What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-13 compared with 2020-08-14 · 509 added, 460 removed, 793 unchanged (55% of the section changed)

2 unchanged sentences

except par value and share data)

September 30,

Current assets:

14 unchanged sentences

Accounts payable and accrued liabilities

Revolving credit facility

Total current liabilities

7 unchanged sentences

5,000,000 shares authorized;

no shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

no shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Common stock, $0.001 par value;

250,000,000 shares authorized;

12,849,238 and 12,917,348 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

12,782,151 and 12,917,348 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

4 unchanged sentences

notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands,

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Finance receivables interest income, including fees

12 unchanged sentences

Unrealized net gain (loss) on warrants

Unrealized net gain (loss) on equity securities

(Loss) income before provision (benefit) for income taxes

(Benefit) provision for income taxes

Consolidated net (loss) income

Net (loss) income per share

Unrealized net (loss) gain on equity securities

Income before provision (benefit) for income taxes

Provision (benefit) for income taxes

Consolidated net income

Net income per share

Weighted Average Shares

1 unchanged sentence

notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

Six Months Ended

Consolidated net (loss) income

September 30,

Nine Months Ended

September 30,

Consolidated net income

Other comprehensive income, net of tax

Comprehensive (loss) income

Comprehensive income

See accompanying

3 unchanged sentences

except share data)

Six Months Ended June 30, 2020

Additional Paid-

Nine Months Ended September 30, 2020

Stockholders’

6 unchanged sentences

Stock-based compensation

Issuance of common stock in lieu of payment of

employee cash bonuses

Issuance of common stock in payment of employee cash bonuses

Issuance of common stock

1 unchanged sentence

Balances at June 30, 2020

Stock-based compensation

Issuance of common stock

Repurchases of common stock in open market

Balances at September 30, 2020

$ (4,195,069 )

Six Months Ended June 30, 2019

Additional Paid-

Nine Months Ended September 30, 2019

Stockholders’

9 unchanged sentences

Balances at June 30, 2019

Stock-based compensation

Issuance of common stock

Repurchases of common stock in open market

Balances at September 30, 2019

$ (4,204,412 )

3 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Consolidated net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Consolidated net income

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan credit losses

15 unchanged sentences

Cash flows from investing activities:

Acquisition of business, net of cash acquired

Investment in equity securities

Investment in finance receivables

4 unchanged sentences

Cash flows from financing activities:

Net proceeds from credit facility

Repurchases of common stock, including fees and expenses

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

15 unchanged sentences

the sales of life science products by third parties.

The Company is headquartered in Dallas, Texas, and as of June 30, 2020, the

Company had 33 employees.

The Company is headquartered in Dallas, Texas, and as of September 30, 2020,

the Company had 32 employees.

Company has net operating loss carryforwards (“NOLs”) and believes that the ability to utilize these NOLs is an important

1 unchanged sentence

However, at this time, under current law, the Company does not anticipate that the Finance Receivables

or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior

and Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior

to their respective expiration dates.

1 unchanged sentence

might result in the ability to utilize more of the NOLs.

of August 10, 2020, and since inception of the strategy, the Company and its partners have executed transactions with 36

of November 10, 2020, and since inception of the strategy, the Company and its partners have executed transactions with 38

different parties under its specialty finance strategy, funding an aggregate $550.4 million in various financial products across

4 unchanged sentences

August 26, 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc.

(“Enteris”).

SWK Products Holdings LLC (“SWK Products”), a wholly-owned subsidiary of the Company, entered

into a merger agreement pursuant to which Enteris became a wholly-owned subsidiary of SWK Products.

(“Enteris”), which is a wholly-owned subsidiary of the Company.

is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug

12 unchanged sentences

(“GAAP”).

The consolidated financial statements include the accounts of all subsidiaries and affiliates

in which the Company holds a controlling financial interest as of the financial statement date.

The consolidated financial statements include the accounts of all subsidiaries and affiliates in

which the Company holds a controlling financial interest as of the financial statement date.

