SCI - Annual Report 2022 | FinancialReports.eu

Stock Code:4119

SCI PHARMTECH, INC.

Parent Company Only Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2022 and 2021

Address: No.61, LN. 309, HAIHUN.RD., LUZHU DIST., TAOYUAN CITY 33856, TAIWAN (R.O.C)

Telephone: (03)354-3133

The independent auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and financial statements, the Chinese version shall prevail.

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses Due to Major Disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 9. The contents of statements of major accounting items	Page
	1 2 3 4 5 6 7 8 8 8～10 10～24 25 25～54 55～56 56 56 56～57 57 57～58 58～59 60 60 60 60 61～71

Contents
1. Cover Page
2. Table of Contents
3. Independent Auditors’ Report
4. Balance Sheets
5. Statements of Comprehensive Income
6. Statements of Changes in Equity
7. Statements of Cash Flows
8. Notes to the Financial Statements
(1)
Company history
(2)
Approval date and procedures of the financial statements
(3)
New standards, amendments and interpretations adopted
(4)
Summary of significant accounting policies
(5)
Significant accounting assumptions and judgments, and major sources
of estimation uncertainty
(6)
Explanation of significant accounts
(7)
Related-party transactions
(8)
Pledged assets
(9)
Commitments and contingencies
(10) Losses Due to Major Disasters
(11) Subsequent Events
(12) Other
(13) Other disclosures
(a) Information on significant transactions
(b) Information on investees
(c) Information on investment in mainland China
(d) Major shareholders
(14) Segment information
9. The contents of statements of major accounting items

Page

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KPMG

台北市110615信義路5段7號68樓(台北101大樓) 電話 Tel + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, 傳真 Fax + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) 網址 Web kpmg.com/tw

Independent Auditors’ Report

To the Board of Directors of SCI Pharmtech, Inc.:

Opinion

We have audited the financial statements of SCI Pharmtech, Inc. (“ the Company” ), which comprise the statement of financial position as of December 31, 2022 and 2021, the statement of comprehensive income, the statement of changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Account of Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report .

1. Inventory valuation

Please refer to Note 4(g) and Note 5 of the financial statements for the accounting policy of inventory valuation, as well as the estimation of inventory valuation, respectively. Information regarding the inventory and related expenses are shown in Note 6(e) of the financial statements.

Description of key audit matters:

Due to the characteristics of the pharmaceutical industry, products are manufactured for specific customers, providing batch-specific differentiation services according to their needs while the Company estimates the net realizable value of inventory. If there were no objective information regarding the current sales price available for reference, the Company has to make an evaluation of each product's various factors, such as the demands of the market, to determine the net realizable value of the product. As the reasonableness of estimation might have an impact on the inventory valuation, the test of inventory valuation is one of the key audit matters in our audit.

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

3-1

Our audit procedures include:

． Assessing the reasonableness of provision policies and procedures on allowance for inventory valuation losses, including the evaluation of changes in the market, customer demand and inventory turn-over, to identify the obsolete inventories.
． Performing a retrospective review of inventory movements to evaluate the reasonableness of inventory obsolescence reserve policy and policy on scrapping of inventories.
． Sampling and inspecting the Company’s sales price; as well as verifying the calculation of the lower of cost or net realizable value; evaluating the adopted net realizable value as a basis for obsolete inventories.

2. Revenue recognition

Please refer to Note 4(o) of the financial statements, for the accounting policy of Revenue recognition for operating revenue recognition.

Description of key audit matters:

The Company’s main products are the manufacture of Active Pharmaceutical Ingredients, and Intermediates, etc. The Company’ s major customers are foreign pharmaceutical companies that have transaction terms different from each other, and the revenue recognition was booked by using manual adjustments, which may result in an inappropriate risk in revenue recognition. Therefore, the revenue recognition is one of the key audit matters in our audit.

Our audit procedures include:

． Understanding and testing the related controls surrounding the aforementioned sales and collection cycle;
． Testing of details;
． Verifying whether the revenue had been recognized in the proper period by testing the selected sales transactions before and after the balance sheet date in order to evaluate the accuracy of the timing of the Company's operating revenue recognition.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’ s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

3-2

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

3-3

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Kuan-Ying Kuo and Shu-Min Hsu.

KPMG

Taipei, Taiwan (Republic of China) March 14, 2023

Notes to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ audit report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and financial statements, the Chinese version shall prevail.

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Balance Sheets

December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars)

Assets Current assets: 1100 Cash and cash equivalents(note 6(a)) 1110 Current financial assets at fair value through profit or loss(note 6(b)) 1170 Notes and accounts receivable, net(Notes 6(d) and 6(s)) 1206 Other receivables(Notes 6(f) and 10) 1310 Inventories, net(Note 6(e)) 1470 Other current assets Non-current assets: 1518 Non-current financial assets at fair value through other comprehensive income(Note 6(c)) 1550 Investments accounted for using equity method(Note 6(g)) 1600 Property, plant and equipment(Notes 6(h), 7 and 8) 1755 Right-of-use assets(Note 6(i)) 1780 Intangible assets 1840 Deferred tax assets(Note 6(p)) 1900 Other non-current assets(Notes 6(h) and 7) Total assets	December 31, 2022 Amount % $ 149,842 3 97,545 2 173,565 3 31,101 1 513,430 10 60,135 1 1,025,618 20 66,723 1 476,237 10 3,101,947 62 77,736 2 54,582 1 167,252 3 66,298 1 4,010,775 80 $ 5,036,393 100	December 31, 2021 Amount % 302,866 7 360,401 9 82,976 2 265,586 6 294,182 7 61,809 2 1,367,820 33 72,521 2 401,046 10 1,778,788 42 2,134 - 60,290 1 241,552 6 265,644 6 2,821,975 67 4,189,795 100 Liabilities and Equity Current liabilities: 2100 Total short-term borrowings(Note 6(j)) 2170 Notes and accounts payable 2130 Current contract liabilities(Note 6(s)) 2200 Other payables(Note 6(l)) 2213 Payables on contractors and equipment 2230 Current tax liabilities 2250 Current provisions(Notes 6(n) and 10) 2280 Current lease liabilities(Notes 6(m) and 7) 2300 Other current liabilities(Note 6(d)) Non-Current liabilities: 2541 Long-term bank loans(Note 6(k)) 2580 Non-current lease liabilities(Notes 6(m) and 7) 2570 Deferred tax liabilities(Note 6(p)) 2630 Long-term deferred revenue(Note 6(k)) 2640 Provisions for employee benefits, non-current(Note 6(o)) Total liabilities Equity(Note 6(q)): 3100 Ordinary share 3200 Capital surplus 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings 3400 Other components of equity Total equity Total liabilities and equity	December 31, 2022		December 31, 2021 Amount % - - 33,779 1 41,764 1 128,648 3 118,194 3 - - 418,840 10 1,584 - 5,028 - 747,837 18 - - 571 - 103,811 3 - - 16,945 - 121,327 3 869,164 21 953,824 23 1,348,339 32 426,103 10 29,378 1 611,916 14 (48,929) (1) 3,320,631 79 4,189,795 100
			Amount %
			$ 112,000 2 $ 48,636 1 31,773 1 295,916 6 160,591 3 3,862 - 111,384 2 1,833 - 5,224 - 771,219 15 432,356 9 76,145 2 103,811 2 4,108 - 19,530 - 635,950 13 1,407,169 28 953,824 19 1,357,127 27 431,874 8 48,929 1 892,197 18 (54,727) (1) 3,629,224 72 $ 5,036,393 100

See accompanying notes to financial statements.

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Statements of Comprehensive Income

For the years ended December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars, except for earnings per share)

4110 Sales revenue(Note 6(s)) 5110 Cost of sales(Notes 6(e), 6(o) and 12) 5900 Gross profit Operating expenses(Notes 6(o) and 12): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6900 Net operating income Non-operating income and expenses: 7101 Interest income 7130 Dividend income 7190 Other income(Notes 6(m), 6(u), 7 and 10) 7235 Gains (losses) on financial assets (liabilities) at fair value through profit or loss 7510 Interest expense(Notes 6(m) and 7) 7590 Miscellaneous disbursements(Notes 6(h) and 6(v)) 7610 Gains (losses) on disposals of property, plant and equipment 7630 Foreign exchange gains (losses) 7775 Share of loss of associates and joint ventures accounted for using equity method, net 7900 Profit before tax 7950 Less: Income tax expenses(Note 6(p)) 8200 Profit 8300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss： 8311 Gains (losses) on remeasurements of defined benefit plans(Note 6(o)) 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss(Note 6(p)) 8300 Other comprehensive income, net 8500 Total comprehensive income Earnings per share(Note 6(r)): 9750 Basic earnings per share 9850 Diluted earnings per share	2022 Amount % $ 899,738 100 608,559 68 291,179 32 50,404 6 82,081 9 39,649 4 172,134 19 119,045 13 888 - 5,494 1 264,427 29 (14,074) (2) (1,608) - (1,319) - (1,333) - 27,542 3 (11,242) (1) 268,775 30 387,820 43 79,040 9 308,780 34 (3,840) - (5,798) (1) (768) - (8,870) (1) $ 299,910 33 $ 3.24 $ 3.23	2021 Amount % 864,217 100 656,128 76 208,089 24 49,108 6 54,318 6 30,347 4 133,773 16 74,316 8 526 - 9,437 1 25,285 3 2,242 - (41) - (17,126) (2) - - (14,993) (2) (14,140) (1) (8,810) (1) 65,506 7 9,810 1 55,696 6 2,508 - (19,551) (2) 501 - (17,544) (2) 38,152 4 0.58 0.58

See accompanying notes to financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Statements of Changes in Equity

For the years ended December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars)

