consideration are updated each reporting period based on available historical data, contractual terms, and management’s judgment regarding current market conditions. Accrued liabilities related to gross-to-net adjustments are classified within accrued liabilities on the consolidated balance sheets. The Company does not disclose the value of unsatisfied performance obligations as all contracts have an expected duration of one year or less.
Acquisitions, Goodwill and Other Intangible Assets
The Company allocates the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the cost of an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The Company uses a variety of information sources to determine the value of acquired assets and liabilities, including: identifiable intangibles.
Goodwill and indefinite-lived intangibles are not amortized but are instead evaluated annually for impairment as part of the Company’s annual financial review, or when indicators of a potential impairment are present. The annual test for impairment performed for goodwill can be qualitative or quantitative, taking into consideration certain factors surrounding the fair value of the goodwill including, level by which fair value exceeded carrying value in the prior valuation, as well as macroeconomic factors, industry conditions and actual results at the test date.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with the generally accepted accounting principles in the United States (“GAAP”), our management uses earnings before interest, taxes, depreciation, and amortization expenses to net income (“EBITDA”), a non-GAAP measure, as a key measure in operating our business. We use EBITDA to make strategic decisions, establish business plans and forecasts, identify trends affecting our business, and evaluate performance. For example, we use adjusted EBITDA as a measure of our operating performance. Adjusted EBITDA is presented for supplemental informational purposes only, should not be considered a substitute for, or a more meaningful measure than, financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure.
For the year ended December 31, 2025, adjusted EBITDA was $(5,384,274), compared to adjusted EBITDA of $17,820,898 for the year ended December 31, 2024. The decrease reflects the transition from a diversified operating business (which included higher-revenue wholesale and asset-sale activities in 2024) to a focused specialty pharmaceutical company in 2025, with initial ARBLI™ revenues only commencing in Q3 2025 and higher operating costs associated with the build-out of commercialization infrastructure. Excluding the non-cash impairment charges of $26,346,050 recognized in 2025, adjusted EBITDA was $(5,384,274), reflecting the early-stage commercial nature of the business. The following table reconciles net loss from continuing operations to adjusted EBITDA for the years ended December 31, 2025 and 2024:
Year Ended
December 31,
Net (loss) income
Depreciation and amortization
Benefit for income taxes
Interest expense
Other non-operating expenses (income)
Stock based compensation (non-cash)
Impairment loss
Adjusted EBITDA
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.
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 “ Item 8. Financial Statements and Supplemental Data .”.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following is a list of our directors serving on our board of directors (our “Board”) and our executive officers.
Name
Age
Position
Director Since
Dr. Narasimhan Mani
Co-Chief Executive Officer, President, and Director
May 2025
Dr. Shankar Hariharan
Co-Chief Executive Officer, Executive Chairman, and Director
July 2024
Donald G. Fell (1)(2)(3)
Director
January 2014
Mayur Doshi (1)(2)(3)
Director
May 2024
Subbarao Jayanthi (1)(2)(3)
Director
June 2024
Member of the audit committee.
Member of the compensation committee.
Member of the nominating and corporate governance committee.
Executive Officers
Dr. Shankar Hariharan, Co-Chief Executive Officer, Executive Chairman, and Director
Dr. Hariharan has over 37 years of experience in successfully leading branded, specialty and generic pharmaceutical businesses and has held several leadership positions at Scienture, Forest Labs, Par Pharmaceuticals and Amneal Pharmaceuticals. He most recently was the founder, president and chief executive officer of Scienture. At Amneal in his role as the Executive Vice President and Chief Scientific Officer, he oversaw Global Research & Development, Global Regulatory Affairs, and Specialty Product Development and was instrumental in the company achieving significant revenue growth (>$1.5B) with high profit margins. Prior to joining Amneal, Dr. Hariharan founded DermAct, an R&D organization specializing in new molecule discovery and product development for key indications in Dermatology, leading to the company’s successful acquisition. Dr. Hariharan obtained his bachelor’s degree in pharmacy at the Banaras Hindu University (BHU) in India and his Ph.D. in Pharmaceutical Sciences at Northeastern University in Boston, Massachusetts. Dr. Hariharan currently serves on the Board of Depymed, Inc. and on the Advisory Board of New Rhein Healthcare, LLC and MAA Laboratories. Our Board believes that Dr. Hariharan is qualified to serve as a member of the Board because of his extensive business and management background, especially in relation to his executive experience in the healthcare industry.