Normally a controlling financial

33 unchanged sentences

to be consistent with current year presentation and have no impact on previously reported total assets, total stockholders’

or net (loss) income.

equity or net income.

preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company to make estimates

5 unchanged sentences

valuation of accounts receivable;

impairment of financing

impairment of finance

long-lived assets;

5 unchanged sentences

and contingencies and litigation, among others.

Some of these judgments can be subjective and

complex, and consequently, actual results may differ from these estimates.

The Company’s estimates often are based on complex

judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable.

For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are

Some of these judgments can be subjective and complex,

and consequently, actual results may differ from these estimates.

The Company’s estimates often are based on complex judgments,

probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable.

For any given

individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable.

Company regularly evaluates its estimates and assumptions using historical experience and other factors, including the economic

10 unchanged sentences

judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

account for business combinations under the acquisition method of accounting.

This method requires the recording of acquired assets

and assumed liabilities at their acquisition date fair values.

The excess of the purchase price over the fair value of assets

acquired and liabilities assumed is recorded as goodwill.

Results of operations related to business combinations are included

prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within

selling, general and administrative expenses.

Refer to Note 3, Business Combinations , for further information regarding

our acquisition of Enteris.

Company earns revenues from its two U.S.-based business segments:

3 unchanged sentences

pharmaceutical Peptelligence®

platform, which enables

the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in

an enteric-coated tablet formulation.

platform, which

enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules

in an enteric-coated tablet formulation.

financial results of Enteris are included in the Pharmaceutical Development segment as of the acquisition date.

Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under

which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties.

Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners,

under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third

The terms of these arrangements typically include payment to the Company of one or more of the following:

non-refundable, upfront

license fees;

non-refundable,

upfront license fees;

reimbursement of certain costs;

4 unchanged sentences

classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet

Deferred revenue was $0.7 million and $0.1 million as of June 30, 2020 and December 31, 2019, respectively, and is included

in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.

Deferred revenue was $0.5 million and $0.1 million as of September 30, 2020 and December 31, 2019, respectively, and is

included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.

and Development

30 unchanged sentences

impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326).”

The new standard

adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses

rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses,

which the FASB believes will result in more timely recognition of losses.

The ASU describes the impairment allowance as a valuation

June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).”

This standard adds an

impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather

than incurred losses.

Under this guidance, an entity recognizes as an allowance its estimate of expected credit losses, which

the FASB believes will result in more timely recognition of losses.

This ASU describes the impairment allowance as a valuation

account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount

14 unchanged sentences

on its portfolio under the new CECL model.

Net (Loss) Income

net (loss) income per share is computed using the weighted-average number of outstanding shares of common stock.

Diluted net income

per share is computed using the weighted-average number of outstanding shares of common stock, and when dilutive, shares of common

Net Income per

net income per share is computed using the weighted-average number of outstanding shares of common stock.

Diluted net income per

share is computed using the weighted-average number of outstanding shares of common stock, and when dilutive, shares of common

stock issuable upon exercise of options and warrants deemed outstanding using the treasury stock method.

following table shows the computation of basic and diluted net (loss) income per share for the following periods (in thousands,

except per share amounts):

following table shows the computation of basic and diluted net income per share for the following periods (in thousands, except

per share amounts):

Three Months Ended

Six Months Ended

Net (loss) income

September 30,

Nine Months Ended

September 30,

Weighted-average shares outstanding

1 unchanged sentence

Weighted-average diluted shares

Basic net (loss) income per share

Diluted net (loss) income per share

the three months ended June 30, 2020 and 2019, outstanding stock options, restricted stock units and warrants to purchase shares

of common stock in an aggregate of approximately 495,000 and 447,000, respectively, have been excluded from the calculation

of diluted net (loss) income per share as all such securities were anti-dilutive.

For the six months ended June 30, 2020 and 2019,

outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 483,000, and

424,000, respectively, have been excluded from the calculation of diluted net (loss) income per share as all such securities were

anti-dilutive.