Retained earnings Legal reserve Special reserve Unappropriated retained earnings 390,081 - 818,327 - - 55,696 - - 2,007 - - 57,703 36,022 - (36,022) - 29,378 (29,378) - - (39,743) - - (158,971) 426,103 29,378 611,916 - - 308,780 - - (3,072) - - 305,708 5,771 - (5,771) - 19,551 (19,551) - - (105) 431,874 48,929 892,197	Retained earnings Legal reserve Special reserve Unappropriated retained earnings 390,081 - 818,327 - - 55,696 - - 2,007 - - 57,703 36,022 - (36,022) - 29,378 (29,378) - - (39,743) - - (158,971) 426,103 29,378 611,916 - - 308,780 - - (3,072) - - 305,708 5,771 - (5,771) - 19,551 (19,551) - - (105) 431,874 48,929 892,197	Retained earnings Legal reserve Special reserve Unappropriated retained earnings 390,081 - 818,327 - - 55,696 - - 2,007 - - 57,703 36,022 - (36,022) - 29,378 (29,378) - - (39,743) - - (158,971) 426,103 29,378 611,916 - - 308,780 - - (3,072) - - 305,708 5,771 - (5,771) - 19,551 (19,551) - - (105) 431,874 48,929 892,197	Total equity
Legal reserve 390,081 - - - 36,022 - - - 426,103 - - - 5,771 - - 431,874	Special reserve
	-	818,327 55,696 2,007 57,703 (36,022) (29,378) (39,743) (158,971) 611,916 308,780 (3,072) 305,708 (5,771) (19,551) (105) 892,197	3,322,222 55,696 (17,544) 38,152 - - (39,743) - 3,320,631 308,780 (8,870) 299,910 - - 8,683 3,629,224
	- -
	-
	- 29,378 - -
	29,378 - -
	-
	- 19,551 -
	48,929

See accompanying notes to financial statements.

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Statements of Cash Flows

For the years ended December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments for: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Net loss (gain) on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Dividend income Share of loss of subsidiaries, associates and joint ventures accounted for using equity method Losses from disposal of property, plant and equipment Losses due to (reversal of) major disasters Others Total adjustments to reconcile profit Changes in operating assets and liabilities: (Increase) decrease in notes and accounts receivable (Increase) decrease in inventories Decrease in other receivables and other current assets Increase (decrease) in notes and accounts payable Decrease in contract liabilities Increase (decrease) in other payable Decrease in provisions Increase (decrease) in other current liabilities Decrease in provision for employee benefits, non-current Total changes in operating assets and liabilities Total adjustments Cash flow from (used in) operations Dividends received Interest received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through other comprehensive income Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Acquisition of intangible assets Increase in prepayments of property, plant and equipment Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Proceeds from long-term borrowings Payment of lease liabilities Cash dividends paid Net cash flows from (used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2022 $ 387,820 83,044 8,213 14,074 1,608 (888) (5,494) 11,242 1,333 (101,202) - 11,930 (90,589) (219,248) 266,159 14,857 (9,991) 41,865 (110,851) 196 (1,255) (108,857) (96,927) 290,893 5,494 888 (1,608) (110) 295,557 - (2,123) 250,905 (77,750) (1,085,123) 65 2,200 - (82,461) (994,287) 790,000 (678,000) 435,767 (2,061) - 545,706 (153,024) 302,866 $ 149,842	2021 65,506 56,191 7,517 (2,242) 41 (526) (9,437) 14,140 - (5,455) 62 60,291 254,773 86,697 239,656 (47,099) (55,531) (60,190) (151,392) (4,949) (990) 260,975 321,266 386,772 9,437 526 (41) (115,846) 280,848 (6,375) (2,158) 311,954 (66,000) (514,170) - (2,000) (3,953) (256,858) (539,560) - - - (1,773) (39,743) (41,516) (300,228) 603,094 302,866

See accompanying notes to financial statements.

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Notes to the Financial Statements

For the years ended December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars, unless otherwise specified)

(1) Company history

SCI Pharmtech, Inc. (the “Company”) was incorporated in September 18, 1987 as a company limited by shares and registered under the Ministry of Economic Affairs, R.O.C. The major business activities of the Company are the research and development, manufacture and sale of Active Pharmaceutical Ingredients (“API”), Intermediates, specialty chemicals. Mercuries & Associates, Holding Ltd. is the parent company of the Company.

(2) Approval date and procedures of the financial statements

These financial statements were authorized for issuance by the Board of Directors on March 14, 2023.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2022:

－
●Amendments to IAS 16 “Property, Plant and Equipment Proceeds before Intended Use”
－
●Amendments to IAS 37 “Onerous Contracts Cost of Fulfilling a Contract”
●Annual Improvements to IFRS Standards 2018–2020
●Amendments to IFRS 3 “Reference to the Conceptual Framework”
(b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2023, would not have a significant impact on its financial statements:

●Amendments to IAS 1 “Disclosure of Accounting Policies”
●Amendments to IAS 8 “Definition of Accounting Estimates”
●Amendments to IAS 12 “ Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or
Interpretations
Amendments to IAS 1
“Classification of Liabilities
as Current or Non-current”
Amendments to IAS 1 “Non-
current Liabilities with
Covenants”

Content of amendment
Effective date per
IASB
Under
existing
IAS
1
requirements,
companies classify a liability as current
when they do not have an unconditional
right to defer settlement for at least 12
months after the reporting date. The
amendments has removed the requirement
for a right to be unconditional and instead
now requires that a right to defer settlement
must exist at the reporting date and have
substance.
The amendments clarify how a company
classifies a liability that can be settled in its
own shares – e.g. convertible debt.
January 1, 2024
After reconsidering certain aspects of the
2020
amendments1,
new
IAS
1
amendments clarify that only covenants
with which a company must comply on or
before the reporting date affect the
classification of a liability as current or
non-current.
Covenants with which the company must
comply after the reporting date (i.e. future
covenants) do not affect a liability’ s
classification at that date. However, when
non-current liabilities are subject to future
covenants, companies will now need to
disclose
information
to
help
users
understand the risk that those liabilities
could become repayable within 12 months
after the reporting date.
January 1, 2024

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”
●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”
●Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “
●IFRS16 “Requirements for Sale and Leaseback Transactions”

(4) Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized as follows. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

(a) Statement of compliance

These annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

(b) Basis of preparation

(i) Basis of measurement

Except for the following significant accounts, the annual financial statements have been prepared on a historical cost basis:

1) Financial instruments at fair value through profit or loss are measured at fair value;
2) Financial assets at fair value through other comprehensive income are measured at fair value;
3) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in note 4(q).
(ii) Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the Company operates. The financial statements are presented in New Taiwan Dollar (NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(c) Foreign currencies

Transactions in foreign currencies are translated into the respective functional currencies of the Company at exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

(i) an investment in equity securities designated as at fair value through other comprehensive income;
(ii) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
(iii) qualifying cash flow hedges to the extent that the hedges are effective.
(d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

An entity shall classify a liability as current when:

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(f) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

2) Fair value through other comprehensive income (FVOCI)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and trade receivables, other receivable, guarantee deposit paid and other financial assets) and debt investments measured at FVOCI.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

‧ debt securities that are determined to have low credit risk at the reporting date; and

‧ other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables are always measured at an amount equal to lifetime ECL.

Lifetime ECL are the ECL that result from all possible default events over the expected life of a financial instrument.

12-month ECL are the portion of ECL that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECL is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’ s historical experience and informed credit assessment as well as forwardlooking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘ investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the debtor is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECL are discounted at the effective interest rate of the financial asset.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

‧ significant financial difficulty of the borrower or issuer;
‧ a breach of contract such as a default or being more than 90 days past due;
‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
‧ it is probable that the borrower will enter bankruptcy or other financial reorganization; or
‧ the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

5) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

4) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

5) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The parent company only financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual proportionate share.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company’s interests in the associate.

When the Company’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus, however, when the balance of the capital surplus arising from the investment was insufficient, the difference charged or credited to retained earnings. If the Company's ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(i) Investment in subsidiaries

When preparing the parent company only financial statements, investment in subsidiaries which are controlled by the Company is accounted for using the equity method. Under the equity method, the amounts of net income, other comprehensive income and equity attributable to shareholders of the Company in the parent company only financial statement are equal to those in the consolidated financial statements.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(j) Property, plant and equipment
(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) Buildings: 2 ~ 55 years
2) Machinery: 3 ~15 years
3) Other equipment: 3 ~ 15 years

Building and equipment constitutes mainly building, mechanical and electrical power equipment and its related facilities. Each such part depreciates based on its useful life.

Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted if appropriate.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(k) Lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i) As a lessee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

1) fixed payments, including in-substance fixed payments;
2) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
3) amounts expected to be payable under a residual value guarantee; and
4) payments or penalties for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

1) there is a change in future lease payments arising from the change in an index or rate; or
2) there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or
3) there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying assets, or
4) there is a change of its assessment on whether it will exercise an extension or termination option; or
5) there is any lease modifications in lease subject, scope of the lease or other terms.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of assets that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a leasor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

(l) Intangible assets

(i) Recognition and measurement

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use.

The estimated useful life of computer software is 6~11 years.

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(m) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax asset) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(n) Provisions

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(o) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(i) Sale of goods

The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(ii) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(p) Government grants and government assistance

The Company recognizes an unconditional government grant related to profit or loss as other income when the grant becomes receivable. Other government grants related to assets are initially recognized as deferred income at fair value if there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant; they are then recognized in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Company for expenses or losses incurred are recognized in profit or loss on a systematic basis in the periods in which the expenses or losses are recognized.

(q) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plans

The Company ’s net obligation in respect of defined benefit plans is calculate by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Termination benefits

Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.

(iv) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(r) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) temporary differences related to investments in subsidiaries and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

Deferred tax assets and liabilities are offset if the following criteria are met:

(i) The Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or
2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(s) Earnings per share

The Company discloses basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares. Dilutive potential ordinary shares comprise convertible bond, employee stock options, remuneration to employees not yet approved by the Board of directors, and restricted employee shares.

