SCI — Interim / Quarterly Report 2021

Nov 8, 2021

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Stock Code:4119

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors’ Review Report For the Three Months Ended March 31, 2021 and 2020

Address: No.61, LN. 309, HAIHUN.RD., LUZHU DIST., TAOYUAN CITY 33856, TAIWAN (R.O.C) Telephone: (03)354-3133

The independent auditors’ review report and the accompanying consolidated 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’ review report and consolidated financial statements, the Chinese version shall prevail.

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Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Review Report 4. Consolidated Balance Sheets 5. Consolidated Statements of Comprehensive Income 6. Consolidated Statements of Changes in Equity 7. Consolidated Statements of Cash Flows 8. Notes to the Consolidated Financial Statements (1) Company history (2) Approval date and procedures of the consolidated 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

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KPMG

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

Independent Auditors’ Review Report

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

Introduction

We have reviewed the accompanying consolidated balance sheets of SCI Pharmtech, Inc. and its subsidiaries as of March 31, 2021 and 2020, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2021 and 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with Statement of Auditing Standard 65, “ Review of Financial Information Performed by the Independent Auditor of the Entity” . A review of the consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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.

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Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the SCI Pharmtech, Inc. and its subsidiaries as of March 31, 2021 and 2020, and of its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2021 and 2020 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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

KPMG

Taipei, Taiwan (Republic of China) May 6, 2021

Notes to Readers

The accompanying consolidated financial statements are intended only to present the consolidated 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 review such consolidated financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ review report and the accompanying consolidated 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’ review report and consolidated financial statements, the Chinese version shall prevail.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards as of March 31, 2021 and 2020

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2021, December 31, 2020, and March 31, 2020 (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(p)) 1206 Other receivables (note 10) 1310 Inventories, net (note 6(e)) 1470 Other current assets Non-current assets: 1510 Non-current financial assets at fair value through profit or loss (note 6(b)) 1518 Non-current financial assets at fair value through other comprehensive income (note 6(c)) 1600 Property, plant and equipment (notes 6(f) and 8) 1755 Right-of-use assets (note 6(g)) 1780 Intangible assets 1840 Deferred tax assets 1900 Other non-current assets Total assets	March 31, 2021 Amount % $ 811,372 18 - - 154,843 3 519,057 12 247,549 6 48,314 1 1,781,135 40 668,809 15 68,211 1 1,515,046 34 2,014 - 39,888 1 263,546 6 119,842 3 2,677,356 60 $ 4,458,491 100	December 31, 2020 Amount % 633,029 14 - - 337,749 8 519,651 11 380,879 8 47,503 1 1,918,811 42 667,955 14 85,697 2 1,500,152 33 2,568 - 41,319 1 263,546 6 89,890 2 2,651,127 58 4,569,938 100	March 31, 2020 Amount % 656,467 15 557,168 13 504,456 12 9 - 423,545 10 40,735 1 2,182,380 51 - - 102,728 2 1,884,571 44 2,477 - 46,206 1 57,243 1 34,729 1 2,127,954 49 4,310,334 100 Liabilities and Equity Current liabilities: 2170 Notes and accounts payable 2130 Current contract liabilities (note 6(p)) 2200 Other payables (note 6(i)) 2213 Payables on contractors and equipment 2230 Current tax liabilities 2250 Current provisions (note 6(k)) 2280 Current lease liabilities (note 6(j)) 2300 Other current liabilities Non-Current liabilities: 2580 Non-current lease liabilities (note 6(j)) 2570 Deferred tax liabilities 2640 Provisions for employee benefits, non-current Total liabilities Equity attributable to owners of parent (note 6(n)): 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	March 31, 2021		December 31, 2020		March 31, 2020
				Amount %		Amount %		Amount %
						80,878 2 97,295 2 188,938 4 21,064 1 127,490 3 595,232 13 1,340 - 9,977 - 1,122,214 25 1,248 - 103,811 2 20,443 - 125,502 2 1,247,716 27 794,853 17 1,348,339 30 390,081 9 - - 818,327 18 (29,378) (1) 3,322,222 73 4,569,938 100		70,115 2 61,726 1 226,079 5 27,758 1 154,014 4 86,081 2 1,681 - 12,522 - 639,976 15 815 - - - 21,173 - 21,988 - 661,964 15 794,853 19 1,348,339 31 332,971 8 4,788 - 1,179,766 27 (12,347) - 3,648,370 85 4,310,334 100

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2021 and 2020

(expressed in Thousands of New Taiwan Dollars, except for earnings per common share)

4110 Sales revenue (note 6(p)) 5110 Cost of sales (notes 6(e), 6(l) and 12) 5900 Gross profit Operating expenses (notes 6(l) and 12): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6900 Net operating income Non-operating income and expenses: 7190 Other income 7101 Interest income 7235 Gains (losses) on financial assets (liabilities) at fair value through profit or loss 7510 Interest expense (note 6(j)) 7590 Miscellaneous disbursements 7630 Foreign exchange gains (losses) 7900 Profit before tax 7950 Less: Income tax expenses (note 6(m)) 8200 Profit 8300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss: 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(m)) 8300 Other comprehensive income, net 8500 Total comprehensive income Earnings per share (note 6(o)): 9750 Basic earnings per share 9850 Diluted earnings per share