Basic net income per share

Diluted net income per share

the three months ended September 30, 2020 and 2019, outstanding stock options, restricted stock units and warrants to purchase

shares of common stock in an aggregate of approximately 409,000 and 436,000, respectively, have been excluded from the calculation

of diluted net income per share as all such securities were anti-dilutive.

For the nine months ended September 30, 2020 and 2019,

outstanding stock options, restricted stock units and warrants to purchase shares of common stock in an aggregate of approximately

455,000, and 428,000, respectively, have been excluded from the calculation of diluted net income per share as all such securities

were anti-dilutive.

Business Combinations

2 unchanged sentences

The total merger consideration was $34.6 million, which

included contingent consideration of $14.5 million, which was remeasured to $16.3 million as of June 30, 2020.

The purchase price

was subject to certain adjustments with respect to cash, debt, working capital, transaction expenses and the value of the contingent

consideration agreement entered into, in connection with the transaction.

to the acquisition, Enteris entered into a non-exclusive commercial license agreement with Cara Therapeutics, Inc.

“License Agreement”), for oral formulation rights to Enteris’

included contingent consideration of $14.5 million, which was remeasured to $16.5 million as of September 30, 2020.

three months ended September 30, 2020, the Company recognized $2.5 million of revenue and accounts receivable related to the completion

of a milestone under the License Agreement (as defined below) with Cara Therapeutics, Inc.

(“Cara”).

Subsequent to September

30, 2020, the Company paid $1.0 million of such amount to the seller of Enteris, pursuant to earnout provisions of

the merger agreement.

The purchase price was subject to certain adjustments with respect to cash, debt, working capital, transaction

expenses and the value of the contingent consideration agreement entered into, in connection with the transaction.

to the acquisition, Enteris entered into a non-exclusive commercial license agreement with Cara (the “License

Agreement”), for oral formulation rights to Enteris’

Peptelligence®

technology to develop and commercialize

Oral KORSUVA in any indication worldwide, excluding South Korea and Japan.

Cara is obligated to pay Enteris certain development,

regulatory and tiered commercial milestone payments, as well as low single-digit royalties based on net sales in the licensed

technology to develop and commercialize Oral

KORSUVA TM in any indication worldwide, excluding South Korea and Japan.

Cara is obligated to pay Enteris certain

development, regulatory and tiered commercial milestone payments, as well as low single-digit royalties based on net sales in

the licensed territory.

acquisition was accounted for under the acquisition method of accounting.

3 unchanged sentences

largely of synergies and the acquisition of intangible assets.

The resulting goodwill is not expected to be deductible for

allocation of the merger consideration has been prepared on a preliminary basis and changes to the allocation to certain assets,

liabilities, including tax estimates and potential indemnities, may be revised as additional information becomes available.

Company will finalize the acquisition accounting within the required measurement period of one year.

The resulting goodwill is not expected to be deductible for tax

following table summarizes the allocation of the merger consideration (at fair value) to the assets and liabilities of Enteris

15 unchanged sentences

1, 2019, the earliest period presented herein (in thousands):

Six Months Ended

June 30, 2019

September 30,

pro forma financial information includes adjustments that are directly attributable to the business combination and are factually

5 unchanged sentences

of operations that would have been achieved nor are they indicative of future results of operations.

was no change in the carrying amount of goodwill from December 31, 2019 to June 30, 2020, and net book value

remains at $8.4 million.

was no change in the carrying amount of goodwill from December 31, 2019 to September 30, 2020, and net book

value remains at $8.4 million.

The net book value of goodwill is solely related to the Enteris acquisition in 2019.