(t) Operating segments

The operating segment information is disclosed within the consolidated financial statements but not disclosed in the parent company only financial statements.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

In preparing the financial statements, management has made judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

There are no critical judgments in applying the accounting policies that have significant effects on the amounts recognized in the financial statements.

Besides, for those uncertainties due to accounting assumptions and estimations, information about the significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

(a) Inventory valuation

Inventories are measured at the lower of cost or net realizable value. The Company writes down the cost of inventories to net realizable value since the inventories at reporting date were estimated to be obsolescence and unmarketable items. The inventory valuation is based on the demand of the products within a specific period. Therefore, the value of inventories will vary significantly variable. Please refer to note 6(e) of the financial statement for inventory valuation.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash and cash equivalents
	December 31,		December 31,
		2022	2021
Cash on hand	$	732	530
Checking accounts and demand deposits		69,394	302,336
Time deposits		79,716	-
	$	149,842	302,866

(i) The Company did not provide cash and cash equivalents as collateral for its loans.

(ii) Please refer to note 6(w) for the interest rate risk and sensitivity analysis of the financial assets and liabilities of the Company.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(b) Financial assets at fair value through profit or loss

	December 31,	December 31,	December 31,
		2022	2021
Mandatorily measured at fair value through profit or loss:
Non-derivative financial assets
Beneficiary certificate	$	1,039	144,252
Stocks listed on domestic markets		96,506	216,149
Total	$	97,545	360,401

The Company did not provide any aforementioned financial assets as collateral for its loans as of December 31, 2022 and 2021, respectively.

Financial assets at fair value through other comprehensive income, non-current:
December 31, 2022 Financial assets at fair value through other comprehensive income: Emerging stocks and unlisted stocks on domestic markets $ 66,723	December 31, 2021
	72,521

The Company designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Company intends to hold for long-term for strategic purposes.

In December 2021, the Company participated in the capital increase by cash of Energenesis Biomedical Co., Ltd. (Energenesis) with the amount of $6,375. As of December 31, 2022, the Energenesis' ownership held by the Company was 2.4%.

No strategic investments were disposed for the years ended December 31, 2022 and 2021, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

Please refer to note 6(w) for market risk of the Company.

As of December 31, 2022 and 2021, the Company did not provide any aforementioned financial assets as collateral for its loans.

(d) Notes and accounts receivable

December 31, 2022 Accounts receivable 173,565 Less: Loss allowance - $ 173,565	December 31, 2021
	82,976 -
	82,976

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables as well as incorporated forward looking information including the reasonable prediction of historical credit loss experience and future economic situation (macroeconomic and relevant industry information). The loss allowance provision was determined as follows:

December 31, 2022	December 31, 2022	December 31, 2022
Gross carrying amount Rate of loss allowance provision Loss allowance provision $134,842 - - 30,762 - - 535 - - 2,709 - - - - - - - - 4,717 (Note) - - $173,565 - December 31, 2021		Loss allowance provision
		- - - - - - -
		-
Gross carrying amount $ 77,998 349 107 - 8 - 4,514 (Note) - $ 82,976	Rate of loss allowance provision - - - - - - - -	Loss allowance provision
		- - - - - - - -
		-

Note: The account receivable has already estimated as refund liabilities for short-term sales discounts and allowances. (recorded as other current liabilities)

The movement in the allowance for notes and trade receivable was as follows:

Balance at January 1 (Balance at December 31)	2022 $ -	2021
		-

As of December 31, 2022 and 2021, the Company did not provide any aforementioned notes and accounts receivable as collaterals for its loans.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(e) Inventories

Raw materials Work in progress Finished goods	December 31, 2022 December 31, 2021 $ 195,009 142,304 45,405 22,244 273,016 129,634 $ 513,430 294,182	December 31, 2022 December 31, 2021 $ 195,009 142,304 45,405 22,244 273,016 129,634 $ 513,430 294,182
		142,304 22,244 129,634
		294,182

The details of the cost of sales were as follows:

Inventory that has been sold Write-down of inventories Loss on disposal of inventories Unallocated production overheads	2022 $ 552,135 5,593 2,778 48,053 $ 608,559	2021 441,581 (5,597) 4,373 215,771
		656,128

As of December 31, 2022 and 2021, the Company did not provide any inventories as collaterals for its loans.

(f) Other receivables

Insurance claim receivable Others	December 31, 2022 $ 30,950 151 $ 31,101	December 31, 2021
		265,539 47
		265,586

(g) Investments accounted for using equity method

The components of investments accounted for using equity method at the reporting date were as follows:

Subsidiaries Associates	December 31, 2022 December 31, 2021 $ 349,354 348,599 126,883 52,447 $ 476,237 401,046	December 31, 2022 December 31, 2021 $ 349,354 348,599 126,883 52,447 $ 476,237 401,046
		348,599 52,447
		401,046

(i) Subsidiaries

Please refer to the consolidated financial statements for the year ended December 31, 2022.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) Associates

1) In April 2021, the Company acquired 40% shares of Framosa Co., Ltd. for $66,000 in cash, resulting in the Company to have significant influence over Framosa Co., Ltd. However, in November 2022, the Company subscribed to the newly issued shares of Framosa Co., Ltd. amounting to $77,750, at a percentage disproportionate from its existing ownership percentage, resulting in the ownership of the Company to decrease from 40% to 25%, and the capital surplus to increase by $8,788.
2) The Company’s financial information on investments accounted for using equity method that are individually insignificant was as follows:

Attributable to the Company: Profit (loss) Other comprehensive income (loss) Total comprehensive income (loss)	2022 $ (12,102) - $ (12,102)	2021 (13,553) - (13,553)

(iii) Pledge to secure

The Company did not provide any investment accounted for using equity method as collaterals for its loans.

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2022 and 2021, were as follows:

Land	Buildings and construction	Machinery and equipment	Office equipment	Others equipment	Prepayments for equipment and construction in progress	Total
$ 509,514 - 90,215 - $ 599,729 $ 509,514 - - - $ 509,514	684,472 1,881 15,758 (1,879) 700,232 553,521 4,480 131,536 (5,065) 684,472	543,143 209,583 376,183 (12,014) 1,116,895 543,884 61,735 56,837 (119,313) 543,143	33,939 4,957 16,973 (403) 55,466 32,917 1,863 2,399 (3,240) 33,939	12,968 - - -	630,253 928,967 (239,198) - 1,320,022 219,670 543,222 (130,266) (2,373) 630,253	2,414,289 1,145,388 259,931 (14,296) 3,805,312 1,872,474 611,300 60,506 (129,991) 2,414,289
				12,968
				12,968 - - -
				12,968

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

Land	Buildings and construction	Machinery and equipment	Office equipment	Others equipment	Prepayments for equipment and construction in progress	Total
$ - - - - $ - $ - - - - $ - $ 599,729 $ 509,514 $ 509,514	264,840 24,123 - (1,879) 287,084 248,002 21,903 - (5,065) 264,840 413,148 305,519 419,632	345,081 51,250 - (10,616) 385,715 420,724 27,947 - (103,590) 345,081 731,180 123,160 198,062	19,688 4,350 - (403) 23,635 17,963 3,516 - (1,791) 19,688 31,831 14,954 14,251	5,892 1,039 - -	- - - - - - - - - - 1,320,022 219,670 630,253	635,501 80,762 - (12,898) 703,365 691,531 54,416 - (110,446) 635,501 3,101,947 1,180,943 1,778,788
				6,931
				4,842 1,050 - -
				5,892
				6,037
				8,126
				7,076

(i) In May 2013, the Company purchased a piece of land for the construction of its factory in Taoyuan Luzhu that was auctioned by the court at a price of $211,184. The amount had been paid in full, and the transfer procedures have been completed. The title deed of a certain portion of the land, measuring 2,259 square meters, was registered in the name of Mr. Weichyun Wong due to certain legal requirements. However, both parties agreed that the Company is the actual owner of the land.
(ii) In 2020, the Company derecognized some part of property, plant and equipment in fire damage amounting to $401,187. Furthermore, the Company rechecked the condition of various properties and equipment in 2021, and derecognized some properties and equipment, which were damaged in the fire and could not be repaired, amounting to $19,545. The above derecognized assets were recorded under the losses due to disasters (miscellaneous disbursements). Please refer to note 6(v) for the details.
(iii) As of December 31, 2022 and 2021, the Company’ s prepayments for equipment purchases amounted to $65,288 and $262,434, respectively, which were recorded as other non-current assets.
(iv) As of December 31, 2022 and 2021, part of the property, plant and equipment of the Company had been pledged as collateral. Please refer to note 8 for the details.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(i) Right-of-use assets

The Company leases many assets including land, company cars and copy machines. Information about leases for which the Company as a lessee is presented below:

Cost:
Balance on January 1, 2022

Additions
Balance on December 31, 2022

Balance on January 1, 2021

Additions
Reductions
Reductions due to lease modification
Balance on December 31, 2021

Accumulated depreciation:
Balance on January 1, 2022

Depreciation
Balance on December 31, 2022

Balance on January 1, 2021

Depreciation
Reductions
Reductions due to lease modification
Balance on December 31, 2021

Carrying amount:
Balance on December 31, 2022

Balance on January 1, 2021

Balance on December 31, 2021

Amount
$ 4,406
77,884
$
82,290
$ 5,657
1,384
(2,545)
(90)
$
4,406
$ 2,272
2,282
$
4,554
$ 3,089
1,775
(2,545)
(47)
$
2,272
$
77,736
$
2,568
$
2,134

In August 2022, the Company leases a piece of land in Guanyin, Taoyuan from subsidiary for the construction of plants and the lease term is fifty years.