Dr. Narasimhan Mani, Co-Chief Executive Officer, President, and Director
Dr. Mani has served as a director and the Co-Chief Executive Officer and President of the Company since May 2025. Dr. Mani is an experienced healthcare professional with over 25 years of experience in the pharmaceutical industry. He most recently served as the President and Chief Executive Officer for Kesin Pharma Corporation, a specialty pharma company with a focus on commercializing specialty and brand products. His past roles include serving as the Chief Executive Officer of Xiromed LLC, a generics and specialty drug product company and as the Vice President, Global Corporate Strategy and Business Development, at Amneal Pharmaceuticals where he led all the company’s strategic initiatives across Global Strategy, Portfolio Management, Business Development, and Commercial Operations. His previous experiences also include being the Corporate Finance and Strategic Planning Leader at Johnson & Johnson in New Brunswick, New Jersey, in the pharmaceutical and medical device sectors. He also worked as a Research Scientist and Product Development leader during his time at Forest Laboratories and Par Pharmaceuticals. He is an invited member of the Executives-in-Residence at New Rhein Healthcare Investors, a life-sciences focused private equity firm, and serves on the board of directors at Corsair Pharma, Inc., one of their portfolio companies. Dr. Mani’s journey in the pharmaceutical and healthcare space began with his B.Pharm (Hons.) from BITS, Pilani, India which he completed in 1995. His subsequent graduate degrees include M.S. Analytical Chemistry, from the University of Oklahoma, Norman in 1998, Ph.D. in Pharmaceutics, from the University of Georgia, Athens in 2003 and MBA in Finance and Marketing, from Columbia Business School, New York, NY in 2008. Dr. Mani is also the recipient of the 2021 Outstanding 50 Asian Americans in Business Award in September 2021. Our Board believes that Dr. Mani is qualified to serve as a member of the Board because of his extensive executive and strategic planning experience in the pharmaceutical and healthcare industries, including his background in commercializing specialty products, business-development initiatives, and serving in senior roles at both public and private companies.
Non-Employee Directors
Donald G. Fell, Director
Mr. Fell has served as an independent director of our company since January 2014. Mr. Fell currently serves as a director of urban-gro, Inc. (NASDAQ: UGRO) since February 2026, a director of Wellgistics Health, Inc. (NASDAQ: WGRX) since October 2025, a director of Crown Reserve Acquisition Corp. I, a special acquisition corporation (a “SPAC”) (NASDAQ: CRAC), since May 2025, a director of Kernel Group Holdings, Inc. (NASDAQ: KRNL), a SPAC, since December 2022, a director of Oceantech Acquisitions I Corp. (NASDAQ: OTEC), a SPAC, since March 2023, and a director of Integrated Wellness Acquisition Corp (NYSE: WEL), a SPAC, since February 2024. Mr. Fell previously served as a director of several SPACs that have completed a business combination including: Aesther Healthcare Acquisition Corp. (n/k/a Ocean Biomedical, Inc. (NASDAQ: OCEA)) from June 2021 until February 2023, Semper Paratus Acquisition Corporation (n/k/a Tevogen Bio Holdings Inc. (NASDAQ: TVGN)) from June 2023 until February 2024, and PowerUp Acquisition Corp. (n/k/a Aspire Biopharma Holdings, Inc. (NASDAQ: ASBP) from August 2023 until February 2026.