As of June 30, 2020,

the Company concluded that it is more likely than not that fair value of the reporting unit is greater than its carrying value,

and goodwill is not considered to be impaired.

of June 30, 2020, the gross book value, accumulated amortization, net book value and estimated useful life of acquired intangible

assets were as follows (in thousands, except estimated useful life data):

of June 30, 2020

As of September

30, 2020, the Company concluded that it is more likely than not that fair value of the reporting unit is greater than its carrying

value, and goodwill is not considered to be impaired.

of September 30, 2020, the gross book value, accumulated amortization, net book value and estimated useful life of acquired

intangible assets were as follows (in thousands, except estimated useful life data):

As of September 30, 2020

Licensing agreement

Trade names and trademarks

2 unchanged sentences

Total intangibles

expense from the acquisition of Enteris was $6.8 million for the period ended June 30, 2020 and was recorded

in depreciation and amortization expense.

Based on amounts recorded at June 30, 2020, the Company will recognize acquired

intangible asset amortization as follows (in thousands):

expense from the acquisition of Enteris was $9.4 million for the nine months ended September 30, 2020 and

was recorded in depreciation and amortization expense.

Based on amounts recorded at September 30, 2020, the Company

will recognize acquired intangible asset amortization as follows (in thousands):

2020 (remaining)

4 unchanged sentences

expected using the effective interest method.

of June 30, 2020, the Company had a credit loss allowance of $8.4 million.

Of the total $8.4 million, $1.2 million and $0.6 million

are associated with the Company’s Cambia®

of September 30, 2020, the Company had a credit loss allowance of $8.4 million.

Of the total $8.4 million, $1.2 million and $0.6

million are associated with the Company’s Cambia®

and Besivance®

royalties, respectively.

The remaining $6.6 million is related

to the ABT Molecular Imaging, Inc.

The remaining $6.6 million is

related to the ABT Molecular Imaging, Inc.

(“ABT”), now known as Best ABT, Inc.

(“Best”), second lien term loan that

was recognized in order to reflect the Best royalty at its estimated fair value of $4.1 million.

The carrying values of finance

receivables are as follows (in thousands):

(“Best”), second lien term

loan that was recognized in order to reflect the Best royalty at its estimated fair value of $4.1 million.

The carrying values

of finance receivables are as follows (in thousands):

September 30,

Royalty purchases

3 unchanged sentences

following table presents nonaccrual and performing finance receivables by portfolio segment, net of credit loss allowance (in

June 30, 2020

September 30, 2020

December 31, 2019

1 unchanged sentence

Total carrying value

of June 30, 2020 and December 31, 2019, the Company had three finance receivables in nonaccrual status:

(a) the term loan to B&D

Dental Corporation (“B&D”), with a net carrying value of $8.3 million, (b) the Best royalty, with a net carrying

value of $4.1 million and (c) the Tissue Regeneration Therapeutics, Inc.

(“TRT”) royalty, with a net carrying value

of $3.5 million.

Although in nonaccrual status, the B&D term loan and the TRT royalty were not considered impaired as of both

June 30, 2020 and December 31, 2019.

The Company collected an aggregate $0.1 million in cash on two of its nonaccrual royalties

during the six months ended June 30, 2020.

(Please see B&D, Best and TRT below for further details regarding nonaccrual

and impaired finance receivables).

of September 30, 2020 and December 31, 2019, the Company had three finance receivables in nonaccrual status:

(a) the term loan

to B&D Dental Corporation (“B&D”), with a net carrying value of $8.3 million, (b) the Best royalty, with a net

carrying value of $4.0 million and (c) the Tissue Regeneration Therapeutics, Inc.

(“TRT”) royalty, with a net carrying

value of $3.5 million.

Although in nonaccrual status, the B&D term loan and the TRT royalty were not considered impaired as

of both September 30, 2020 and December 31, 2019.

The Company collected an aggregate $0.2 million in cash on two of its nonaccrual

finance receivables during the nine months ended September 30, 2020.

(Please see B&D, Best and TRT below for further

details regarding nonaccrual and impaired finance receivables).

December 10, 2013, the Company entered into a five-year credit agreement to provide B&D a senior secured term loan with a

11 unchanged sentences

The Company obtained

a third-party valuation of B&D as of December 31, 2019.

a third-party valuation of B&D as of September 30, 2020.