(j) Short-term borrowings

The details of short-term borrowings were as following:

The details of short-term borrowings were as following:
Unsecured bank loans Unused credit line for short-term borrowings Range of interest rates	December 31, 2022 $ 112,000 $ 658,000 1.48%~1.58%	December 31, 2021
		-
		420,000
		-

(i) For the years ended December 31, 2022 and 2021, the Company had the additional short-term borrowings amounting to $790,000 and $0, respectively, and the repayment each amounted to $678,000 and $0, respectively.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) For the collateral of the Company's assets for short-term borrowings, please refer to note (8).
(iii) For the information on the Company's exposure to the interest rate risk and liquidity risk, please refer to note 6(w).
(k) Long-term borrowings

Secured bank loans－Maturity year 114.3~116.2 Unsecured bank loans－Maturity year 114.11 Less: current portion Less: deferred income Unused credit lines Range of interest rates	December 31, 2022 $ 322,767 113,000 - (3,411) $ 432,356 $ 714,233 0.8%~1.8%

(i) For the year ended December 31, 2022, the Company had the additional long-term borrowings amounting to $435,767 and the repayment amounted to $0.
(ii) The Company’ s application for a low-interest loan for the construction of plants, purchasing equipment, and support medium-term working capital, had been approved by the National Development Fund, Executive Yuan in 2022, with Mega International Commercial Bank providing the non-revolving loan of $1,000,000, which was recognized and measured by using the market rates, with the margin interests calculated by using the rates between the actual rates and the market rates, recognized as deferred income, based on the Government grants. As of December 31, 2022, the Company had used the credit amount of $322,767.
(l) Other payables

Salaries payable Indemnities payable Others	December 31, 2022 December 31, 2021 $ 85,129 77,512 125,403 - 85,384 51,136 $ 295,916 128,648	December 31, 2022 December 31, 2021 $ 85,129 77,512 125,403 - 85,384 51,136 $ 295,916 128,648
		77,512 - 51,136
		128,648

(m) Lease liabilities

The carrying amount of lease liabilities was as follows:

Current Non-current Please refer to note 6(w) for maturity analysis.	December 31, 2022 December 31, 2021 $ 1,833 1,584 $ 76,145 571	December 31, 2022 December 31, 2021 $ 1,833 1,584 $ 76,145 571
		1,584
		571

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The amounts recognized in profit or loss were as follows: 2022 Interest on lease liabilities $ 562 Expenses relating to short-term leases $ 19,817 Variable lease payments not included in the measurement of lease liabilities $ 38 Expense relating to leases of low-value assets, excluding short-term leases of low-value assets $ 591 Lease modification gains (recorded as other income) $ - The amounts recognized in the statement of cash flows for the Company were as follows: Total cash outflow for leases $ 23,069	2021
	39
	39,365
	108
	1,141
	(1)
	42,426

The Company leases company cars and copy machines: The leases typically run for a period of three to six years.

The Company leases land from subsidiary: The leases typically run for a period of fifty years.

The Company also leases production lines, vehicles and office equipment with contract terms of less than one year. These leases are short-term or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(n) Provisions

Balance on January 1, 2022 Provisions made (reversed) during the year Provisions used during the year Balance on December 31, 2022 Balance on January 1, 2021 Provisions made (reversed) during the year Provisions used during the year Balance on December 31, 2021	Environmental protection costs $ 43,946 11,287 (12,008) $ 43,225 $ 86,156 5,270 (47,480) $ 43,946	Fire disaster indemnity 374,894 (101,202) (205,533) 68,159 509,076 (25,000) (109,182) 374,894	Total 418,840 (89,915) (217,541) 111,384 595,232 (19,730) (156,662) 418,840

(i) In 2022 and 2021, the provisions were recognized for the treatment of liquid waste in accordance with the Standards of Environmental Protection Administration; the amount of provisions were estimated at quantity and cost of the treatment of liquid waste. The Company considers to write off and recognize the above provisions in the following year.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) For the years ended December 31, 2022 and 2021, the Company recognized (reversed) the fire indemnity amounting to $101,202 and $25,000, respectively, due to the fire spreading to the nearby factories. Please refer to note 6(u) and note 6(v) for the details.

(o) Employee benefits

(i) Defined benefit plans

Reconciliations of the defined benefit obligation at present value and plan assets at fair value are as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2022 December 31, 2021 $ (79,356) (75,744) 59,826 58,799 $ (19,530) (16,945)

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for its employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on the years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from two-year time deposits with interest rates offered by the local banks.

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $59,236 at the end of the reporting period. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the Company were as follows:

Defined benefit obligation at January 1 Current service costs and interest Remeasurement in net defined benefit liability (assets) Benefits paid Defined benefit obligation at December 31	2022 $ (75,744) (1,106) (8,519) 6,013 $ (79,356)	2021 (85,075) (1,134) 1,544 8,921 (75,744)

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Company were as follows:

Fair value of plan assets at January 1 Contributions made Interest income Remeasurement in net defined benefit liability (assets) Benefits paid Fair value of plan assets at December 31	2022 $ 58,799 1,979 382 4,679 (6,013) $ 59,826	2021 64,632 1,935 189 964 (8,921)
		58,799

4) Movements of the effect of the asset ceiling

In 2022 and 2021, there were no movements on the effect of the Company's defined benefit plans asset ceiling.

5) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

Service cost Net interest of net liabilities for defined benefit obligations Operating cost Operating expenses	2022 $ 621 103 $ 724 $ 497 227 $ 724	2021 887 58 945 688 257 945

6) Remeasurement in net defined benefit liability (asset) recognized in other comprehensive income

The Company’s remeasurement of the net defined benefit liability (assets) recognized in other comprehensive income for the years ended December 31, 2022 and 2021, were as follows:

Cumulative amount at January 1 Recognized during the year Cumulative amount at December 31	2022 $ 5,256 3,840 $ 9,096	2021 7,764 (2,508) 5,256

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

7) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate as of December 31 Future salary increasing rate	December 31, 2022 December 31, 2021 % 1.25 % 0.65 % 3.00 % 2.00

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $2,272.

The weighted-average duration of the defined benefit obligation is 7 years.

8) Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

benefit obligation shall be as follows:
		The impact on the	present value of
		the defined benefit obligation
		Increased 0.25%	Decreased 0.25%
As of December 31, 2022
Discount rate	$	(1,426)	1,470
Future salary increasing rate		1,441	(1,405)
As of December 31, 2021
Discount rate		(1,410)	1,454
Future salary increasing rate		1,430	(1,395)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions remain constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of the pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2022 and 2021.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligations.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company recognized the pension costs under the defined contribution method amounting to $6,770 and $6,837 for the years ended December 31, 2022 and 2021, respectively. Payment was made to the Bureau of Labor Insurance.

(p) Income taxes

(i) Income tax expenses

The amount of income tax for the years ended December 31, 2022 and 2021, was as follows:

Current income tax expense Recognized during the year $ Tax incentives Income tax estimate under (over) Deferred income tax expense Recognition and reversal of temporary differences Income tax underestimate (overestimate) for prior years Income tax expense $	2022 5,637 (1,691) 26 3,972 75,757 (689) 75,068 79,040	2021 - - (11,683) (11,683) 14,074 7,419 21,493 9,810

The amount of income tax recognized in other comprehensive income for 2022 and 2021 was as follows:

Items that will not be reclassified subsequently to profit or loss: Remeasurement in defined benefit plan Reconciliation of income tax and profit before tax for Profit excluding income tax Income tax using the Company’s domestic tax rate Tax incentives Net gains or losses on domestic investments accounted for using equity method Tax-exempt income Over provision in prior periods Other	2022 2021 $ (768) 501 2022 and 2021 is as follows: 2022 2021 $ 387,820 65,506 77,564 13,101 (1,691) - 2,248 2,828 (965) (1,533) (663) (4,264) 2,547 (322) $ 79,040 9,810

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax assets and liabilities: None.
2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 were as follows:

Deferred tax assets: Balance on January 1, 2022 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2022 Balance on January 1, 2021 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021	Loss for market price decline and obsolete inventories $ 24,701 1,118 - $ 25,819 $ 25,820 (1,119) - $ 24,701	Losses due to major disasters 110,989 - - 110,989 115,350 (4,361) - 110,989	Provision 83,208 (63,748) - 19,460 116,555 (33,347) - 83,208	Deferred revenue - - - - 1,167 (1,167) - -	Tax Losses 20,669 (20,669) - - - 20,669 - 20,669	Others 1,985 8,231 768 10,984 4,654 (2,168) (501) 1,985	Total
							241,552 (75,068) 768
							167,252
							263,546 (21,493) (501)
							241,552

Deferred tax liabilities: Balance on January 1, 2022 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2022 Balance on January 1, 2021 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2021	Insurance claim compensation
	$ 103,811 - - $ 103,811 $ 103,811 - - $ 103,811

(iii) Examination and approval

The ROC tax authorities have examined the Company’s income tax returns through 2020.

(q) Capital and other equity

As of December 31, 2022 and 2021, the authorized common stocks were both $1,200,000, with a par value of 10 New Taiwan dollars per share, of which 8,000 thousand shares were reserved for the issuance of employee stock options, and both of which 95,382 thousand shares, were issued. All issued shares were paid up upon issuance.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(i) Ordinary shares

Based on a resolution at the annual stockholders’ meeting held on July 15, 2021, the Company increased its common stock through the issuance of stock dividends by transferring retained earnings amounting to $158,971. The newly issued shares totaled 15,897 thousand shares with a par value of $10 New Taiwan Dollars per share. The effective date was August 29, 2021, and the registration procedures had been completed.