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the three months ended March 31, 2021 and 2020

(expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parent

Balance at January 1, 2020 Profit for the three months ended March 31, 2020 Other comprehensive income for the three months ended March 31, 2020 Total comprehensive income for the three months ended March 31, 2020 Balance at March 31, 2020 Balance at January 1, 2021 Profit for the three months ended March 31, 2021 Other comprehensive income for the three months ended March 31, 2021 Total comprehensive income for the three months ended March 31, 2021 Balance at March 31, 2021	Ordinary shares	Capital surplus		Retained earnings	Retained earnings	Retained earnings	Other equity interest Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total equity 22,254 3,474,640 - 208,331 (34,601) (34,601) (34,601) 173,730 (12,347) 3,648,370 (29,378) 3,322,222 - 41,673 (17,486) (17,486) (17,486) 24,187 (46,864) 3,346,409	Other equity interest Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total equity 22,254 3,474,640 - 208,331 (34,601) (34,601) (34,601) 173,730 (12,347) 3,648,370 (29,378) 3,322,222 - 41,673 (17,486) (17,486) (17,486) 24,187 (46,864) 3,346,409
				Legal reserve	Special reserve Unappropriated retained earnings
	$ 794,853 - - - $ 794,853 $ 794,853 - - - $ 794,853	1,348,339		332,971 - - - 332,971 390,081 - - - 390,081	4,788 - - - 4,788 - - - - -	971,435		22,254 - (34,601) (34,601) (12,347) (29,378) - (17,486) (17,486) (46,864)
		- -				208,331 -
		-				208,331
		1,348,339				1,179,766
		1,348,339				818,327
		- -				41,673 -
		-				41,673
		1,348,339				860,000

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the three months ended March 31, 2021 and 2020

(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 Others Total adjustments to reconcile profit Changes in operating assets and liabilities: Decrease (increase) in notes and accounts receivable Decrease (increase) in inventories Decrease (increase) in other receivables and other current assets Increase (decrease) in contract liabilities Increase (decrease) in notes and accounts payable Increase (decrease) in other payable Increase (decrease) in provisions Increase (decrease) in other current liabilities Increase (decrease) in provision for employee benefits, non-current Total changes in operating assets and liabilities Total adjustments Cash flow from (used in) operations 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 profit or loss Acquisition of property, plant and equipment Decrease (increase) in refundable deposits Increase in prepayments of property, plant and equipment Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Payment of lease liabilities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards SCI PHARMTECH, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

March 31, 2021 and 2020

(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. The consolidated financial statements of the Company comprise the Company and its subsidiaries (together referred to as the “Group” and individually as the “ Group entities” ). Please refer to note 4(b) for related information of the Group primarily business activities. Mercuries & Associates, Holding Ltd. is the parent company of the Company.

(2) Approval date and procedures of the consolidated financial statements

These consolidated financial statements were authorized for issuance by the Board of Directors on May 6, 2021.

(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. (“FSC”) which have already been adopted.

The Group has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2021:

• ●Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”

• －

• ●Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform Phase 2”

• ●Amendments to IFRS 16 “Covid-19-Related Rent Concessions beyond June 30, 2021”

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (b) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Group, 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”

Content of amendment Effective date per IASB The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of balance sheet, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. January 1, 2023

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

The Group 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 consolidated 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 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”

• ●Amendments to IAS 1 “Disclosure of Accounting Policies”

• ●Amendments to IAS 8 “Definition of Accounting Estimates”

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(4) Summary of significant accounting policies:

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the preparation and guidelines of IAS 34 “Interim Financial Reporting” which are endorsed and issued into effect by FSC, and do not include all of the information required by the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the FSC (hereinafter referred to IFRS endorsed by the FSC) for a complete set of the annual consolidated financial statements.

Except the following accounting policies mentioned below, the significant accounting policies adopted in the consolidated financial statements are the same as those in the consolidated financial statement for the year ended December 31, 2020. For the related information, please refer to note 4 of the consolidated financial statements for the year ended December 31, 2020.

(b) Basis of Consolidation

• (ii) List of subsidiaries in the consolidated financial statements.

Name of investor	Name of subsidiary	Principal activity The research and development, manufacture and sale of API	Shareholding	Shareholding
			March 31, 2021 % 100.00	December 31, 2020 March 31, 2020 % 100.00 % 100.00
The Company	Yushan Pharmaceuticals Inc. (Yushan)

(c) Income taxes

The income tax expenses have been prepared and disclosed in accordance with paragraph B12 of International Financial Reporting Standards 34, Interim Reporting.

Income tax expenses for the period are best estimated by multiplying pre-tax income for the interim reporting period by the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period.

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled, and be recognized directly in equity or other comprehensive income as tax expense.

(d) Employee benefits

The pension cost in the interim period was calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior fiscal year.

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The preparation of the consolidated financial statements in conformity with the Regulations and IFRSs (in accordance with IAS 34 “Interim Financial Reporting” and endorsed by the FSC) requires management to make 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 preparation of the consolidated interim financial statements, estimates and underlying assumptions are reviewed on an ongoing basis which are in conformity with the consolidated financial statements for the year ended December 31, 2020. For the related information, please refer to note 5 of the consolidated financial statements for the year ended December 31, 2020.