As a result of the third-party valuation and facts and circumstances

1 unchanged sentence

thus, accrued

interest has not been reversed nor has an allowance been recorded as of June 30, 2020.

interest has not been reversed nor has an allowance been recorded as of September 30, 2020.

October 31, 2018, ABT announced that it entered into an asset purchase agreement with Best, a wholly-owned subsidiary of Best

11 unchanged sentences

the year ended December 31, 2019, the Company re-evaluated the value of the Best royalty based on 2019 business trends, and as

a result, the Company recognized a provision for credit losses of $1.6 million to reflect the Best royalty at its estimated fair

value of $4.1 million.

June 13, 2013, the Company purchased royalties from TRT related to its technology licenses in the family cord banking services

sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon the achievement of royalty receipts-based

During the quarter ended March 31, 2016, royalty payments from the primary U.S.

licensee ended as a result of the

licensee terminating a technology license.

The Company and TRT continue to evaluate options in regard to enforcing TRT’s

intellectual property rights against this licensee, as well as seeking additional U.S.

TRT’s Canadian licensee

continues to pay royalties.

The Company is in discussions with TRT to restructure the purchase agreement.

Given uncertainties

regarding the outcome of the negotiations and the ultimate timing of cash flows related to the U.S.

intellectual property, the

Company has placed the TRT royalty on non-accrual status, although the Company does not consider it impaired as of June 30, 2020.

The Company evaluated several factors in this determination, including input from intellectual property counsel regarding the

strength of the related intellectual property, continued receipt of Canadian licensee royalty payments and anticipated terms of

the restructured purchase agreement.

in corporate debt securities and equity securities at June 30, 2020 and December 31, 2019 consist of the following (in thousands):

a result, the Company recognized a provision for credit losses of $1.6 million to reflect the Best royalty at its then estimated

fair value of $4.1 million.

June 13, 2013, the Company purchased two royalty streams from TRT derived from the licensed use of TRT’s technology in the

family cord banking services sector for $2.0 million, plus additional consideration of $1.25 million was paid on October 20, 2014

upon aggregate royalty payments reaching a certain threshold.

As of June 30, 2020, the fair value of the royalty was $3.5 million.

On August 21, 2020, the Company and TRT agreed to terminate the royalty purchase agreement in exchange for TRT issuing the Company

TRT common equity and a convertible note.

The convertible note carries no interest, can be redeemed in cash without penalty at

any time by TRT, and converts into common equity of TRT at decreasing valuations over time to induce repayment in cash.

September 30, 2020, the Company does not believe there is an impairment of the carrying value of the investment in TRT.

in corporate debt securities and equity securities at September 30, 2020 and December 31, 2019 consist of the following (in thousands):

September 30,

Corporate debt securities

2 unchanged sentences

amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale

debt securities as of June 30, 2020 and December 31, 2019, are as follows (in thousands):

June 30, 2020

debt securities as of September 30, 2020 and December 31, 2019, are as follows (in thousands):

September 30, 2020

Corporate debt securities

1 unchanged sentence

Corporate debt securities

following table presents unrealized net gains and losses on equity securities during the three and six months ended June 30, 2020

following table presents unrealized net gains and losses on equity securities during the three and nine months ended September

30, 2020 and 2019 (in thousands):

Three Months Ended

Six Months Ended

Unrealized net gain (loss) on equity securities reflected in the unaudited condensed consolidated statements of operations

September 30,

Nine Months Ended

September 30,

Unrealized net (loss) gain on equity securities reflected in the unaudited condensed consolidated statements of income

Equity Securities

of June 30, 2020, the Company’s equity securities include 96,810 shares of Misonix, Inc.

(“Misonix”) common stock received

pursuant to Misonix’s purchase of Solsys Medical, Inc.

of September 30, 2020, the Company’s equity securities include 96,810 shares of Misonix, Inc.