(ii) Capital surplus

The balances of capital surplus as of December 31, 2022 and 2021 were as follows:

Additional paid-in capital Gain on disposal of assets Stock options Changes in equity of associates and joint ventures accounted for using equity method Employee stock options	December 31, 2022 December 31, 2021 $ 1,270,247 1,270,247 980 980 71,530 71,530 8,788 - 5,582 5,582 $ 1,357,127 1,348,339	December 31, 2022 December 31, 2021 $ 1,270,247 1,270,247 980 980 71,530 71,530 8,788 - 5,582 5,582 $ 1,357,127 1,348,339
		1,270,247 980 71,530 - 5,582
		1,348,339

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(iii) Retained Earning

The Company's article of incorporation stipulates that Company’s net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and special reserves are supposed to set aside in accordance with the relevant regulations or as required by the government. And then any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

According to the Company’s dividend policy, the type of dividends should be determined after considering the Company’ s capital and financial structure, operating conditions, operating surplus, industrial characteristics and cycle. The distribution of net earnings should not be lower than 50% of the current profit before tax. Cash dividends to stockholders should not be lower than 10% of the total dividends.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

1) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

A portion of current period earnings and undistributed prior period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should equal to the current period total net reduction of other shareholders’ equity. For the year 2020 earnings distribution in 2021, the amount to be reclassified to special reserve shall be a portion of current-period earnings and undistributed priorperiod earnings. As for the year 2021 earnings distribution in 2022, the amount to be reclassified to special reserve shall be a portion of after-tax net profit for the period plus items other than after-tax net profit for the period, that are included in the undistributed earnings of the period. A portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

3) Earnings distribution

Based on the resolution of stockholders’ meeting held on June 21, 2022, there were no dividends to be appropriated from the 2021 earnings. Moreover, based on the resolution of stockholders’ meeting held on July 15, 2021, the appropriation of earnings for the year 2020 was approved, and the dividends per share were appropriated as follows:

Dividends distributed to ordinary shareholders: Cash Stock Total	2021 Amount per share (dollars) Total amount $ - - - - $ -	2020 Amount per share (dollars) Total amount 0.50 39,743 2.00 158,971 198,714	2020 Amount per share (dollars) Total amount 0.50 39,743 2.00 158,971 198,714
			Total amount
			39,743 158,971
			198,714

On March 14, 2023, the Company's Board of Directors resolved to appropriate the 2022 earnings. These earnings were appropriate as follows:

Dividends distributed to ordinary shareholders: Cash Shares Total	2022	2022
	Amount per share (dollars)	Total amount
	$ 0.25 23,846 1.25 119,228 $ 143,074 (Continued)	23,846 119,228
		(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(iv) Other equity (net of tax)

		Unrealized gains
		(losses) from
		financial assets
		measured at fair
		value through
		other
		comprehensive
		income
Balance at January 1, 2022	$	(48,929)
Unrealized gains (losses) from financial assets measured at fair value through other
comprehensive income		(5,798)
Balance at December 31, 2022	$	(54,727)
Balance at January 1, 2021	$	(29,378)
Unrealized gains (losses) from financial assets measured at fair value through other
comprehensive income		(19,551)
Balance at December 31, 2021	$	(48,929)

(r) Earnings per share

The calculation of basic earnings per share and diluted earnings per share for the years ended December 31, 2022 and 2021 were as follows:

2022 Basic earnings per share Profit attributable to ordinary shareholders of the Company $ 308,780 Weighted-average number of ordinary shares (thousand shares) 95,382 $ 3.24 Diluted earnings per share Profit attributable to ordinary shareholders of the Company $ 308,780 Weighted-average number of ordinary shares (thousand shares) 95,382 Effect of potentially dilutive ordinary shares: Effect of employee compensation 288 Weighted-average number of ordinary shares (thousand shares) (diluted) 95,670 $ 3.23	2021
	55,696
	95,382
	0.58
	55,696
	95,382 183
	95,565
	0.58

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(s) Revenue from contracts with customers
(i) Disaggregation of revenue

Primary geographical markets Italy Germany Japan Taiwan United States China Switzerland Spain Others Major products Active Pharmaceutical Ingredients Intermediates Specialty Chemical	2022 $ 204,824 130,457 110,243 109,319 93,269 54,911 54,458 6,339 135,918 $ 899,738 $ 450,223 433,362 16,153 $ 899,738	2021
		244,025 92,758 19,508 58,520 108,242 148,804 52,739 30,306 109,315
		864,217
		396,602 451,915 15,700
		864,217

(ii) Contract balances

Notes and accounts receivable Less: allowance for impairment Total Contract liabilities (sales received in advance)	December 31, 2022 $ 173,565 - $ 173,565 $ 31,773	December 31, 2021 January 1, 2021 82,976 337,749 - - 82,976 337,749 41,764 97,295	December 31, 2021 January 1, 2021 82,976 337,749 - - 82,976 337,749 41,764 97,295
			337,749 -
			337,749
			97,295

Please refer to note 6(d) for the information of accounts receivable and the impairment.

The amount of revenue recognized for the years ended December 31, 2022 and 2021 that was included in the contract liability balance at the beginning of the period were $10,314 and $64,893, respectively.

The changes of contract liabilities are arising from the difference of time point, which the Company transfers the ownership of goods and which customers do the payment.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(t) Remuneration to employees and directors

In accordance with the Articles of incorporation, the Company should contribute no less than 3% of the profit as employee remuneration and less than 2% as directors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The aforementioned employees’ compensation will be distributed in shares or cash. The recipients may include the employees of the subordinate of the Company who meet certain specific requirements.

For the years ended December 31, 2022 and 2021, the remunerations to employees amounted to $26,091 and $6,424, respectively, and the remunerations to directors amounted to $4,250 and $876, respectively. These amounts were calculated using the Company’s net income before tax without the remunerations to employees and directors for each period, multiplied by the proposed percentage which is stated under the Company's proposed Article of Incorporation. These remunerations were expensed under operating costs or expenses for each period. Shares distributed to employees as employees’ remuneration are calculated based on the closing price of the Company’s shares on the day before the approval by the Board of Directors.

There were no differences between the amounts approved in the Board of Directors and those recognized in the 2022 and 2021 financial statements. Related information would be available at the Market Observation Post System Website.

(u) Other income

Provisions reversal of fire indemnity Insurance claim income, net Others Miscellaneous disbursements Losses in property plant, and equipment and construction in progress due to the disaster Fire indemnity (reversals) Subtotal Cleaning expenses after the disaster Others	2022 $ 101,202 158,275 4,950 $ 264,427 2022 $ - - - - 1,319 $ 1,319	2021 - - 25,285 25,285 2021 19,545 (25,000) (5,455) 21,710 871 17,126

(v) Miscellaneous disbursements

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(w) Financial Instruments

(i) Credit risk
1) Credit risk exposure

The carrying amount of financial assets and contract assets represents the maximum amount exposed to credit risk.

2) Concentration of credit risk

As of December 31, 2022 and 2021, there were five and five major customers, respectively, that accounted for 72.58% and 84.15%, respectively, of notes and accounts receivable. Thus, credit risk is significantly centralized. In order to minimize credit risk, the Company periodically evaluates the major clients’ financial positions and the possibility of collecting notes and accounts receivables to ensure the uncollectible amount is recognized appropriately as loss allowance.

3) Receivables and debt securities
a) For credit risk exposure of notes and trade receivables, please refer to note 6(d).
b) Other financial assets at amortized cost include other receivables and time deposits. The counterparties of the time deposits held by the Company are the financial institutions with investment grade credit ratings. Therefore, the credit risk is considered to be low.

(ii) Liquidity Risk

The following table shows the contractual maturities of financial liabilities, excluding estimated interest payments:

Carrying Amount December 31, 2022 Non-derivative financial liabilities: Short-term borrowings $ 112,000 Notes and accounts payable 48,636 Lease liabilities (including current and non-current) 77,978 Other payables 295,916 Payables on contractors and equipment 160,591 Long-term borrowings 432,356 $ 1,127,477	Contractual cash flows (112,177) (48,636) (114,367) (295,916) (160,591) (455,385) (1,187,072)	Within a year (112,177) (48,636) (3,122) (295,916) (160,591) (5,608) (626,050)	1 ~ 2 years - - (2,483) - - (5,624) (8,107)	Over 2 years - - (108,762) - - (444,153) (552,915)

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

Carrying Amount December 31, 2021 Non-derivative financial liabilities: Notes and accounts payable $ 33,779 Lease liabilities (including current and non-current) 2,155 Other payables 128,648 Payables on contractors and equipment 118,194 $ 282,776	Contractual cash flows (33,779) (2,178) (128,648) (118,194) (282,799)	Within a year (33,779) (1,605) (128,648) (118,194) (282,226)	1 ~ 2 years - (573) - - (573)	Over 2 years
				- - - -
				-

The Company is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amount.

(iii) Currency risk
1) Exposure to foreign currency risk

The Company’s significant exposure to foreign currency risk was as follow:

Foreign currency: in thousands of dollars

Financial assets Monetary items USD to TWD EUR to TWD Financial liabilities Monetary items USD to TWD	December 31, 2022	December 31, 2022	December 31, 2021 Foreign currency Exchange rate TWD 11,977 27.63 330,925 859 31.12 26,732 1,098 27.63 30,338
	Foreign currency	Exchange rate TWD 30.66 253,987 32.52 16,032 30.66 31,518
	$ 8,284 493 1,028

2) Sensitivity analysis

The Company’ s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, loans and borrowings, accounts payable, accrued expenses and other payables that are denominated in foreign currency.

The analysis assumes that all other variables remain constant. A strengthening (weakening) 1% of the functional currency against each foreign currency as of December 31, 2022 and 2021 would have affected the net profit before tax increased or decreased $2,385 and $3,273, respectively, for the years ended December 31, 2022 and 2021. The analysis is performed on the same basis for both periods.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

3) Foreign exchange gain and loss on monetary items

Since the Company has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For years 2022 and 2021, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $27,542 and $(14,993), respectively.