(6) Explanation of significant accounts:

Expect for the following disclosures, there is no significant difference as compared with those disclosed in the consolidated financial statements for the year ended December 31, 2020. Please refer to note 6 of the 2020 annual consolidated financial statements.

• (a) Cash and cash equivalents

Cash on hand Checking accounts and demand deposits Time deposits Bills sold under repurchase agreements	March 31, 2021 $ 502 446,479 127,698 236,693 $ 811,372	December 31, 2020 592 283,291 127,505 221,641 633,029	March 31, 2020 506 192,137 254,312 209,512
			656,467

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

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

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

Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Beneficiary certificate Stocks listed on domestic markets Total Current Non-current	March 31, 2021 $ 417,397 251,412 $ 668,809 $ - $ 668,809	December 31, 2020 417,065 250,890 667,955 - 667,955	March 31, 2020
			326,033 231,135
			557,168
			557,168
			-

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group reassessed the purpose of holding the aforementioned financial assets and reclassified them under non-current assets from current assets on September 30, 2020.

The Group did not provide any aforementioned financial assets as collateral for its loans as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively.

• (c) Financial asset at fair value through other comprehensive income, non-current:

Financial assets at fair value through other comprehensive income: Emerging stocks and unlisted stocks in domestic markets	March 31, 2021 $ 68,211	December 31, 2020 85,697	March 31, 2020
			102,728

The Group 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 Group intends to hold for long-term for strategic purposes.

No strategic investments were disposed for the three months ended March 31, 2021 and 2020, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

Please refer to note 6(r) for market risk of the Group.

As of March 31, 2021, December 31, 2020 and March 31, 2020, the Group did not provide any aforementioned financial assets as collateral for its loans.

• (d) Notes and accounts receivable

Notes receivable Accounts receivable Less: Loss allowance	March 31, 2021 $ 702 154,141 - $ 154,843	December 31, 2020 99 337,650 - 337,749	March 31, 2020
			1,532 504,103 (1,179)
			504,456

The Group 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:

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Current 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due 91 to 180 days past due 181 to 270 days past due 271 to 360 days past due More than 360 days past due Current 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due 91 to 180 days past due 181 to 270 days past due 271 to 360 days past due Current 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due 91 to 180 days past due 181 to 270 days past due 271 to 360 days past due More than 360 days past due		March 31, 2021	Loss allowance provision - - - - - - - - - Loss allowance provision - - - - - - - - Loss allowance provision - - - - - - - 1,179 1,179 (Continued)
	Gross carrying amount Rate of loss allowance provision $ 107,748 - 38,332 - 1,947 - 6,816 - - - - - - - - % 100 $ 154,843 December 31, 2020
		Rate of loss allowance provision - - - - - - - March 31, 2020
		Rate of loss allowance provision - - - - - - - % 100

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Balance at January 1 (Balance at March 31)	For the three months ended March 31,	For the three months ended March 31,
	2021 $ -	2020
		1,179

As of March 31, 2021, December 31, 2020 and March 31, 2020, the Group did not provide any aforementioned notes and accounts receivable as collaterals for its loans.

(e) Inventories

Raw materials Work in progress Finished goods	March 31, 2021 $ 139,777 17,431 90,341 $ 247,549	December 31, 2020 116,984 16,322 247,573 380,879	March 31, 2020
			96,008 65,774 261,763
			423,545

For the three months ended March 31, 2021 and 2020, inventory cost recognized as cost of sales amounting to $161,166 and $407,432, respectively, and unallocated production overheads amounting to $64,999 and $19,118, respectively.

The write-down of inventories to net realizable value were recorded as cost of sales. Furthermore, the Group reversed the allowance for inventory valuation loss and obsolescence because the net realizable value was no longer lower than the cost after the disposal of obsolete inventories. The details are as following:

The write-downs (reversals)	2021 $ 1,619	2020 (639)

As of March 31, 2021, December 31, 2020 and March 31, 2020, the Group did not provide any inventories as collaterals for its loans.

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(f) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group were as follows:

Cost: Balance on January 1, 2021 Additions Transferred (out) in Disposal and derecognitions Balance on March 31, 2021 Balance on January 1, 2020 Additions Transferred (out) in Disposal and derecognitions Balance on March 31, 2020 Depreciation and impairments loss: Balance on January 1, 2021 Depreciation for the period Transferred (out) in Disposals and derecognitions Balance on March 31, 2021 Balance on January 1, 2020 Depreciation for the period Disposals and derecognitions Balance on March 31, 2020 Carrying amounts: Balance on January 1, 2021 Balance on March 31, 2021 Balance on January 1, 2020 Balance on March 31, 2020	Land	Buildings and construction	Buildings and construction	Machinery and equipment	Machinery and equipment		Office equipment		Others equipment		Prepayment for equipment and construction in progress 222,713 21,947 - - 244,660 168,428 26,701 (5,000) - 190,129 - - - - - - - - - 222,713 244,660 168,428 190,129	Total 2,191,683 25,110 2,352 (3,650) 2,215,495 3,458,826 28,820 11,325 (7,643) 3,491,328 691,531 12,568 - (3,650) 700,449 1,581,827 32,573 (7,643) 1,606,757 1,500,152 1,515,046 1,876,999 1,884,571
	$ 825,680 - - - $ 825,680 $ 825,680 - - - $ 825,680 $ - - - - $ - $ - - - $ - $ 825,680 $ 825,680 $ 825,680 $ 825,680		553,521 - - -		543,884 3,163 2,109 (3,005) 546,151 1,667,500 1,752 16,325 (6,568) 1,679,009 420,724 6,536 - (3,005) 424,255 1,219,926 23,185 (6,568) 1,236,543 123,160 121,896 447,574 442,466		32,917 - 243 (645) 32,515 40,656 367 - (24) 40,999 17,963 823 - (645) 18,141 20,099 993 (24) 21,068 14,954 14,374 20,557 19,931		12,968 - - -
			553,521						12,968
									18,720 - - -
									18,720
									4,842 268 - -
									5,110
									7,748 398 -
									8,146
									8,126
									7,858
									10,972
									10,574

