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 Six Months Ended June 30, 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 June 30, 2021 and 2020, and the related consolidated statements of comprehensive income for the three months and six months ended June 30, 2021 and 2020, and changes in equity and cash flows for the six months ended June 30, 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

Except as explained in the Basis for Qualified Conclusion paragraph, 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.

Basis for Qualified Conclusion

As stated in note 6(f), the other equity accounted investments of SCI Pharmtech, Inc. and its subsidiaries in its investee companies of $65,037 thousand as of June 30, 2021, and its equity in net earnings (losses) on these investee companies of $(963) thousand for the three months and the six months ended June 30, 2021, were recognized solely on the financial statements prepared by these investee companies, but not reviewed by independent auditors.

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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Qualified Conclusion

Except for the adjustments, if any, as might have been determined to be necessary had the financial statements of certain equity accounted investee companies described in the Basis for Qualified Conclusion paragraph above been reviewed by independent auditors, 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 SCI Pharmtech, Inc. and its subsidiaries as of June 30, 2021 and 2020, and of its consolidated financial performance for the three months and six months ended June 30, 2021 and 2020, as well as its consolidated cash flows for the six months ended June 30, 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) August 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 June 30, 2021 and 2020

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2021, December 31, 2020, and June 30, 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(q)) 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)) 1550 Investments accounted for using the equity method (note 6(f)) 1600 Property, plant and equipment (notes 6(g) and 8) 1755 Right-of-use assets (note 6(h)) 1780 Intangible assets 1840 Deferred tax assets 1900 Other non-current assets Total assets	June 30, 2021 Amount % $ 427,889 10 624,375 15 137,153 3 525,316 13 249,778 6 50,333 1 2,014,844 48 - - 58,115 1 65,037 2 1,584,831 37 2,956 - 64,257 1 256,127 6 207,624 5 2,238,947 52 $ 4,253,791 100	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	June 30, 2020 Amount % 778,055 17 661,063 14 494,115 11 599 - 523,808 11 24,113 - 2,481,753 53 - - 113,534 3 - - 1,896,374 41 1,980 - 44,179 1 55,752 1 45,245 1 2,157,064 47 4,638,817 100 Liabilities and Equity Current liabilities: 2170 Notes and accounts payable 2130 Current contract liabilities (note 6(q)) 2200 Other payables (note 6(j)) 2213 Payables on contractors and equipment 2230 Current tax liabilities 2250 Current provisions (note 6(l)) 2280 Current lease liabilities (note 6(k)) 2300 Other current liabilities Non-Current liabilities: 2580 Non-current lease liabilities (note 6(k)) 2570 Deferred tax liabilities 2640 Provisions for employee benefits, non-current Total liabilities Equity attributable to owners of parent (note 6(o)): 3100 Ordinary Share 3200 Capital surplus 3310 Legal reserve 3350 Unappropriated retained earnings 3400 Other components of equity Total equity Total liabilities and equity	June 30, 2021		December 31, 2020		June 30, 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		119,258 3 57,371 1 741,232 16 48,654 1 113,886 3 91,720 2 1,378 - 3,903 - 1,177,402 26 620 - - - 20,963 - 21,583 - 1,198,985 26 794,853 17 1,348,339 29 390,081 8 908,100 20 (1,541) - 3,439,832 74 4,638,817 100

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 and six months ended June 30, 2021 and 2020