He is presently Professor and Institute Director for the Davis, California-based Foundation for Teaching Economics and adjunct professor of economics for the University of Colorado, Colorado, Springs. From 1995 – 2012, Mr. Fell held positions with the University of South Florida as a member of the Executive MBA faculty, Director of Executive and Professional Education and Senior Fellow of the Public Policy Institute. He has also served as visiting professor of economics at the University of LaRochelle, France, and as adjunct professor of economics at both Illinois State University and The Ohio State University. Mr. Fell holds undergraduate and graduate degrees in economics from Indiana State University and is all but dissertation (ABD) in economics from Illinois State University. Through his work with the Foundation for Teaching Economics and the University of Colorado, Colorado Springs he has conducted graduate institutes on economic policy and environmental economics in 44 states, throughout Canada, the Islands and Eastern Europe. We believe Mr. Fell is qualified to serve as a member of the Board because of his extensive business and management background. Our Board believes that Mr. Fell’s extensive experience in the field of economics and business will provide us with valuable insight as we seek to execute our business strategy.
Mayur Doshi, Director
Mr. Doshi is President and Chief Executive Officer of AlfaGene Bioscience, Inc. He has successfully initiated several companies and for the last ten years has been the Chief Executive Officer of Apogee Pharma. Mr. Doshi currently serves as a director of Crown Reserve Acquisition Corp. I (NASDAQ: CRAC), a SPAC, since May 2025. He has also served as a director of PowerUp Acquisition Corp. (NASDAQ: PWUP), a SPAC, from August 2023 until February 2026. He has over 20 years of experience in the global generic pharmaceutical market. He is a trained chemist and seasoned entrepreneur with extensive experience in active pharmaceutical ingredients. He has more than twenty years of pharmaceutical and bio-tech industry experience; entering the generic pharmaceutical industry in 1988. He is Chairman and Managing Director of Apogee Pharma, Inc., a major importer of APIs. He works closely with his clients assisting them in bringing new generic drugs to market, including Barr Pharmaceuticals, DuPont Pharmaceuticals, Sandoz, Wyeth and Watson. He is also a major investor in a generic pharmaceutical company and is the founder of, and primary investor in, AlfaGene. He worked and managed extensively in the pharmaceutical industry and created a multimillion dollar company. Mr. Doshi also serves as a philanthropist for various organizations. Our Board believes that Mr. Doshi is well qualified to serve as a director because of his experience in the global generic pharmaceutical market and his experience as a seasoned entrepreneur.
Subbarao Jayanthi, Director
Subbarao Jayanthi, is the Managing Partner of RxC International, LLC and has been with the company since May 2013. RxC International is a strategy consulting firm advising biopharma companies on growth strategies and while at the firm Mr. Jayanthi has advised senior executives and board members at several biopharma companies on corporate strategy, portfolio strategy, and licensing/M&A transactions in the US, EU, and Japan. Mr. Jayanthi is also a Board Member and Chief Business Officer of Interlude Biopharma, a GI company with three late-stage novel medications under development for gastrointestinal disorders. He is also a Senior Advisor to Modig Life Sciences, a rare disease company developing an antisense oligonucleotide for a fatal neurodegenerative disease. Before this, Subbarao was the head of business planning at Daiichi Sankyo, a Top 20 global biopharma company. He spent a decade in leadership positions at global strategy consulting firms such as BCG and others, earlier in his career. He has authored books on biopharma commercialization, value chain management, and investments. He has an MBA in strategy, finance, and marketing from Kellogg School of Management at Northwestern University. Our Board believes that Mr. Jayanthi is qualified to serve as a director because of his extensive business and management background, especially in relation to his executive experience in the healthcare industry.
Family Relationships
There are no familial relationships among our directors and executive officers.
Board Composition
Our business and affairs are managed under the direction of our Board. Dr. Hariharan is the Executive Chairman of our Board. Subject to the terms of our Certificate of Incorporation, our Board may fix, by one or more resolutions adopted from time to time by our Board, the number of directors on the Board. Currently, our Board is comprised of five directors with one-year terms. Each director’s term will continue until the election and qualification of his or her successor, or the earlier of his or her death, resignation or removal.
Our Amended and Restated Bylaws (our “Bylaws”) provide that a majority of our Board will fill vacant directorships, including newly-created seats, unless our Board determines that any such vacancies or newly created directorships should be filled by our stockholders. Our Bylaws also provide that, subject to any applicable preferred stockholder rights, our directors may only be removed for cause and by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares entitled to vote in the election of directors, voting together as a single class.