In May 2013, the Group 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 given to Mr. Weichyun Wong due to certain legal requirements.

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

However, both parties agreed that the Group is the actual owner of the land.

In 2020, the Company derecognized some part of property, plant and equipment in fire damage amounting to $401,187. Please refer to note 10 for the details.

As of March 31, 2021, December 31, 2020 and March 31, 2020, part of the property, plant and equipment the Group had provided at collateral for its loans. Please refer to note 8 for details.

(g) Right-of-use assets

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

Cost: Balance on January 1, 2021 Additions Reductions Balance on March 31, 2021 Balance on January 1, 2020 (Same as balance on March 31, 2020) Accumulated depreciation: Balance on January 1, 2021 Depreciation for the period Reductions Balance on March 31, 2021 Balance on January 1, 2020 Depreciation for the period Balance on March 31, 2020 Carrying amount: Balance on January 1, 2021 Balance on March 31, 2021 Balance on January 1, 2020 Balance on March 31, 2020

Amount $ 5,657 - (90) $ 5,567 $ 4,747 $ 3,089 511 (47) $ 3,553 $ 1,773 497 $ 2,270 $ 2,568 $ 2,014 $ 2,974 $ 2,477

(h) Short-term borrowings

The details of short-term borrowings were as following:

Unsecured bank loans Unused credit line for short-term borrowings Range of interest rates	March 31, 2021	March 31, 2021		December 31, 2020 - 338,989 -	March 31, 2020
	$ - $ 350,000 -				-
					338,038
		-			-

Please refer to note 8 for the details of property, plant and equipment as collateral for its loans.

(Continued)

17

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Please refer to note 6(r) for the information of interest risk, foreign currency risk and liquidity risk.

• (i) Other payables

Salaries payable Others	March 31, 2021 $ 84,386 58,495 $ 142,881	December 31, 2020 118,602 70,336 188,938	March 31, 2020
			142,365 83,714
			226,079

• (j) Lease liabilities

The carrying amount of lease liabilities was as follows:

Current Non-current	March 31, 2021 $ 1,043 $ 988	December 31, 2020 1,340 1,248	March 31, 2020
			1,681
			815

Please refer to note 6(r) for maturity analysis.

For the three months ended March 31, 2021 2020 The amounts recognized in profit or loss were as follows: Interest on lease liabilities $ 9 10 Expenses relating to short-term leases $ 2,033 540 Variable lease payments not included in the measurement of lease liabilities $ 65 153 Expense relating to leases of low-value assets, excluding short-term leases of low-value assets $ 244 68 Profits from the change of the lease (recorded as other income) $ (1) - The amounts recognized in the statement of cash flows for the Group were as follows: Total cash outflow for leases $ 2,864 1,267	For the three months ended March 31,	For the three months ended March 31,
	2021	2020
		10
		540
		153
		68
		-
		1,267

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

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

(Continued)

18

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(k) Provisions

Except for the following disclosure, there was no significant change for provisions for the periods from January 1 to March 31, 2021 and 2020. For the related information, please refer to note 6(l) of the consolidated financial statements for the year ended December 31, 2020.

Balance at January 1, 2021 Provisions used during the year Balance at December 31, 2021 Balance at January 1, 2020 Provisions made during the year Provisions used during the year Balance at December 31,2020	Environmental protection costs		Fire Disaster Indemnity 509,076 (6,465) 502,611 - - - -	Total
				595,232 (9,749)
				585,483
				83,957 16,218 (14,094)
				86,081

(l) Employee benefits

(i) Defined benefit plans

Management believes that there was no material volatility of the market, no material reimbursement and settlement or other material one-time events since prior fiscal year. As a result, the pension cost in the accompanying interim period was measured and disclosed according to the actuarial report as of December 31, 2020 and 2019.

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

			For the three	months
			ended March 31,
			2021	2020
Operating	cost	$	172	387
Operating	expenses		64	(57)
		$	236	330

(Continued)

19

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Defined contribution plans

The Group’s expenses under the pension plan cost to the Bureau of Labor Insurance for the three months ended March 31, 2021 and 2020 were as follows:

		For the three	months
		ended March 31,
		2021	2020
Operating cost	$	1,360	1,305
Selling expenses		66	65
Administration expenses		170	161
Research expenses		223	190
	$	1,819	1,721

(m) Income taxes

• (i) The income tax expense in the interim financial statements is measured and disclosed accordance to paragraph B12 of IAS 34 “International Financial Reporting”.