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

For the three months ended June 30, 2021 2020 Amount % Amount % 4110 Sales revenue (note 6(q)) $ 176,572 100 727,922 100 5110 Cost of sales (notes 6(e), 6(m) and 12) 141,978 80 346,449 48 5900 Gross profit 34,594 20 381,473 52 Operating expenses (notes 6(m) and 12): 6100 Selling expenses 10,953 6 37,624 5 6200 Administrative expenses 11,255 7 38,039 5 6300 Research and development expenses 6,985 4 10,610 1 29,193 17 86,273 11 6900 Net operating income 5,401 3 295,200 41 Non-operating income and expenses: 7190 Other income 9,007 5 847 - 7101 Interest income 232 - 1,648 - 7235 Gains (losses) on financial assets (liabilities) at fair value through profit or loss 752 - 13,896 2 7770 Share of gain (loss) of associates and joint ventures accounted for using the equity method, net (963) (1) - - 7510 Interest expense (note 6(k)) (12) - (9) - 7590 Miscellaneous disbursements (657) - (100) - 7630 Foreign exchange gains (losses) (9,263) (5) (14,108) (2) (904) (1) 2,174 - 7900 Profit before tax 4,497 2 297,374 41 7950 Less: Income tax expenses (note 6(n)) 746 - 55,704 8 8200 Profit 3,751 2 241,670 33 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 (10,096) (6) 10,806 2 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note 6(n)) - - - - 8300 Other comprehensive income, net (10,096) (6) 10,806 2 8500 Total comprehensive income $ (6,345) (4) 252,476 35 Earnings per share (note 6(p)): 9750 Basic earnings per share $ 0.05 3.04 9850 Diluted earnings per share $ 0.05 3.03	For the six months ended June 30, 2021 2020 Amount % Amount % 500,198 100 1,512,250 100 369,762 74 772,360 51 130,436 26 739,890 49 25,187 5 67,979 5 28,480 6 75,667 5 14,014 3 20,842 1 67,681 14 164,488 11 62,755 12 575,402 38 12,359 3 2,077 - 459 - 3,111 - 1,606 - (7,710) - (963) - - - (21) - (19) - (4,989) (1) (228) - (14,831) (3) (9,444) (1) (6,380) (1) (12,213) (1) 56,375 11 563,189 37 10,951 2 113,188 7 45,424 9 450,001 30 (27,582) (5) (23,795) (2) - - - - (27,582) (5) (23,795) (2) 17,842 4 426,206 28 0.57 5.66 0.57 5.62	For the six months ended June 30, 2021 2020 Amount % Amount % 500,198 100 1,512,250 100 369,762 74 772,360 51 130,436 26 739,890 49 25,187 5 67,979 5 28,480 6 75,667 5 14,014 3 20,842 1 67,681 14 164,488 11 62,755 12 575,402 38 12,359 3 2,077 - 459 - 3,111 - 1,606 - (7,710) - (963) - - - (21) - (19) - (4,989) (1) (228) - (14,831) (3) (9,444) (1) (6,380) (1) (12,213) (1) 56,375 11 563,189 37 10,951 2 113,188 7 45,424 9 450,001 30 (27,582) (5) (23,795) (2) - - - - (27,582) (5) (23,795) (2) 17,842 4 426,206 28 0.57 5.66 0.57 5.62
	2021 Amount % 500,198 100 369,762 74 130,436 26 25,187 5 28,480 6 14,014 3 67,681 14 62,755 12 12,359 3 459 - 1,606 - (963) - (21) - (4,989) (1) (14,831) (3) (6,380) (1) 56,375 11 10,951 2 45,424 9 (27,582) (5) - - (27,582) (5) 17,842 4 0.57 0.57
		5.62

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 six months ended June 30, 2021 and 2020 (expressed in Thousands of New Taiwan Dollars)

For the six months ended June 30, 2021 and 2020

Equity attributable to owners of parent

Balance at January 1, 2020 Profit for the six months ended June 30, 2020 Other comprehensive income for the six months ended June 30, 2020 Total comprehensive income for the six months ended June 30, 2020 Appropriation and distribution of retained earnings: Legal reserve appropriated Reversal of special reserve Cash dividends of ordinary share Balance at June 30, 2020 Balance at January 1, 2021 Profit for the six months ended June 30, 2021 Other comprehensive income for the six months ended June 30, 2021 Total comprehensive income for the six months ended June 30, 2021 Balance at June 30, 2021	Ordinary shares	Capital surplus		Retained earnings	Retained earnings	Retained earnings
				Legal reserve	Special reserve Unappropriated retained earnings
	$ 794,853 - - - - - - $ 794,853 $ 794,853 - - - $ 794,853	1,348,339		332,971 - - - 57,110 - - 390,081 390,081 - - - 390,081	4,788 - - - - (4,788) - - - - - - -	971,435
		- -				450,001 -
		-				450,001
		- - -
		1,348,339
		1,348,339
		- -
		-
		1,348,339

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 six months ended June 30, 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 Share of loss (profit) of associates and joint ventures accounted for using the equity method 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 notes and accounts payable Increase (decrease) in contract liabilities 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: Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of financial assets at fair value through profit or loss Acquisition of investments accounted for using the equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in prepayments of property, plant and equipment Decrease (increase) in refunded deposits 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

June 30, 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 August 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”

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

The Group assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2022, would not have a significant impact on its consolidated financial statements:

• －

• ●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”

(Continued)

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

• (c) 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 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”

(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.