(iv) Interest rate analysis

The details of financial assets and liabilities exposed to interest rate risk were as follows:

Financial assets Financial liabilities	Carrying amount
	December 31, 2022 December 31, 2021 $ 69,101 302,043 547,767 -

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 0.25% when reporting to management internally, which also represents the Company management’s assessment of the reasonably possible interest rate change.

If the interest rate had increased or decreased by 0.25%, the Company's net profit before tax would have increased (decreased) by $(1,197) and $755, respectively, for the years ended December 31, 2022 and 2021, with all other variable factors remaining constant. This is mainly due to the Company’s bank savings and borrowings with variable interest rates.

(v) Fair value

1) Fair value hierarchy

The fair value of financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income are measured on a recurring basis. The carrying amount and fair value of the Company’ s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required:

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

	December 31, 2022	December 31, 2022	December 31, 2022
Book value $ 97,545 66,723 149,842 173,565 31,101 1,010 355,518 $ 519,786 $ 112,000 48,636 77,978 295,916 160,591 432,356 $ 1,127,477		Fair Value
	Level 1 Level 2 Level 3 Total 97,545 - - 97,545 - - 66,723 66,723 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - December 31, 2021
Book value $ 360,401 72,521 302,866 82,976 265,586 3,210 654,638 $ 1,087,560		Fair Value
	Level 1 360,401 - - - - -	Level 2 - - - - - -	Level 3 Total - 360,401 72,521 72,521 - - - - - - - -

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

Financial liabilities measured at amortized cost Notes and accounts payable Lease liabilities (including current and non- current) Other payables Payables on contractors and equipment Total		December 31, 2021	December 31, 2021	December 31, 2021
	Book value $ 33,779 2,155 128,648 118,194 $ 282,776		Fair Value
		Level 1 - - - -	Level 2 - - - -	Level 3 Total - - - - - - - -

2) Valuation techniques for financial instruments not measured at fair value

The Company’s valuation techniques and assumptions used for financial instruments not measured at fair value were as follows:

a) Financial assets and liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

3) Valuation techniques for financial instruments measured at fair value
a) Non-derivative financial instruments

Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-therun bonds from Taipei Exchange can be used as a base to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market.

If a quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have a quoted price in an active market. If a financial instrument is not in accord with the definition mentioned above, then it is considered to be without a quoted price in an active market. In general, market with low trading volume or high bid-ask spreads is an indication of a non-active market.

Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The measurement of fair value of a non-active market financial instruments held by the Company which do not have quoted market prices are based on the comparable market approach, with the use of key assumptions of price-book ratio multiple or earnings multiple of comparable listed companies as its basic measurement. These assumptions have been adjusted for the effect of discount without the marketability of the equity securities.

4) Transfers between Levels

There were no transfers in either level during 2022 and 2021.

5) Reconciliation of Level 3 fair values

January 1, 2022 Total gains and losses recognized: In profit or loss In other comprehensive income December 31, 2022 January 1, 2021 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased December 31, 2021	Fair value through other comprehensive income Unquoted equity instruments $ 72,521 - (5,798) $ 66,723 $ 85,697 - (19,551) 6,375 $ 72,521

For the years ended December 31, 2022 and 2021, total gains and losses that were included in unrealized gains and losses from financial assets at fair value through other comprehensive income were as follows:

comprehensive income were as follows:
		2022	2021
Total gains and losses recognized:
In other comprehensive income, and presented in
“unrealized gains and losses from financial assets at
fair value through other comprehensive income”	$	(5,798)	(19,551)

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

6) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company’ s financial instruments that use Level 3 inputs to measure fair value include “financial assets measured at fair value through other comprehensive income – debt investments”. Financial assets at fair value through other comprehensive income – equity investments without an active market have more than one significant unobservable inputs. The significant unobservable inputs of financial assets at fair value through other comprehensive income – equity investments without an active market are individually independent, and there is no correlation between them.

Quantified information of significant unobservable inputs was as follows:

Item Fair value through other comprehensive income– equity investments without an active market 〃	Valuation technique Price-Book ratio method 〃	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement ‧The multiplier of Price- Book Ratio (As of December 31, 2022 and 2021 were 1.42~2.89 and 1.70~2.72, respectively) The higher the fair value is, the higher the multiplier will be. ‧Lack-of-Marketability discount rate (As of December 31, 2022 and 2021 were 23% and 23%~50%) The higher the Lack-of- Marketability discount rate is, the lower the fair value will be.

7) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The Company's measurement on the fair value of financial instruments is deemed reasonable despite different valuation models or assumptions that may lead to various results. For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

Inputs Price-Book ratio multiples Lack-of Marketability discount rate	Move up or Other comprehensive income downs Favorable Unfavorable 5% $ 3,312 3,357 5% $ 976 1,021	Other comprehensive income	Other comprehensive income
			Unfavorable
			3,357
			1,021

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

December 31, 2021 Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income	Inputs Price-Book ratio multiples Lack-of Marketability discount rate	Move up or Other comprehensive income downs Favorable Unfavorable 5% $ 3,698 3,600 5% $ 2,345 2,247	Other comprehensive income	Other comprehensive income
				Unfavorable
				3,600
				2,247

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(x) Financial risk management

(i) Overview

The Company have exposures to the following risks from its financial instruments:

1) credit risk
2) liquidity risk
3) market risk

The following likewise discusses the Company’ s objectives, policies and processes for measuring and managing the above mentioned risks. For more disclosures about the quantitative effects of these risk exposures, please refer to the respective notes in the accompanying financial statements.

(ii) Structure of risk management

The Company operations are affected by a variety of financial risks, the risks including market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s financial risk management focus on uncertainty in the financial market to avoid hidden difficulty at the financial statement and financial performance of the Company. The Company’s finance department carried out risk management according to the dealer’s authority approved by Board of Directors. The Company’ s financial department maintain close communication with operation department in charge of identifying, evaluating, avoiding financial risk.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

1) Accounting receivable and other receivables

The Company’s finance department has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’ s credit limits are offered. Credit limits are established for each customer, which represent the maximum open amount without requiring approval from the finance department and are reviewed periodically. Customers that fail to meet the Company’ s benchmark creditworthiness may transact with the Company only on a prepayment basis.

The Company’ s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. The Company’s customers are mainly from the pharmaceutical industry. In order to mitigate account receivable credit risk, the Company constantly assesses the financial status of the customers, and requests the customers to provide guarantee or security if necessary. The Company regularly accesses the collectability of accounts receivable and recognizes allowance for accounts receivable. The impairment losses are always within management’s expectation.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including customer profile, operating and financial status, payment records and the degree of cooperation. Customers that are graded as “ high risk” are placed on a restricted customer list and monitored by the finance department more strictly, and the transactions are made on a more cautious way.

The Company set the allowance for bad debt account to reflect the estimated losses for trade, other receivables, and investment. The allowance for bad debt account consists of specific losses relating to individually significant exposure and the unrecognized losses arising from similar assets groups. The allowance for bad debt account is based on historical collection record of similar financial assets.

2) Investment

The exposure to credit risk for the bank deposits, fixed income investments and other financial instruments is measured and monitored by the Company’s finance department. The Company only deals with banks, other external parties, corporate organizations, government agencies and financial institutions with good credit rating. The Company does not expect any counterparty above fails to meet its obligations hence there is no significant credit risk arising from these counterparties.

3) Guarantees

The Company’ s policy is to provide financial guarantees to the entities listed in the policy. As of December 31, 2022 and 2021, no guarantees were outstanding.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(iv) Liquidity risk

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises the banking facilities and ensures in compliance with the terms of the loan agreements.

Please refer to note 6(j) and note 6(k) for unused long-term and short-term bank facilities as of December 31, 2022 and 2021.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’ s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Company’s entities, primarily the New Taiwan Dollars (TWD). The currencies used in these transactions are denominated in TWD and USD.

The Company pays attention to changes in exchange rates and uses forward exchange contracts to hedge its currency risk. The Company’ s risk management policy avoids currency risk by fair value hedge.

As for other monetary assets and liabilities denominated in other foreign currencies, when short-term imbalance takes place, the Company buys or sells foreign currencies at spot rate to ensure that the net exposure is kept on an acceptable level.

2) Interest rate risk

The Company evaluates the changes in market interest rates at any time, and establishes relationships with financial institutions to strive for the most suitable interest rate in a timely manner, and use it with short-term and long-term financing lines to reduce interest expenses.

(y) Capital management

The Company’s objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, to maintain the interest of other related parties, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, issue new shares, or sell assets to settle any liability.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company use the debt-to-equity ratio to manage capital. This ratio is the total net debt divided by the total capital. The net debt from the balance sheet is derived from the total liabilities less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, and other equity plus net debt.

The Company’s capital management strategy is to maintain a debt-to-equity ratio of less than 30% in December 31, 2022 and 2021. The ratio of debt to capital in December 31, 2022 and 2021, is as follows:

December 31, 2022	December 31, 2022	December 31, 2021
$ 547,767 149,842 $ 397,925 $ 3,629,224 % 11		- 302,866
		-
		3,320,631
	% 11	% -

(z) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow for the years ended December 31, 2022 and 2021, were as follows:

(i) For the acquisition of right-of-use assets by lease for the years ended December 31, 2022 and 2021, please refer to note 6(i).
(ii) Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021, were as follows:

					Non-cash	changes
		January 1,					December
		2022		Cash flows	Acquisition	Other	31, 2022
Short-term borrowings	$	-		112,000	-	-	112,000
Long-term borrowings		-		435,767	-	(3,411)	432,356
Lease liabilities		2,155		(2,061)	77,884	-	77,978
	$	2,155		545,706	77,884	(3,411)	622,334
						Non-cash
						changes
						Changes in
				January 1,		lease	December
				2021	Cash flows	payments	31, 2021
Lease liabilities			$	2,588	(1,773)	1,340	2,155

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(7) Related-party transactions:

(a) Parent company and ultimate controlling party

Mercuries & Associates Holding Ltd. (Mercuries) is both the parent company of the consolidated entity and the ultimate controlling party of the Company, holding 33.11% of the Company’ s outstanding shares. It has issued the consolidated financial statements available for public use.