• (ii) The income tax expenses for the three months ended March 31, 2021 and 2020 were calculated as follows:

	For	the three months ended	the three months ended
		March 31,
		2021	2020
Current income tax expense	$	10,205	57,484

• (iii) The amount of income tax recognized in other comprehensive income for the three months ended March 31, 2021 and 2020 were as follows:

		For the three months ended	For the three months ended
			March 31,
		2021	2020
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement from defined benefit plans	$	-	-

• (iv) Examination and approval

The ROC tax authorities have examined the Company’s and Yushan Pharmaceuticals Inc.'s income tax returns through 2019.

(Continued)

20

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(n) Capital and other equity

Except for the following disclosure, there was no significant change for capital and other equity for the periods from January 1 to March 31, 2021 and 2020. For the related information, please refer to note 6(o) of the consolidated financial statements for the year ended December 31, 2020.

(i) Retained Earnings

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.

(ii) Earnings distribution

On March 24. 2021, the Company's Board of Directors resolved to appropriate the 2020 earnings. On June 19, 2020, the shareholder's meeting resolved to distribute the 2019 earnings. These earnings were appropriated as follows:

Dividends distributed to ordinary shareholders: Cash Stock Total	2020 Amount per share (dollars) Total amount $ 0.5 39,743 2.0 158,970 $ 198,713	2019	2019
		Amount per share (dollars) 5.80 -	Total amount
			461,014 -
			461,014

(Continued)

21

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Other equity (net of tax)

Other equity (net of tax)
		Financial
		assets
		measured at
		fair value
		through other
	comprehensive
		income
Balance at January 1, 2021	$	(29,378)
Unrealized gains (losses) from financial assets measured at fair value through
other comprehensive income		(17,486)
Balance at March 31, 2021	$	(46,864)
Balance at January 1, 2020	$	22,254
Unrealized gains (losses) from financial assets measured at fair value through
other comprehensive income		(34,601)
Balance at March 31, 2020	$	(12,347)

(o) Earnings per share

For the three months ended March 31, 2021 and 2020, the Company’ s earnings per share was calculated as follows:

Basic earnings per share Profit attributable to ordinary shareholders of the Company $ Weighted-average number of ordinary shares (thousand shares) $ Diluted earnings per share Profit attributable to ordinary shareholders of the Company $ Weighted-average number of ordinary shares (thousand shares) Effect of potentially dilutive ordinary shares: Effect of employee compensation Weighted-average number of ordinary shares (thousand shares) (diluted) $	For the three months ended March 31, 2021 2020 41,673 208,331 79,485 79,485 0.52 2.62 41,673 208,331 79,485 79,485 487 710 79,972 80,195 0.52 2.60	For the three months ended March 31, 2021 2020 41,673 208,331 79,485 79,485 0.52 2.62 41,673 208,331 79,485 79,485 487 710 79,972 80,195 0.52 2.60
	2021 41,673 79,485 0.52 41,673 79,485 487 79,972 0.52
		208,331
		79,485
		2.62
		208,331
		79,485 710
		80,195
		2.60

(Continued)

22

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(p) Revenue from contracts with customers

• (i) Disaggregation of revenue

Disaggregation of revenue
	For	the three months ended
		March 31,
		2021	2020
Primary geographical markets:
Italy	$	74,816	150,051
China		53,600	11,847
Taiwan		39,597	46,076
United States		26,227	117,724
Spain		25,407	153,942
Turkey		25,285	20,742
Germany		17,236	26,169
Japan		12,182	66,950
Switzerland		-	64,441
Others		49,276	126,386
	$	323,626	784,328
Major products
Active Pharmaceutical Ingredients	$	204,570	534,543
Intermediates		110,320	219,521
Specialty Chemical		8,736	30,264
	$	323,626	784,328

(ii) Contract balances

Notes and accounts receivable Less: allowance for impairment Total Contract liabilities (sales received in advance)	March 31, 2021 $ 154,843 - $ 154,843 $ 62,291	December 31, 2020 337,749 - 337,749 97,295	March 31, 2020 505,635 (1,179) 504,456 61,726

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

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

(Continued)

23

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(q) 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 three months ended March 31, 2021 and 2020, the remunerations to employees amounted to $5,016 and $26,220, respectively, and the remunerations to directors amounted to $684 and $3,575, 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.

For the year ended December 31, 2020 and 2019, the remunerations to employees amounted to $44,000 and $69,459, respectively, and the remunerations to directors amounted to $1,000 and $9,301, respectively. The remunerations above are identical to those of the actual distributions. The information is available on the Market Observation Post System website.

(r) Financial Instruments

Except for the contention mentioned below, there was no significant change in the fair value of the Group’s financial instruments and degree of exposure to credit risk, liquidity risk and market risk arising from financial instruments. For the related information, please refer to note 6(t) of the consolidated financial statements for the year ended December 31, 2020.

(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

The Group’ s customers are mainly from the pharmaceutical industry; therefore, the Group does not concentrate on a specific customer and the sales regions are widely spread, thus, there should be no concern on the significant concentrations of accounts receivable credit risk. And in order to mitigate accounts receivable credit risk, the Group constantly assesses the financial status of its customers, wherein it does not require its customers to provide any collateral.