(Continued)

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SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the 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
			June 30, 2021 % 100.00	December 31, 2020 June 30, 2020 % 100.00 % 100.00
The Company	Yushan Pharmaceuticals Inc. (Yushan)

(c) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over the 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 consolidated financial statements include the Group’ 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 Group, from the date on which significant influence commences until the date on which significant influence ceases.

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

When the Group’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 Group has incurred legal or constructive obligations or made payments on behalf of the associate.

(d) 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.

(Continued)

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

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.

(e) 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.

(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 and cash equivalents
Cash on hand Checking accounts and demand deposits Time deposits Bills sold under repurchase agreements	June 30, 2021 $ 540 399,349 28,000 - $ 427,889	December 31, 2020 592 283,291 127,505 221,641 633,029	June 30, 2020
			531 186,500 220,270 370,754
			778,055

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

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

(Continued)

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

(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	June 30, 2021 $ 371,682 252,693 $ 624,375 $ 624,375 $ -	December 31, 2020 417,065 250,890 667,955 - 667,955	June 30, 2020
			416,788 244,275
			661,063
			661,063
			-

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. After the fire incident, the Group's capital requirement increased. The Group reassessed the purpose of holding the aforementioned financial assets again and reclassified them under current assets on June 30, 2021.

The Group did not provide any aforementioned financial assets as collateral for its loans as of June 30, 2021, December 31, 2020 and June 30, 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	June 30, 2021 $ 58,115	December 31, 2020 85,697	June 30, 2020
			113,534

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 six months ended June 30, 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(s) for market risk of the Group.

As of June 30, 2021, December 31, 2020 and June 30, 2020, the Group did not provide any aforementioned financial assets as collateral for its loans.

(Continued)

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

(d) Notes and accounts receivable

Notes receivable Accounts receivable Less: Loss allowance	June 30, 2021 $ - 137,153 - $ 137,153	December 31, 2020 99 337,650 - 337,749	June 30, 2020 1,956 493,338 (1,179) 494,115

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:

Current 1 to 30 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		June 30, 2021
	Gross carrying amount Rate of loss allowance provision $ 109,030 - 16,980 - 6,200 - 4,943 - - - - - - % 100 $ 137,153 December 31, 2020		Loss allowance provision
			- - - - - - -
			-
		Rate of loss allowance provision - - - - - - -	Loss allowance provision
			- - - - - - -
			-

(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		June 30, 2020
	Gross carrying amount $ 348,892 133,007 7,242 2,383 2,591 - - 1,179 $ 495,294	Rate of loss allowance provision - - - - - - - % 100	Loss allowance provision
			- - - - - - - 1,179
			1,179

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

The movement in the allowance for notes and trade receivable	was as follows:	was as follows:
Balance at January 1 (Balance at June 30)	For the six months ended June 30,
	2021 $ -	2020
		1,179

As of June 30, 2021, December 31, 2020 and June 30, 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	June 30, 2021 $ 139,322 31,352 79,104 $ 249,778	December 31, 2020 116,984 16,322 247,573 380,879	June 30, 2020
			143,287 95,988 284,533
			523,808

For the three months and six months ended June 30, 2021 and 2020, inventory cost recognized as cost of sales amounting to $98,549, $340,143, $259,715 and $747,575, respectively, and unallocated production overheads amounting to $52,159, $17,166, $117,158 and $36,284, respectively.

(Continued)

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

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)	For the three months ended June 30,	For the three months ended June 30,		For the six months ended June 30, 2021 2020 (7,111) (11,499)
	2021 $ (8,730)	2020		2021 (7,111)

As of June 30, 2021, December 31, 2020 and June 30, 2020, the Group did not provide any inventories as collaterals for its loans.