Our Board does not have a policy requiring the positions of the Chairperson of our Board and our Chief Executive Officer to be separate or held by the same individual. Our directors believe that this determination should be based on criteria that are in our and our stockholders’ best interests, including the composition, skills and experience of our directors, specific challenges faced by us or the industry in which we operate, and governance efficiency.
Director Independence
Our Board determines the independence of each director and nominee for election as a director, as defined in the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) and applicable laws of the Securities and Exchange Commission (the “SEC”), on an annual basis. In assessing director independence, our Board considers, among other matters, the nature and extent of any business relationships, including transactions conducted, between us and each director and between us and any organization for which one of our directors is a director or executive officer or with which one of our directors is otherwise affiliated.
Our Board has determined that (i) each of the directors serving on the Board, other than Shankar Hariharan and Narasimhan Mani, qualifies as an independent director, as defined under the Nasdaq listing rules and (ii) our Board consists of a majority of “independent directors,” as defined under applicable SEC and Nasdaq rules relating to director independence. We also are subject to certain rules of the SEC and Nasdaq relating to the membership, qualifications and operations of the audit committee, as discussed below.
Board Committees
Our Board has the authority to appoint committees to perform certain management and administration functions. Currently, our Board has three committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Each committee operates under a written charter approved by our Board. Copies of each charter are posted on the Investor Relations section of our website at www.scientureholdings.com/governance . Please note that any references to our website does not include or incorporate by reference the information on our website.
Audit Committee
We established our Audit Committee to oversee our accounting and financial reporting processes and the audits of our financial statements. Only our independent directors serve on our Audit Committee, which consists of Donald G. Fell, Mayur Doshi (chair), and Subbarao Jayanthi. Our Board selected the members of the Audit Committee based on a determination that each of the members is financially literate (as required by Nasdaq rules) and qualified to monitor the performance of management and the independent auditors and to monitor our disclosures so that our disclosures fairly present our business, financial condition, and results of operations.
Our Board has also determined that Mr. Doshi is an “audit committee financial expert” (as defined in the SEC rules) because he has the following attributes: (i) an understanding of generally accepted accounting principles in the United States of America (“GAAP”) and financial statements; (ii) the ability to assess the general application of such principles in connection with accounting for estimates, accruals and reserves; (iii) experience analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements; (iv) an understanding of internal control over financial reporting; and (v) an understanding of audit committee functions. Mr. Doshi has acquired these attributes by means of having held various positions that provided relevant experience, as described in his biographical information above.
Our Audit Committee has the sole authority, at its discretion and at our expense, to retain, compensate, evaluate, and terminate our independent auditors and to review, as it deems appropriate, the scope of our annual audits, our accounting policies and reporting practices, our system of internal controls, our compliance with policies regarding business conduct and other matters. In addition, our Audit Committee has the authority, at its discretion and at our expense, to retain special legal, accounting, or other advisors to advise the Audit Committee.
Our Audit Committee Charter was filed as Exhibit 99.1 to the Current Report on Form 8-K that we filed with the SEC on October 28, 2019, and is available on our website at www.scientureholdings.com/governance .
Compensation Committee
Our Compensation Committee is comprised exclusively of independent directors and currently consists of Donald G. Fell (chair), Mayur Doshi, and Subbarao Jayanthi. Our Compensation Committee is responsible for the administration of our stock compensation plans, the approval, review, and evaluation of the compensation arrangements for our executive officers and directors, and for overseeing and advising our Board on the adoption of policies that govern our compensation and benefit programs. In addition, our Compensation Committee has the authority, at its discretion and at our expense, to retain special legal, accounting, or other advisors to advise our Compensation Committee.