(Continued)

24

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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 Group 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:

March 31, 2021 Non-derivative financial liabilities: Notes and accounts payable Lease liabilities (including current and non-current) Other payables Payables on contractors and equipment December 31, 2020 Non-derivative financial liabilities: Notes and accounts payable Lease liabilities (including current and non-current) Other payables Payables on contractors and equipment	Carrying Amount $ 20,132 2,031 142,881 32,131 $ 197,175 $ 80,878 2,588 188,938 21,064 $ 293,468	Contractual cash flows (20,132) (2,063) (142,881) (32,131) (197,207) (80,878) (2,629) (188,938) (21,064) (293,509)	Within a year (20,132) (1,066) (142,881) (32,131) (196,210) (80,878) (1,368) (188,938) (21,064) (292,248)	1 ~ 2 years - (828) - - (828) - (922) - - (922)	Over 2 years - (169) - - (169) - (339) - - (339)

(Continued)

25

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

March 31, 2020 Non-derivative financial liabilities: Notes and accounts payable Lease liabilities (including current and non-current) Other payables Payables on contractors and equipment	Carrying Amount $ 70,115 2,496 226,079 27,758 $ 326,448	Contractual cash flows (70,115) (2,566) (226,079) (27,758) (326,518)	Within a year (70,115) (1,731) (226,079) (27,758) (325,683)	1 ~ 2 years - (531) - - (531)	Over 2 years - (304) - - (304)

The Group 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 Group’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	M	arch 31, 2021	TWD 406,139 110,057 8,204	De	cember 31, 2	020	Foreign currency	March 31, 2020
	Foreign currency	Exchange rate		Foreign currency	Exchange rate	TWD 503,325 110,658 40,285		Exchange rate TWD 30.175 717,320 33.04 94,726 30.175 45,685
	$ 14,258 3,307 288	28.485 33.28 28.485		17,704 3,178 1,417	28.43 34.82 28.43		23,772 2,867 1,514

2) Sensitivity analysis

The Group’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.

(Continued)

26

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The analysis assumes that all other variables remain constant. A strengthening (weakening) 1% of the functional currency against each foreign currency for the three months ended March 31, 2021 and 2020 would have affected the net profit before tax increased or decreased $5,080 and $7,664, respectively. The analysis is performed on the same basis for both periods.

• 3) Foreign exchange gain and loss on monetary items

The exchange gains and losses of monetary items, including realized and unrealized, are changed into functional currency, which is the Group’s presentation currency. For the three months ended March 31, 2021 and 2020, the exchange gains (losses), including realized and unrealized, are $(5,568) and $4,664, respectively.

(iv) Interest rate analysis

For the details of financial assets and liabilities exposed to interest rate risk, please refer to note 6(r) liquidity risk.

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

Variable rate instruments: Financial assets Financial liabilities	Carrying amount
	March 31, 2021 March 31, 2020 $ 445,962 191,855 - -

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 Group management’s assessment of the reasonably possible interest rate change.

If the interest rate had increased or decreased by 0.25%, the Group's net profit before tax would have increased or decreased by $279 and $120, respectively, for the three months ended March 31, 2021 and 2020, with all other variable factors remaining constant. This is mainly due to the Group’s bank savings with variable interest rates.

(Continued)

27

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(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 Group’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:

Financial assets at fair value through profit or loss Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Emerging stocks and unlisted stocks on domestic market Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable Other receivables Refunded deposits (recognized as other non-current assets) Subtotal Total 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			March 31, 2021	March 31, 2021	March 31, 2021
	Book value			Fair Value
			Level 1 668,809 - - - - - - - - -	Level 2 - - - - - - - - - -	Level 3 Total - 668,809 68,211 68,211 - - - - - - - - - - - - - - - -
	$ 668,809 68,211 811,372 154,843 519,057 3,210 1,488,482 $ 2,225,502 $ 20,132 2,031 142,881 32,131 $ 197,175

(Continued)

28

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets at fair value through profit or loss Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Emerging stocks and unlisted stocks on domestic market Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable Other receivables Refunded deposits (recognized as other non-current assets) Subtotal Total 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 Financial assets at fair value through profit or loss Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Emerging stocks and unlisted stocks on domestic market				December 31, 2020	December 31, 2020	December 31, 2020
	Book value				Fair Value
				Level 1 Level 2 667,955 - - - - - - - - - - - - - - - - - - - March 31, 2020		Level 3 Total - 667,955 85,697 85,697 - - - - - - - - - - - - - - - -
	$ 667,955 85,697 633,029 337,749 519,651 1,210 1,491,639 $ 2,245,291 $ 80,878 2,588 188,938 21,064 $ 293,468
		Book value			Fair Value
				Level 1 557,168 19,682	Level 2 Level 3 Total - - 557,168 - 83,046 102,728
	$ 557,168 102,728
		102,728

(Continued)

29

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable Other receivables Refunded deposits (recognized as other non-current assets) Subtotal Total 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				March 31, 2020	March 31, 2020
		Book value			Fair Value
				Level 1 - - - - - - - -	Level 2 Level 3 Total - - - - - - - - - - - - - - - - - - - - - - - -
	656,467 504,456 9 5,758 1,166,690 $ 1,826,586 $ 70,115 2,496 226,079 27,758 $ 326,448	656,467 504,456 9 5,758
		1,166,690

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

The Group’ s valuation techniques and assumptions used for financial instruments not measured at fair value are 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.