• (f) Investments accounted for using the equity method

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

Associates	June 30, 2021 $ 65,037	December 31, 2020 -	June 30, 2020
			-

• (i) In April 2021, the Group acquired 40% shares of Framosa Co., Ltd., for $66,000 in cash, resulting in the Group to have significant influence over Framosa Co., Ltd.

• (ii) The Group’s financial information on investments accounted for using the equity method that are individually insignificant was as follows:

Attributable to the Group: Profit (loss) Other comprehensive income (loss) Comprehensive income (loss)	For the six months ended June 30, 2021 $ (963) - $ (963)

• (iii) Pledge to secure

The Group did not provide any investment accounted for using the equity method as collateral for its loans.

• (iv) The investments were accounted for using the equity method, and the share of profit or loss and other comprehensive income of those investments were calculated based on the financial statements that have not been reviewed.

(Continued)

16

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

(g) 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 June 30, 2021 Balance on January 1, 2020 Additions Transferred (out) in Disposal and derecognitions Balance on June 30, 2020 Depreciation and impairments loss: Balance on January 1, 2021 Depreciation for the period Transferred (out) in Disposals and derecognitions Balance on June 30, 2021 Balance on January 1, 2020 Depreciation for the period Transferred (out) in Disposals and derecognitions Balance on June 30, 2020 Carrying amounts: Balance on January 1, 2021 Balance on June 30, 2021 Balance on January 1, 2020 Balance on June 30, 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 96,156 (116,489) - 202,380 168,428 60,302 (5,000) - 223,730 - - - - - - - - - - 222,713 202,380 168,428 223,730	Total 2,191,683 104,488 6,132 (4,247) 2,298,056 3,458,826 71,737 10,930 (9,254) 3,532,239 691,531 25,941 - (4,247) 713,225 1,581,827 65,344 (2,052) (9,254) 1,635,865 1,500,152 1,584,831 1,876,999 1,896,374
	$ 825,680 - - - $ 825,680 $ 825,680 - - - $ 825,680 $ - - - - $ - $ - - - - $ - $ 825,680 $ 825,680 $ 825,680 $ 825,680		553,521 243 116,489 -		543,884 7,784 5,091 (3,602) 553,157 1,667,500 10,916 17,374 (8,179) 1,687,611 420,724 13,292 - (3,602) 430,414 1,219,926 46,602 - (8,179) 1,258,349 123,160 122,743 447,574 429,262		32,917 305 1,041 (645) 33,618 40,656 519 (1,444) (24) 39,707 17,963 1,664 - (645) 18,982 20,099 2,023 (2,052) (24) 20,046 14,954 14,636 20,557 19,661		12,968 - - -
			670,253						12,968
									18,720 - - -
									18,720
									4,842 531 - -
									5,373
									7,748 796 - -
									8,544
									8,126
									7,595
									10,972
									10,176

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)

17

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 June 30, 2021, December 31, 2020 and June 30, 2020, part of the property, plant and equipment the Group had provided at collateral for its loans. Please refer to note 8 for details.

(h) 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 June 30, 2021 Balance on January 1, 2020 (Same as balance on June 30, 2020) Accumulated depreciation: Balance on January 1, 2021 Depreciation for the period Reductions Balance on June 30, 2021 Balance on January 1, 2020 Depreciation for the period Balance on June 30, 2020 Carrying amount: Balance on January 1, 2021 Balance on June 30, 2021 Balance on January 1, 2020 Balance on June 30, 2020

Amount $ 5,657 1,384 (90) $ 6,951 $ 4,747 $ 3,089 953 (47) $ 3,995 $ 1,773 994 $ 2,767 $ 2,568 $ 2,956 $ 2,974 $ 1,980

(i) 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	June 30, 2021	June 30, 2021		December 31, 2020 - 338,989 -	June 30, 2020
	$ - $ 350,000 -				-
					337,439
		-			-

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

(Continued)

18

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

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

(j) Other payables

Salaries payable Dividend payable Others	June 30, 2021 $ 85,332 - 57,507 $ 142,839	December 31, 2020 118,602 - 70,336 188,938	June 30, 2020
			195,652 461,014 84,566
			741,232