None of our current or former officers and employees are or were during the year ending December 31, 2025, members of our Compensation Committee. Additionally, no member of our Compensation Committee had any relationship requiring disclosure by us under Section 404 of Regulation S-K. During the year ending December 31, 2025, none of our executive officers (A) served as a member of our Compensation Committee (or any other committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our Compensation Committee (or another committee performing equivalent functions or, in the absence of any such committee, our Board); (B) served as a director of another entity, one of whose executive officers served on our Compensation Committee (or other committee performing equivalent functions or, in the absence of any such committee, our Board); or (C) served as a member of the compensation committee (or other committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as our director.
Accordingly, the Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules and regulations.
Our Compensation Committee Charter was filed as Exhibit 99.2 to the Current Report on Form 8-K that we filed with the SEC on October 28, 2019, and is available on our website at www.scientureholdings.com/governance .
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee is comprised exclusively of independent directors and currently consists of Donald G. Fell (chair), Subbarao Jayanthi, and Mayur Doshi. Our Nominating and Corporate Governance Committee is responsible for identifying prospective qualified candidates to fill vacancies on the Board, recommending director nominees (including chairpersons) for each of our committees, developing and recommending appropriate corporate governance guidelines and overseeing the self-evaluation of the Board.
In considering individual director nominees and committee appointments, our Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on our Board and its committees and to identify individuals who can effectively assist us in achieving our short-term and long-term goals, protecting our stockholders’ interests, and creating and enhancing value for our stockholders. In so doing, our Nominating and Corporate Governance Committee considers a person’s diversity attributes (e.g., professional experiences, skills, background, race, and gender) as a whole and does not necessarily attribute any greater weight to one attribute. Moreover, diversity in professional experience, skills and background, and diversity in race and gender, are just a few of the attributes that our Nominating and Corporate Governance Committee takes into account. In evaluating prospective candidates, our Nominating and Corporate Governance Committee also considers whether the individual has personal and professional integrity, good business judgment and relevant experience and skills, and whether such individual is willing and able to commit the time necessary for our Board and committee service.
While there are no specific minimum requirements that must be met by a prospective director nominee, our Nominating and Corporate Governance Committee believes that director nominees should possess personal and professional integrity, have good business judgment, have relevant experience and skills, and be willing and able to commit the necessary time for our Board and committee service. We do not have a formal diversity policy. However, our Nominating and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending individuals that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound business judgment using their diversity of experience in various areas. We believe our current directors possess diverse professional experiences, skills, and backgrounds, in addition to (among other characteristics) high standards of personal and professional ethics, proven records of success in their respective fields and valuable knowledge of our business and our industry.
Our Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating director nominees, and regularly assesses the appropriate size of our Board and whether any vacancies on our Board are expected due to retirement or other circumstances. In addition, our Nominating and Corporate Governance Committee considers, from time to time, various potential candidates for directorships. Candidates may come to the attention of our Nominating and Corporate Governance Committee through current Board members, professional search firms, stockholders, or other persons. These candidates may be evaluated at regular or special meetings of our Nominating and Corporate Governance Committee and may be considered at any point during the year.
Our Nominating and Corporate Governance Committee evaluates director nominees at regular or special committee meetings pursuant to the criteria described above and reviews qualified director nominees with our Board. Our Nominating and Corporate Governance Committee selects nominees that best suit our Board’s current needs and recommends one or more of such individuals for election to our Board.
Our Nominating and Corporate Governance Committee will consider nominees for our Board recommended in good faith by our stockholders, provided those nominees meet the requirements of Nasdaq and applicable federal securities law. Stockholders should submit the candidate’s name, credentials, contact information and his or her written consent to be considered as a candidate. These recommendations should be submitted in writing to our Secretary. The proposing stockholder should also include his or her contact information and a statement of his or her share ownership (how many shares owned and for how long). Our Nominating and Corporate Governance Committee may request further information about stockholder recommended nominees in order to comply with any applicable laws, rules, or regulations or to the extent such information is required to be provided by such stockholder pursuant to any applicable laws, rules, or regulations. Individuals recommended by stockholders in accordance with these procedures will receive the same consideration received by individuals identified to our Nominating and Corporate Governance Committee through other means. In addition, our Bylaws permit stockholders to nominate directors at an annual meeting of stockholders or at a special meeting at which directors are to be elected in accordance with the notice of meeting pursuant to the requirements of the our Bylaws and applicable Nasdaq and SEC rules and regulations. There were no material changes to the procedures by which our stockholders may recommend nominees to our Board since our last annual or quarterly report filed with the SEC.