(Continued)

30

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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.

The measurement of fair value of a non-active market financial instruments held by the Group 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 from one level to another

For the three months ended March 31, 2021 and 2020, there was no transfer from one level to another.

• 5) Reconciliation of Level 3 fair values

January 1, 2021 Total gains and losses recognized: In profit or loss In other comprehensive income March 31, 2021 January 1, 2020 Total gains and losses recognized: In profit or loss In other comprehensive income March 31, 2020	Fair value through other comprehensive income Unquoted equity instruments $ 85,697 - (17,486) $ 68,211 $ 108,619 - (25,573) $ 83,046

(Continued)

31

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For the three months ended March 31, 2021 and 2020, 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:

		For the three	months
		ended March 31,
		2021	2020
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”	$	(17,486)	(25,573)

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

The Group’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 〃 Comparable transaction method	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement ‧ The multiplier of Price- Book Ratio (As of March 31, 2021, December 31, 2020 and March 31, 2020 were 1.73~3.38, 1.79~5.01 and 1.98, respectively) The higher the fair value is, the higher the multiplier will be. ‧ Lack-of-Marketability discount rate (As of March 31, 2021, December 31, 2020 and March 31, 2020 were 23%~50%, 23%~50% and 50%, respectively) The higher the Lack-of- Marketability discount rate is, the lower the fair value will be. ‧ Lack-of-Marketability discount rate (As of March 31, 2020 was 24.31%~30.65%) The higher the Lack-of- Marketability discount rate is, the lower the fair value will be.

(Continued)

32

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The Group’ 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:

March 31, 2021 Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income December 31, 2020 Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income March 31, 2020 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 Price-Book ratio multiples Lack-of Marketability discount rate Price-Book ratio multiples Lack-of Marketability discount rate	Move up or Other comprehensive income downs Favorable Unfavorable 5% $ 2,910 2,993 5% $ 2,067 2,145 5% $ 3,496 3,536 5% $ 2,895 2,895 5% $ 1,911 1,911 5% $ 2,705 2,705	Other comprehensive income	Other comprehensive income
				Unfavorable
				2,993
				2,145
				3,536
				2,895
				1,911
				2,705

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.

(s) Financial risk management

There were no significant changes in the Group’ s financial risk management and policies as disclosed in note 6(u) of the consolidated financial statements for the year ended December 31, 2020.

(Continued)

33

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Capital management

Management believes that the objectives, policies and processes of capital management of the Group has been applied consistently with those described in the consolidated financial statements for the year ended December 31, 2020. Also, management believes that there were no significant changes in the Group’s capital management information as disclosed for the year ended December 31, 2020. Please refer to note 6(v) of the consolidated financial statements for the year ended December 31, 2020.

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

The Group’s investing and financing activities which did not affect the current cash flow for the three months ended March 31, 2021 and 2020, were as follows:

• (i) For the acquisition of right-of-use assets by lease for the three months ended March 31, 2021 and 2020, please refer to note 6(g).

• (ii) Reconciliation of liabilities arising from financing activities for the three months ended March 31, 2021 and 2020, were as follows:

Lease liabilities Lease liabilities	January 1, 2021 $ 2,588 January 1, 2020 $ 2,992	Cash flows (513) Cash flows (496)	Non-cash changes Changes in lease payments (44) Non-cash changes Changes in lease payments -	March 31, 2021
				2,031
				March 31, 2020
				2,496

(7) Related-party transactions:

• (a) Names and relationship with related parties: None.

• (b) Significant transaction with related parties: None.

• (c) Key management personnel compensation

		For	the three months ended	the three months ended
			March 31,
			2021	2020
Salary	and short-term employee benefits	$	5,068	14,078

(Continued)

34

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets Land Building	Subject Pledged as collaterals 〃	March 31, 2021 $ 42,736 4,008 $ 46,744	December 31, 2020 42,736 4,171 46,907	March 31, 2020
				42,736 4,673
				47,409

(9) Commitments and contingencies:

• (a) As of March 31, 2021, December 31, 2020 and March 31, 2020, the unused balance of the Group’s outstanding standby letters of credit amounted to $17,245, $29,106 and $11,962, respectively.

• (b) The significant outstanding purchase commitments for property, plant and equipment were as follows:

Acquisitions of property, plant and equipment	March 31, 2021 $ 98,534	December 31, 2020 49,143	March 31, 2020 47,317

(10) Losses Due to Major Disasters:

A major fire accident occurred on December 20, 2020, and caused damage to some buildings, equipment, construction in progress, and inventories, and spreading to several nearby factories, of which property was impaired and business operation was interrupted. The Company derecognized damaged buildings, equipment and construction in progress at $401,187, and the inventories at $175,565, and accrued for the damage loss for nearby damaged companies for $509,076. The total disaster loss is $1,085,828.

Among which, the damage loss is based on the best estimate from the available evidence as of the reporting date. However, the actual loss of the claim is still subject to future negotiation, and there are contingent liabilities that cannot be estimated or recorded.

For the period from January 1 to March 31, 2021, the above compensation losses amounting to $6,465 had been paid. As of March 31, 2021 and December 31, 2020, the fire disaster indemnity was $502,611 and $509,076, respectively, which was recorded under provisions. Please refer to note 6(k).