• (k) Lease liabilities

The carrying amount of lease liabilities was as follows:

Current Non-current	June 30, 2021 $ 1,646 $ 1,329	December 31, 2020 1,340 1,248	June 30, 2020
			1,378
			620

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

The amounts recognized in profit or loss were as follows: Interest on lease liabilities Expenses relating to short-term leases Variable lease payments not included in the measurement of lease liabilities Expense relating to leases of low-value assets, excluding short-term leases of low-value assets Profits from the change of the lease (recorded as other income)	For the three months ended June 30, 2021 2020 $ 10 9 $ 12,753 252 $ 21 96 $ 384 76 $ - -	For the three months ended June 30, 2021 2020 $ 10 9 $ 12,753 252 $ 21 96 $ 384 76 $ - -	For the six months ended June 30,	For the six months ended June 30,
	2021		2021	2020
	$ 10 $ 12,753 $ 21 $ 384 $ -		19 14,786 86 628 (1)	19
				792
				249
				144
				-

(Continued)

19

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

The amounts recognized in the statement of cash flows for the

Group were as follows: Total cash outflow for leases $ 16,472	2,198

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.

(l) Provisions

Except for the following disclosure, there was no significant change for provisions for the periods from January 1 to June 30, 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 on January 1, 2021 Provisions made during the year Provisions used during the year Balance on June 30, 2021 Balance on January 1, 2020 Provisions made during the year Provisions used during the year Balance on June 30, 2021	Environmental protection costs		Fire Disaster Indemnity 509,076 - (56,153) 452,923 - - - -	Total 595,232 1,230 (83,724)
				512,738
				83,957 51,930 (44,167)
				91,720

In 2020, the Group estimated the fire disaster indemnity amounting to $509,076 due to fire spreading to the nearby factories. Please refer to note 10 for the details.

(m) 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.

(Continued)

20

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

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

Operating cost Operating expenses	For the three months ended June 30, 2021 2020 $ 170 393 67 (63) $ 237 330	For the six months ended June 30, 2021 2020 342 780 131 (120) 473 660
	2021 $ 170 67 $ 237	2021 342 131 473

(ii) Defined contribution plans

The Group’s expenses under the pension plan cost to the Bureau of Labor Insurance for the three months and six months ended June 30, 2021 and 2020, were as follows:

Operating cost Selling expenses Administration expenses Research expenses	For the three months ended June 30, 2021 2020 $ 1,263 1,325 66 66 168 166 226 194 $ 1,723 1,751	For the six months ended June 30,	For the six months ended June 30,
	2021 $ 1,263 66 168 226 $ 1,723	2021 2,623 132 338 449 3,542	2020
			2,630 131 327 384
			3,472

(n) 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 and six months ended June 30, 2021 and 2020 were calculated as follows:

Current income tax expense	For the three months ended June 30, 2021 2020 $ 746 55,704	For the three months ended June 30, 2021 2020 $ 746 55,704	For the six months ended June 30,	For the six months ended June 30,
	2021		2021 10,951	2020
	$ 746			113,188

• (iii) For the three months and six months ended June 30, 2021 and 2020, the Group did not recognize income tax expense in equity and other comprehensive income.

(iv) Examination and approval

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

(Continued)

21

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

(o) 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 June 30, 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

Based on the resolutions of annual stockholders’ meetings held on July 15, 2021 and June 21, 2020, the appropriations of dividends from the distributable retained earnings of 2020 and 2019 were 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)

22

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

(iii) 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			(27,582)
Balance at June 30, 2021	$		(56,960)
Balance at January 1, 2020	$		22,254
Unrealized gains (losses) from financial assets measured at fair value through
other comprehensive income			(23,795)
Balance at June 30, 2020	$		(1,541)

(p) Earnings per share

For the three months and six months ended June 30, 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 June 30, 2021 2020 $ 3,751 241,670 79,485 79,485 $ 0.05 3.04 $ 3,751 241,670 79,485 79,485 62 390 79,547 79,875 $ 0.05 3.03	For the six months ended June 30,	For the six months ended June 30,
	2021 $ 3,751 79,485 $ 0.05 $ 3,751 79,485 62 79,547 $ 0.05	2021 45,424 79,485 0.57 45,424 79,485 277 79,762 0.57	2020
			450,001
			79,485
			5.66
			450,001
			79,485 650
			80,135
			5.62