Our Nominating and Corporate Governance Committee Charter was filed as Exhibit 99.1 to the Current Report on Form 8-K that we filed with the SEC on November 20, 2019, and is available on our website at www.scientureholdings.com/governance .
Code of Business Conduct and Ethics
Our Board has adopted a Code of Ethics that applies to all of our directors, officers and employees. This Code of Ethics is available for review in print, without charge, to any stockholder who requests a copy by writing to us at Scienture Holdings, Inc., 20 Austin Boulevard, Commack, NY 11725, Attention: Investor Relations. In addition, the Code of Ethics was filed as Exhibit 14.1 to the Annual Report on Form 10-K that we filed with the SEC on March 23, 2015, and is available on our website at www.scientureholdings.com/investors .
We intend to disclose any amendments to our Code of Ethics and any waivers with respect to our Code of Ethics granted to our principal executive officer, our principal financial officer, or any of our other employees performing similar functions on our website and also in a Current Report on Form 8-K, as required, within four business days following the date of such amendment or waiver. In such case, the disclosure regarding the amendment or waiver will remain available on our website for at least 12 months after the initial disclosure. There have been no waivers granted with respect to our Code of Ethics to any such officers or employees. The inclusion of our website address in this Form 10-K/A does not include or incorporate by reference the information on our website into this Form 10-K/A.
Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers, persons who beneficially own more than 10% of a registered class of our equity securities, and certain other persons to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC, and to furnish the Company with copies of the forms. Based on its review of the forms filed with the SEC, or representations from reporting persons, we believe that all of our directors, executive officers, and greater than 10% beneficial owners filed such reports in a timely manner, except as follows:
Due to an administrative error, Dr. Mani did not file timely a Form 4 relating to shares of our common stock that he acquired or disposed of on September 19, 2024, March 10, 2025, April 14, 2025, October 1, 2025, and February 20, 2026 and shares of convertible preferred stock he disposed of on September 19, 2024.
Due to an administrative error, Dr. Hariharan did not file timely a Form 4 relating to shares of our common stock that he acquired or disposed of on September 19, 2024, March 10, 2025, April 14, 2025, October 1, 2025, and February 20, 2026 and shares of convertible preferred stock he disposed of on September 19, 2024.
Mr. Fell has not filed a Form 4 relating to shares of our common stock that he acquired or disposed of during the years ending December 31, 2023, 2024, and 2025. We understand Mr. Fell is working to complete these filings in the near future to correct this error.
Mr. Doshi has not filed a Form 3 or any Form 4s since he became a director in May 2024. We understand Mr. Doshi is working to complete these filings in the near future to correct this error.
Mr. Jayanthi has not filed a Form 3 or any Form 4s since he became a director in June 2024. We understand Mr. Jayanthi is working to complete these filings in the near future to correct this error.
Mr. Sherb has not filed a Form 3 or any Form 4s since he was appointed our Chief Financial Officer in March 2025. We understand Mr. Sherb is working to complete these filings in the near future to correct this error.
Insider Trading/Anti-Hedging Policies
Each of our and our subsidiaries’ employees, officers, and directors are subject to our Insider Trading Policy, which prohibits the unauthorized disclosure of any nonpublic information acquired in the workplace and the misuse of material nonpublic information in securities trading. This policy also prohibits trading in our securities during certain pre-established blackout periods around the filing of periodic reports and the public disclosure of material information. We recognize that hedging against losses in our securities may disturb the alignment between stockholders and executives that equity awards are intended to build. To ensure compliance with the policy and applicable federal and state securities laws, all individuals subject to the policy must refrain from the purchase or sale of our securities except in designated trading windows or pursuant to preapproved 10b5-1 trading plans. The anti-hedging provisions prohibit all employees, officers, and directors from engaging in “short sales” of our securities. Our Insider Trading Policy is available on our website at www.scientureholdings.com/governance .