The Company has already entered into related property insurance contracts and is currently in the process of negotiation with the insurance company to handle claims. The Company has confirmed with the insurance company and its notary to recognize the virtually certain amount of compensation that can be received from the insurance company as claim receivables, but shall not exceed the disaster loss of each asset. As of March 31, 2021 and December 31, 2020, the Company recognizes the claim receivables for $519,057, which was recorded under other receivables. However, the insurance claims involve disaster identification, the Company has not been able to confirm the total amount of insurance claims, and will recognize it when the Company can almost be certain that it can receive the subsequent increase in insurance claims income.

(Continued)

35

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(11) Subsequent Events:

The Group established an investee company, Framosa Co., Ltd., in Taiwan with Veolia Environment, wherein the Group held 40% shares of the investee company, which engaged in circular economy by purifying and utilizing used solvents. The investment cost amounting to $66,000 had been paid on April 19, 2021.

(12) Other:

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

By function By item	For the three months ended March 31, 2021	For the three months ended March 31, 2021	For the three months ended March 31, 2021	For the three months ended March 31, 2020	For the three months ended March 31, 2020	For the three months ended March 31, 2020
	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	27,696 3,736 1,532 - 783 9,106 431	16,797 1,295 523 684 1,427 3,973 1,006	44,493 5,031 2,055 684 2,210 13,079 1,437	53,884 3,875 1,692 - 824 28,084 468	40,307 1,216 359 3,575 2,324 4,986 1,002	94,191 5,091 2,051 3,575 3,148 33,070 1,470

• (b) Seasonality of operations

The Group’s operations were not affected by seasonality or cyclicality factors.

(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 Group for the three months ended March 31, 2021:

• (i) Loans to other parties: None.

• (ii) Guarantees and endorsements for other parties: None.

(Continued)

36

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Securities held as of March 31, 2021 (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand dollars

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) Beneficiary Certificate (Cathay Taiwan Money Market Fund) Beneficiary Certificate (Nomura Taiwan Money Market) Beneficiary Certificate (Taishin 1699 Money Market Fund) Beneficiary Certificate (Jih Sun Money Market Fund) Beneficiary Certificate (Yuanta USD Money Market Fund-USD) Beneficiary Certificate (Nomura Global Short Duration Bond Fund) Beneficiary Certificate (CTBC Hua Win Money Market Fund) Beneficiary Certificate (Fubon China Policy Bank Bond ETF) Beneficiary Certificate (Yuanta De-Li Money Market Fund) Beneficiary Certificate (Mega Diamond Money Market Fund) Stock (Fubon S&P Preferred Shares A) Stock (Fubon S&P Preferred Shares B) Stock (TAISHIN FINANCIAL HOLDING CO., LTD. Preferred Stock E) 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 (Fubon S&P US Preferred Stock) Stock (CTBC Financial Holding Co., Ltd. Preferred Shares B) Stock (Shin Kong Financial Holding Co., Ltd. Preferred Shares A) Stock (Chailease Hdding Co., Ltd. Preferred Share A) Stock (Energenesis Biomedical Co., Ltd) Stock (Sunny Pharmtech Inc.)	- - - - - - - - - - - - - - - - - - - - - - -	Non-current Financial asset at fair value through profit or loss 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Financial assets at fair value through other comprehensive income 〃	2,760 4,093 1,273 3,592 3,022 99 2,840 4,064 420 2,744 3,568 793 36 400 790 33 28 2,350 685 642 150 1,458 4,497	46,501 51,335 20,951 49,053 45,210 30,229 30,436 45,167 8,211 45,141 45,163 49,166 2,239 21,240 48,822 2,057 1,357 40,138 43,498 27,895 15,000 38,528 29,683	- - - - - - - - - - - - - - - - - - - - - 2.44 % 3.47 %	46,501 51,335 20,951 49,053 45,210 30,229 30,436 46,167 8,211 45,141 45,163 49,166 2,239 21,240 48,822 2,057 1,357 40,138 43,498 27,895 15,000 38,528 29,683	- - - - - - - - - - - - - - - - - - - - - -

• (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: None.

• (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.

(Continued)

37

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (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.

• (x) Business relationships and significant intercompany transactions: None.

• (b) Information on investees:

The following is the information on investees for the three months ended March 31, 2021 (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		Balance as of March 31, 2021			Net income (losses) of investee	Share of profits/losses of investee	Note
				March 31, 2021	December 31, 2020	Shares (thousands)	Percentage of ownership	Carrying value
SCI PHARMTEC H, INC.	Yushan Pharmaceuticals Inc.	R.O.C.	The research and development, manufacture and sale of API	351,761	351,761	35,190	% 100	349,069	(117)	(117)	Note 1

Note 1：The transactions had been eliminated in the consolidated financial statements.

• (c) Information on investment in mainland China: None.

• (d) Major shareholders:

Unit: shares

Shareholding Shareholder’s Name	Shares	Percentage
Mercuries & Associates Holding Ltd.	25,236,132	% 31.74
Zhan Liwei	5,050,000	% 6.35

(14) Segment information:

The Group only uses one segment to assess its performance and allocate resources. Hence, there is no need to disclose the information.