(Continued)

23

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

Based on the resolutions of annual stockholders’ meetings held on July 15, 2021, the Group resolved to issue new shares as stock dividends; the record date for the stock dividends is August 29, 2021. If the resolution is determined after the reporting period but before the reporting date, the earnings per share after the retrospective adjustment is as follows:

Basic earnings per share Diluted earnings per share	For the three months ended June 30, 2021 2020 $ 0.04 2.53 $ 0.04 2.52	For the six months ended June 30,	For the six months ended June 30,
	2021 $ 0.04 $ 0.04	2021 0.48 0.47	2020
			4.72
			4.68

• (q) Revenue from contracts with customers

• (i) Disaggregation of revenue

Primary geographical markets: Italy China Taiwan United States Switzerland Spain Germany Turkey India Netherlands Japan Others Major products Active Pharmaceutical Ingredients Intermediates Specialty Chemical	For the three months ended June 30, 2021 2020 $ 58,033 100,357 40,712 8,897 4,207 84,574 13,868 136,986 21,149 37,214 1,962 68,613 9,544 3,767 306 32,337 6,814 57,488 - 14,941 2,921 75,592 17,056 107,156 $ 176,572 727,922 $ 90,161 555,831 85,634 138,452 777 33,639 $ 176,572 727,922	For the six months ended June 30,	For the six months ended June 30,
	2021 $ 58,033 40,712 4,207 13,868 21,149 1,962 9,544 306 6,814 - 2,921 17,056 $ 176,572 $ 90,161 85,634 777 $ 176,572	2021 132,849 94,312 43,804 40,095 32,373 27,369 26,780 25,591 11,430 - 15,103 50,492 500,198 294,731 195,954 9,513 500,198	2020
			250,408 20,744 130,650 254,710 59,265 222,555 29,936 53,079 89,529 79,382 142,542 179,450
			1,512,250
			1,090,374 357,973 63,903
			1,512,250

(Continued)

24

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

(ii) Contract balances

Notes and accounts receivable Less: allowance for impairment Total Contract liabilities (sales received in advance)	June 30, 2021 $ 137,153 - $ 137,153 $ 40,167	December 31, 2020 337,749 - 337,749 97,295	June 30, 2020 495,294 (1,179) 494,115 57,371

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.

(r) 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 and six months ended June 30, 2021 and 2020, the remunerations to employees amounted to $532, $29,130, $5,548 and $55,350, respectively, and the remunerations to directors amounted to $68, $3,966, $752 and $7,541, 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 years 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.

(s) 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.

(Continued)

25

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

(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.

• 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:

June 30, 2021 Non-derivative financial liabilities: Notes and accounts payable Lease liabilities (including current and non-current) Other payables Payables on contractors and equipment	Carrying Amount $ 27,920 2,975 142,839 42,692 $ 216,426	Contractual cash flows (27,920) (3,018) (142,839) (42,692) (216,469)	Within a year (27,920) (1,679) (142,839) (42,692) (215,130)	1 ~ 2 years - (1,329) - - (1,329)	Over 2 years - (10) - - (10)

(Continued)

26

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

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 June 30, 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 $ 80,878 2,588 188,938 21,064 $ 293,468 $ 119,258 1,998 741,232 48,654 $ 911,142	Contractual cash flows (80,878) (2,629) (188,938) (21,064) (293,509) (119,258) (2,025) (741,232) (48,654) (911,169)	Within a year (80,878) (1,368) (188,938) (21,064) (292,248) (119,258) (1,397) (741,232) (48,654) (910,541)	1 ~ 2 years - (922) - - (922) - (434) - - (434)	Over 2 years - (339) - - (339) - (194) - - (194)

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		June 30, 2021	TWD 424,714 58,915 4,895	De Foreign currency	cember 31, 2	020	Foreign currency	June 30, 2020
	Foreign currency	Exchange rate			Exchange rate	TWD 503,325 110,658 40,285		Exchange rate TWD 29.58 679,571 33.07 70,307 29.58 88,030
	$ 15,272 1,788 176	27.81 32.95 27.81		17,704 3,178 1,417	28.43 34.82 28.43		22,974 2,126 2,976

(Continued)

27

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

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.