(b) Names and relationship with related parties:

Name of related party	Relationship with the Company
Yushan Pharmaceuticals, Inc. (Yushan Pharmaceuticals)	Subsidiary company
Framosa Co., Ltd. (Framosa)	The associate of the Company
Weichyun Wong	The chairman of the Company

(c) Significant transaction with related parties
(i) Lease
- 1) Lessee

The Company rented lands from its subsidiary, the total value of the contract was $77,368. The rental fee is determined based on nearly and rental rates. The details of the above lease transactions were as follows:

Subsidiary Subsidiary	Lease liabilities Interest expense December 31, 2022 December 31, 2021 2022 2021 $ 76,954 - 539 - Guarantee deposits received (recorded as other non-current liability) December 31, 2022 December 31, 2021 $ 200 -	Lease liabilities Interest expense December 31, 2022 December 31, 2021 2022 2021 $ 76,954 - 539 - Guarantee deposits received (recorded as other non-current liability) December 31, 2022 December 31, 2021 $ 200 -
	December 31, 2022 $ 76,954
		-

2) Lessor

The Company rented out office for related party. The details of the above lease transactions are as follows:

Associate	Rental income (recorded as other income)	Rental income (recorded as other income)
	December 31, 2022 December 31, 2021 $ 167 -
		-

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) Others

The title deed of a certain portion of the land was registered in the name of Mr. Weichyun Wong due to certain legal requirements for the years ended December 31, 2022 and 2021. Please refer to note 6(h).

(d) Key management personnel compensation

Salary and Short-term employee benefits

2022 $ 19,557	2021
	14,290

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets Land Building	Subject	December 31, 2022 December 31, 2021 $ 42,736 42,736 2,884 3,523 $ 45,620 46,259	December 31, 2022 December 31, 2021 $ 42,736 42,736 2,884 3,523 $ 45,620 46,259
	Pledged as collaterals 〃		42,736 3,523
			46,259

(9) Commitments and contingencies:

(a) As of December 31, 2022 and 2021, the unused balance of the Company's outstanding standby letters of credit amounted to $5,535 and $47,625, respectively.
(b) The significant outstanding purchase commitments for property, plant and equipment were as follows:

Acquisitions of property, plant and equipment	December 31, 2022 December 31, 2021 $ 464,044 887,002	December 31, 2022 December 31, 2021 $ 464,044 887,002
		887,002

(10) Losses Due to Major Disasters:

A major fire occurred on December 20, 2020, and caused damage to some of the Company's buildings, equipment, construction in progress and inventories, and spread to several nearby plants, resulting in damage to their property and interruption of their operations. In 2020, the Company derecognized damaged assets, including buildings, equipment and construction in progress and inventories and estimated the amount of fire indemnity for the nearby companies.

The Company is currently in the process of negotiation with the above damaged companies for fire indemnity payments. As of December 31, 2022 and 2021, the outstanding provisions for fire indemnity was $68,159 and $374,894, respectively, which was recorded under provisions. Please refer to note 6(n) for the details.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company has already entered into related property insurance and public liability insurance contracts. As of December 31, 2022 and 2021, the Company recognized the claim receivables for $30,000 and $265,539, respectively, which were recorded under other receivables. As of date of the report, the above receivables had been received.

For the years ended December 31, 2022 and 2021, the Company received net incremental compensation amounting to $158,275 and $0, respectively, which was recorded under other income.

(11) Subsequent Events: none

(12) Other:

The followings are the summary statement of current period employee benefits, depreciation and amortization expenses by function:

By function By item	2022	2022		2021	2021	2021
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	120,816 11,925 5,448 - 3,023 56,073 4,154	80,896 4,509 2,046 4,250 5,222 26,971 4,059	201,712 16,434 7,494 4,250 8,245 83,044 8,213	106,945 12,061 5,716 - 3,094 38,251 3,494	51,482 4,366 2,066 876 5,147 17,940 4,023	158,427 16,427 7,782 876 8,241 56,191 7,517

For the years ended December 31, 2022 and 2021, the information on the number of employees and employee benefit expense of the Company is as follows:

Number of employees Number of directors (non-employees) Average employee benefit expenses Average salaries expenses Average employee salary expense adjustment Remuneration for supervisors	2022 207 5 $ 1,158 $ 999 % 37.41 $ -	2021
		223
		5
		876
		727
		-

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

The Company’ s salary and remuneration policy (including directors, managers and employees) is as follows:

(i) Directors: the remuneration of the directors is based on the policy of the Company’s Articles of Incorporation.

The directors’ remuneration is less than 2% of the profit in according to the Articles of Incorporation. The reasonable remuneration is determined after considering the Company's operating results, and each director’s contribution. In addition, considering that independent directors are also the members of the audit and remuneration committees, the workload is more heavy, therefore, the independent directors have higher director remuneration than other members of the Board of Director.

(ii) Managers and employees:
1) The Company’s salary and remuneration policy is to provide a competitive salary level, to recruit and retain key managers and employees that are required for the Company's operations, and to achieve the Company's steady growth and sustainable development.
2) Employee remuneration includes monthly salary, performance bonus, year-end bonus and remuneration based on the profit status of the current year.
3) The remuneration of managers shall be handled in accordance with the "policies, systems, standards and structure of manager’ s performance goals and salary remuneration".

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2022:

(i) Loans to other parties: None.
(ii) Guarantees and endorsements for other parties: None.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(iii) Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand shares

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company 〃〃〃〃〃〃〃	Beneficiary Certificate (UPAMC James Bond Money Market Fund) Stock (Cathay Financial Holding Co., Ltd. Preferred Stock A) Stock (Cathay Financial Holding Co., Ltd. Preferred Stock B) Stock (Cathay Financial Holding Co., Ltd. Common Stock) Stock (CTBC Financial Holding Co., Ltd. Preferred Shares B) Stock (Shin Kong Financial Holding Co., Ltd. Preferred Shares A) Stock (Energenesis Biomedical Co., Ltd.) Stock (Sunny Pharmtech Inc.)	- - - - - - - -	Current Financial asset at fair value through profit or loss 〃〃〃〃〃 Financial assets at fair value through other comprehensive income 〃	61 743 0.023 61 528 577 1,603 4,497	1,039 42,054 1 2,426 31,311 20,714 32,138 34,585	- - - - - - 2.4 % 3.25 %	1,039 42,054 1 2,426 31,311 20,714 32,138 34,585	- - - - - - - -

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the capital stock: None.

(v) Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:

Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter- party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
The Company	Buildings	2021.10.19	$ 630,000	$ 441,000	ECO Technical Services Co., Ltd.	None	Not applicable	Not applicable	Not applicable	-	Price negotiation	to expand production

(vi) Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock: None.
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of $100 million or 20% of the capital stock: None.
(viii) Receivables from related parties with amounts exceeding the lower of $100 million or 20% of the capital stock: None.
(ix) Trading in derivative instruments: None.

(Continued)

SCI PHARMTECH, INC. Notes to the Financial Statements

(b) Information on investees:

The following is the information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China):

				Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares	Unit: thousand dollars/ thousand shares
Name of investor	Name of investee	Location	Main businesses and products	Original investment amount		Ending balance			Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2022	December 31, 2021	Shares (thousands)	Percentage of ownership	Carrying value
The Company 〃 Yushan Pharmaceuticals Inc.	Yushan Pharmaceuticals Inc. Framosa Co., Ltd. Honey Bear Biosciences, Inc.	R.O.C. R.O.C. R.O.C	The research and development, manufacture and sale of API Circular economy by purifying and utilizing used solvents Biotechnology services	351,900 143,750 15,000	351,900 66,000 -	35,190 14,375 1,500	% 100 % 25 % 6.09	349,354 126,883 14,434	860 (33,584) (9,559)	860 (12,102) (461)

(c) Information on investment in mainland China: None.
(d) Major shareholders:

Unit: shares

		Unit: shares
Shareholding Shareholders' Name	Shares	Percentage
Mercuries & Associates Holding Ltd.	30,283,358	% 31.74
Zhan Liwei	6,060,000	% 6.35

(14) Segment information:

Please refer to the consolidated financial statements for the year ended December 31, 2022.

SCI PHARMTECH, INC.

STATEMENT OF CASH AND CASH

EQUIVALENTS

December 31, 2022

(Expressed in thousands of New Taiwan Dollars

and Foreign Currency)

Item		Description		Amount
Cash on hand			$	732
Checking accounts				293
Demand deposits	TWD			11,592
	Foreign currency	(USD1,413, JPY30,664, EUR132, and others)		57,509
Time deposits	Foreign currency	(USD 2,600)		79,716
Total			$	149,842
Note: The exchange rate at balance sheet date was as follows:
USD: 30.66
EUR: 32.52
JPY: 0.2304

SCI PHARMTECH, INC.

STAEMENTS OF NOTES AND ACCOUNTS

RECEIVABLE

December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Item Accounts Receivable: Siegfried USA, LLC Chemische Fabrik Berg GmbH Sumitomo Chemical Co., Ltd. Taiwan Biotech Co., Ltd. Biolab Sanus Farmaceutica Ltda Others (Note) Subtotal Less: allowance for uncollectible accounts Notes and accounts receivable, net	Description Amount Third parties operating income $ 31,298 〃 29,250 〃 29,074 〃 25,358 〃 10,987 〃 47,598 173,565 - $ 173,565

Note: The amount of individual client included in others does not exceed 5% of the account balance.

SCI PHARMTECH, INC.