The analysis assumes that all other variables remain constant. A strengthening (weakening) 1% of the functional currency against each foreign currency for the six months ended June 30, 2021 and 2020 would have affected the net profit before tax increased or decreased $4,787 and $6,618, 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 and six months ended June 30, 2021 and 2020, the exchange gains (losses), including realized and unrealized, are $(9,263), $(14,108), $(14,831) and $(9,444), respectively.

(iv) Interest rate analysis

For the details of financial assets and liabilities exposed to interest rate risk, please refer to note 6(r) for 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
	June 30, 2021 June 30, 2020 $ 397,644 186,192 - -

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 $497 and $233, respectively, for the six months ended June 30, 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)

28

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			June 30, 2021	June 30, 2021	June 30, 2021
	Book value			Fair Value
			Level 1 624,375 - - - - - - - - -	Level 2 - - - - - - - - - -	Level 3 Total - 624,375 58,115 58,115 - - - - - - - - - - - - - - - -
	$ 624,375 58,115 427,889 137,153 525,316 6,210 1,096,568 $ 1,779,058 $ 27,920 2,975 142,839 42,692 $ 216,426

(Continued)

29

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 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				December 31, 2020	December 31, 2020	December 31, 2020
	Book value				Fair Value
				Level 1 Level 2 667,955 - - - - - - - - - - - - - - - - - - - June 30, 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 1 661,063 25,968 - - - -	Level 2 Level 3 Total - - 661,063 - 87,566 113,534 - - - - - - - - - - - -
	$ 661,063 113,534 778,055 494,115 599 1,210 1,273,979 $ 2,048,576

(Continued)

30

SCI PHARMTECH, INC. AND SUBSIDIARIES Notes to the Consolidated 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			June 30, 2020	June 30, 2020
	Book value			Fair Value
			Level 1 - - - -	Level 2 Level 3 Total - - - - - - - - - - - -
	$ 119,258 1,998 741,232 48,654 $ 911,142

• 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.

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)

31

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

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 six months ended June 30, 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 June 30, 2021 January 1, 2020 Total gains and losses recognized: In profit or loss In other comprehensive income June 30, 2020	Fair value through other comprehensive income Unquoted equity instruments $ 85,697 - (27,582) $ 58,115 $ 108,619 - (21,053) $ 87,566

For the three months and six months ended June 30, 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:

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”	For the three months ended June 30, 2021 2020 $ (10,096) 4,520	For the six months ended June 30, 2021 2020 (27,582) (21,053) (Continued)

32

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

• 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 June 30, 2021, December 31, 2020 and June 30, 2020 were 1.61~2.96, 1.79~5.01 and 1.52, respectively) The higher the fair value is, the higher the multiplier will be. ‧ Lack-of-Marketability discount rate (As of June 30, 2021, December 31, 2020 and June 30, 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 June 30, 2020 was 24.47%~31.76%) 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 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:

(Continued)

33

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

June 30, 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 June 30, 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% $ 2,479 2,506 5% $ 1,877 1,909 5% $ 3,496 3,536 5% $ 2,895 2,895 5% $ 1,439 1,439 5% $ 2,504 2,504	Other comprehensive income	Other comprehensive income
				Unfavorable
				2,506
				1,909
				3,536
				2,895
				1,439
				2,504

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.

(t) 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.

(u) 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.

(Continued)

34

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

• (v) 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 six months ended June 30, 2021 and 2020, were as follows:

• (i) For the acquisition of right-of-use assets by lease for the six months ended June 30, 2021 and 2020, please refer to note 6(h).

• (ii) Reconciliation of liabilities arising from financing activities for the six months ended June 30, 2021 and 2020, were as follows:

==> picture [421 x 148] intentionally omitted <==

----- Start of picture text -----

Non-cash
changes
Changes in
January 1, lease June 30,
2021 Cash flows payments 2021
Lease liabilities $ 2,588 (953) 1,340 2,975
Non-cash
changes
Changes in
January 1, lease June 30,
2020 Cash flows payments 2020
Lease liabilities $ 2,992 (994) - 1,998
----- End of picture text -----

(7) Related-party transactions:

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

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

• (c) Key management personnel compensation

Salary and short-term employee benefits	For the three months ended June 30, 2021 2020 $ 2,921 15,197	For the six months ended June 30,	For the six months ended June 30,
	2021 $ 2,921	2021 7,989	2020
			29,275

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets Land Building	Subject Pledged as collaterals 〃	June 30, 2021 $ 42,736 3,845 $ 46,581	December 31, 2020 42,736 4,171 46,907	June 30, 2020
				42,736 4,504
				47,240

(Continued)

35

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

(9) Commitments and contingencies:

• (a) As of June 30, 2021, December 31, 2020 and June 30, 2020, the unused balance of the Group’s outstanding standby letters of credit amounted to $33,031, $29,106 and $12,561, respectively.

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

follows:
Acquisitions of property, plant and equipment	June 30, 2021 $ 247,749	December 31, 2020 49,143	June 30, 2020
			40,573

(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 June 30, 2021, the above compensation losses amounting to $56,153 had been paid. As of June 30, 2021 and December 31, 2020, the fire disaster indemnity was $452,923 and $509,076, respectively, which was recorded under provisions. Please refer to note 6(l).

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 June 30, 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.

(11) Subsequent Events: None.

(Continued)

36

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

(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 June 30, 2021	For the three months ended June 30, 2021	For the three months ended June 30, 2021	For the three months ended June 30, 2020	For the three months ended June 30, 2020	For the three months ended June 30, 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	25,010 2,811 1,433 - 797 9,532 1,010	10,506 1,027 527 68 1,084 4,283 1,005	35,516 3,838 1,960 68 1,881 13,815 2,015	55,573 3,298 1,718 - 972 28,289 420	36,863 961 363 3,966 2,318 4,979 1,015	92,436 4,259 2,081 3,966 3,290 33,268 1,435
By function By item	For the six months ended June 30, 2021			For the six months ended June 30, 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	52,706 6,547 2,965 - 1,580 18,638 1,441	27,303 2,322 1,050 752 2,511 8,256 2,011	80,009 8,869 4,015 752 4,091 26,894 3,452	109,457 7,173 3,410 - 1,796 56,373 888	77,170 2,177 722 7,541 4,642 9,965 2,017	186,627 9,350 4,132 7,541 6,438 66,338 2,905

• (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 six months ended June 30, 2021:

• (i) Loans to other parties: None.

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

(Continued)

37

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

(iii) Securities held as of June 30, 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 (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 2,840 420 2,744 3,568 793 36 400 790 33 28 2,350 685 642 150 1,458 4,497	46,522 51,360 20,960 49,082 45,238 29,528 30,352 8,291 45,161 45,188 49,880 2,272 21,360 49,533 2,080 1,526 40,067 43,497 27,478 15,000 31,580 26,535	- - - - - - - - - - - - - - - - - - - - 2.44 % 3.47 %	46,522 51,360 20,960 49,082 45,238 29,528 30,352 8,291 45,161 45,188 49,880 2,272 21,360 49,533 2,080 1,526 40,067 43,497 27,478 15,000 31,580 26,535	- - - - - - - - - - - - - - - - - - - - -

• (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.

• (viii) Receivables from related parties with amounts exceeding the lower of $100 million or 20% of the capital stock: None.

(Continued)

38

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

• (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 six months ended June 30, 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 June 30, 2021			Net income (losses) of investee	Share of profits/losses of investee	Note
				June 30, 2021	December 31, 2020	Shares (thousands)	Percentage of ownership	Carrying value
SCI PHARMTEC H, INC. SCI PHARMTEC H, INC.	Yushan Pharmaceuticals Inc. Framosa Co., Ltd.	R.O.C. R.O.C.	The research and development, manufacture and sale of API Circular economy by purifying and utilizing used solvents	351,761 66,000	351,761 -	35,190 6,600	% 100 % 40	348,895 65,037	(291) (2,408)	(291) (963)	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

		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.