STATEMENTS OF INVENTORY

December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Item Finished goods Work in progress Raw materials Total	Cost $ 273,016 45,405 195,009 $ 513,430	Net Realizable Value
		539,923 120,540 199,706
		860,169

STATEMENTS OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT

Please refer to note 13(a)(iii).

SCI PHARMTECH, INC.

CHANGES IN NON-CURRENT FINANCIAL ASSETS AT FAIR VALUE

THROUGH OTHER COMPREHENSIVE INCOME

For the year ended December 31, 2022

(Expressed in thousands of New Taiwan Dollars; thousands of share)

Investee Company Sunny Pharmtech Inc. Energenesis Biomedical Co., Ltd. Less: valuation adjustment Total	Beginning Balance	Beginning Balance	Transferred In	Transferred In	Transferred In	Increase Number of Shares Amount - - - - - - -	Decrease Number of Shares Amount - - - - - 5,798 5,798	Ending Balance Number of Shares Amount Collaterals or Pledged Assets 4,497 50,093 None 1,603 71,357 ″ - (54,727) ″ 66,723	Ending Balance Number of Shares Amount Collaterals or Pledged Assets 4,497 50,093 None 1,603 71,357 ″ - (54,727) ″ 66,723
	Number of Shares	Amount $ 50,093 71,357 (48,929) $ 72,521	Number of Shares		Amount - - - -	Number of Shares - - -	Number of Shares - - -	Number of Shares
	4,497 1,603 -		- - -					4,497 1,603 -

SCI PHARMTECH, INC.

CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

For the year ended December 31, 2022

(Expressed in thousands of New Taiwan Dollars; thousands of shares)

Investee Company Yushan Pharmaceuticals Inc. Framosa Co., Ltd.	Beginning Balance Number of shares Amount 35,190 $ 348,599 6,600 52,447 $ 401,046	Increase Number of shares Amount - - 7,775 77,750 77,750	Increase Number of shares Amount - - 7,775 77,750 77,750	Share of profit recognized 860 (12,102) (11,242)	Changes in equity of associates and joint ventures accounted for using equity method (105) 8,788 8,683	Ending Balance Number of shares Amount 35,190 349,354 14,375 126,883 476,237	Percentage of ownership % 100 % 25	Net value Collaterals or Pledged Assets 349,354 None 126,883 None 476,237
	Number of shares 35,190 6,600	Number of shares - 7,775				Number of shares 35,190 14,375

SCI PHARMTECH, INC.

CHANGES IN PROPERTY, PLANT AND

EQUIPMENT

For the year ended December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Please refer to note 6(h).

STATEMENT OF SHORT-TERM LOANS

December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Creditor	Description Credit loans 〃〃〃〃 Secured loans	Ending Balance $ 62,000 - 50,000 - - - $ 112,000	Contract Period 2022.11.29~ 2023.12.29 2022.11.30~ 2023.11.30 2022.9.22~ 2023.9.22 2022.10.21~ 2023.10.21 2022.11.30~ 2023.11.30 2022.1.25~ 2023.1.24	Interest Rate 1.48% 1.58%	Loan Commitments 38,000 200,000 50,000 150,000 100,000 120,000 658,000	Collaterals or Pledged Assets Note None 〃〃〃〃 Land and Buildings
E. SUN Bank Taishin Bank Jih Sun Bank KGI Bank Taiwan Business Bank Mega Bank

SCI Pharmtech, Inc.

STATEMENT OF LONG-TERM LOANS

December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Creditor Mega Bank Shanghai Commercial and Savings Bank	Loan Commitments $ 1,000,000 150,000 $ 1,150,000	Contract Period 2022.2.25~ 2027.2.15 2022.11.25~ 2025.11.24	Collaterals Interest Pledged Rate Assets 0.8~1.425% Property plant, and equipment 1.8% None	Amount	Amount
				Loan within than 1year - - -	Loan more than 1year
					319,356 113,000
					432,356

SCI PHARMTECH, INC.

STATEMENT OF NOTES AND ACCOUNTS

PAYABLE

December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Vendor name Notes Payable: MSIG Mingtai Insurance Others (Note) Accounts Payable: Fenhe Chemical Co., Limited Trans Chief Chemical Industry Co., Ltd.. Nantong Kaixin Pharma Chemical Co., Ltd. Hebei ChenXin Skytop Pharmcham Co., Ltd. Ching Tide Corporation Air Products San Fu Corporation All-In-Line Chemicals Enterprise Co., Ltd. Others (Note)	Description Amount Third parties operating cost $ 562 〃 32 594 Third parties operating cost 11,879 〃 7,369 〃 5,422 〃 4,799 〃 4,575 〃 2,702 〃 2,437 〃 8,859 48,042 $ 48,636

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

SCI PHARMTECH, INC.

STATEMENT OF OTHER PAYABLES

December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Item		Description		Amount
Payroll payables and year-end	Payroll expenses for	December 2022, estimated 2022	$	85,129
bonuses payable	year-end bonuses,	and employees and directors'
	remuneration
Indemnities payable	Fire compensation			125,403
Estimated expenses payable	Groundwater pollution remediation fee			45,213
Others (Note)	Utilities expense and	freight		40,171
Total			$	295,916
Note: The amount of each item in others does not exceed		5% of the account balance.

STATEMENT OF NET REVENUE

For the year ended December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Item API Intermediates Specialty Chemical	Quantity (thousand kilograms) Amount 184 $ 450,223 124 433,362 163 16,153 $ 899,738

SCI PHARMTECH, INC.

OPERATING COSTS

For the year ended December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Item		Amount
Raw materials
Raw materials, beginning of year	$	169,995
Add: Purchases		443,953
Less: Raw materials, end of year (including raw materials in transit)		(222,998)
Transferred to manufacturing expenses		(19,994)
Transferred to operating expenses		(1,115)
Write-downs		(2,173)
Material consumption		367,668
Direct labor		48,451
Manufacturing expenses		319,716
Total Manufacturing costs		735,835
Add: Work in process, beginning of year		42,401
Finished good used		262,207
Less: Work in process, end of year		(74,565)
Work in process used		(495)
Cost of finished goods		965,383
Add: Finished goods, beginning of year		205,285
Less: Finished goods, end of year (including inventory in transit)		(351,389)
Remanufacture		(262,207)
Transferred to operating expenses		(276)
Finished good used		(3,872)
Write-downs		(605)
Costs of goods sold		552,319
Add: Allowance for inventory obsolescence (reversals)		5,593
The write-down of inventories		2,778
Unallocated production overhead		48,053
Others		(184)
Cost of sales	$	608,559

SCI PHARMTECH, INC.

STATEMENT OF OPERATING EXPENSES

For the year ended December 31, 2022

(Expressed in thousands of New Taiwan Dollars)

Item Payroll expenses Commission expenses Professional service fees Depreciation Freight Consumables Repair and maintenance Others (Note) Total	Selling expenses $ 8,027 2,722 314 661 14,270 277 2 24,131 $ 50,404	Administrative expenses 60,297 - 8,274 18,448 - 1,187 4,565 (10,690) 82,081	Research and development expenses
			18,868 - 1,774 7,862 - 2,914 1,277 6,954
			39,649

Note: The amount of each item in others does not exceed 5% of the account balance.

AI assistant

SCI — Annual Report 2022

52383_rns_2022-11-11_c1fc5ee1-ad26-4e70-855a-b5b3e811020e.pdf

SCI PHARMTECH, INC.

Parent Company Only Financial Statements

Table of contents

KPMG

Independent Auditors’ Report

Opinion

Basis for Opinion

Key Audit Matters

1. Inventory valuation

Description of key audit matters:

2. Revenue recognition

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditors’ Responsibilities for the Audit of the Financial Statements

Notes to Readers

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Balance Sheets

December 31, 2022 and 2021

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Statements of Comprehensive Income

For the years ended December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars, except for earnings per share)

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Statements of Changes in Equity

For the years ended December 31, 2022 and 2021

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Statements of Cash Flows

For the years ended December 31, 2022 and 2021

(expressed in thousands of New Taiwan dollars)

(English Translation of Financial Statements Originally Issued in Chinese) SCI PHARMTECH, INC.

Notes to the Financial Statements

For the years ended December 31, 2022 and 2021

(1) Company history

(2) Approval date and procedures of the financial statements

(3) New standards, amendments and interpretations adopted:

SCI PHARMTECH, INC. Notes to the Financial Statements

SCI PHARMTECH, INC. Notes to the Financial Statements

(4) Summary of significant accounting policies:

(a) Statement of compliance

(i) Basis of measurement

SCI PHARMTECH, INC. Notes to the Financial Statements

(c) Foreign currencies

SCI PHARMTECH, INC. Notes to the Financial Statements

(e) Cash and cash equivalents

(f) Financial instruments

(i) Financial assets

1) Financial assets measured at amortized cost

SCI PHARMTECH, INC. Notes to the Financial Statements

SCI PHARMTECH, INC. Notes to the Financial Statements

SCI PHARMTECH, INC. Notes to the Financial Statements

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

2) Equity instrument

3) Financial liabilities

4) Derecognition of financial liabilities

5) Offsetting of financial assets and liabilities

SCI PHARMTECH, INC. Notes to the Financial Statements

(g) Inventories

(h) Investment in associates

SCI PHARMTECH, INC. Notes to the Financial Statements

(i) Investment in subsidiaries

(ii) Subsequent expenditure

SCI PHARMTECH, INC. Notes to the Financial Statements

(k) Lease

(i) As a lessee

SCI PHARMTECH, INC. Notes to the Financial Statements

(ii) As a leasor

(l) Intangible assets

(i) Recognition and measurement

(ii) Subsequent expenditure

(iii) Amortization

SCI PHARMTECH, INC. Notes to the Financial Statements

(m) Impairment of non-financial assets

(n) Provisions

(o) Revenue from contracts with customers

SCI PHARMTECH, INC. Notes to the Financial Statements

(i) Sale of goods

SCI Annual Report 2022