(“Misonix”) common

stock received pursuant to Misonix’s purchase of Solsys Medical, Inc.

(“Solsys”) on September 27, 2019.

During the three months

ended September 30, 2019 and prior to the acquisition, the Company exercised its Solsys warrants in a cashless transaction to

purchase Solsys preferred stock and exercised its preemptive right to protect against dilution of its Solsys equity position.

Of the total 109,472 shares of Misonix common stock received for its Solsys equity interests, 12,662 shares are held in escrow

by Misonix, are subject to reduction based on terms of the acquisition agreement, and any shares remaining at the end of the escrow

period will be released within 15 to 18 months post closing of the acquisition.

The 96,810 shares are subject to a one year lock-up

that expires on September 27, 2020.

As of June 30, 2020, the 96,810 shares of Misonix common stock are reflected at their estimated

fair value of $1.3 million.

the three months ended September 30, 2019 and prior to the acquisition, the Company exercised its Solsys warrants in a cashless

transaction to purchase Solsys preferred stock and exercised its preemptive right to protect against dilution of its Solsys equity

Of the total 109,472 shares of Misonix common stock received for its Solsys equity interests, 12,662 shares are held

in escrow by Misonix, are subject to reduction based on terms of the acquisition agreement, and any shares remaining at the end

of the escrow period will be released within 15 to 18 months post closing of the acquisition.

The 96,810 shares were subject to

a one year lock-up that expired on September 27, 2020.

As of September 30, 2020, the 96,810 shares of Misonix common stock are

reflected at their estimated fair value of $1.1 million.

Debt Securities

5 unchanged sentences

secured notes have been placed on non-accrual status as of June 30, 2016.

Total cash collected during the six months ended

June 30, 2020 and 2019 was $33,000 and $34,000, respectively, which was credited to the notes’

Total cash collected during the nine months ended

September 30, 2020 and 2019 was $49,000 and $48,000, respectively, which was credited to the notes’

carrying value.

six months ended June 30, 2020, impairment expense of $0.2 million was recognized in order to reflect the notes at their estimated

fair value of $0.3 million.

the nine months ended September 30, 2020, impairment expense of $0.2 million was recognized in order to reflect the notes at their

estimated fair value of $0.3 million.

The notes are included in long-term marketable investments in the unaudited condensed consolidated

2 unchanged sentences

June 29, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with State Bank and Trust

Company as a lender and the administrative agent (“State Bank”) pursuant to which State Bank will provide the Company

Company as a lender and the administrative agent (“State Bank”) pursuant to which State Bank provides the Company

with up to a $20 million revolving senior secured credit facility, which the Company can draw down and repay until maturity, subject

14 unchanged sentences

minimum asset coverage and minimum interest coverage ratios.

the six months ended June 30, 2020 and 2019, the Company recognized $0.3 million and $0.2 million, respectively, of interest

On March 17, 2020, the Company drew $15.0 million on its revolving credit facility in order to support existing business

partners and to finance future investment opportunities.

As of June 30, 2020, $6.4 million was outstanding under the revolving

credit facility, and $13.6 million was available for borrowing.

the nine months ended September 30, 2020 and 2019, the Company recognized $0.4 and $0.3 million, respectively, of interest expense.

On March 17, 2020, the Company drew $15.0 million on its revolving credit facility in order to support existing business partners

and to finance future investment opportunities.

The line of credit was repaid by August 17, 2020.

As of September 30, 2020, no

amount was outstanding under the revolving credit facility, and $20.0 million was available for borrowing.

Party Transactions

3 unchanged sentences

of $13.88 per share.

The warrants have a price anti-dilution mechanism that was triggered by the price that shares were sold by

The warrants had a price anti-dilution mechanism that was triggered by the price that shares were sold by

the Company in a rights offering in 2014, and as a result, the strike price of the warrants was reduced to $13.48 per share.

to certain provisions within the warrant agreement, the warrants meet the definition of a derivative and do not qualify for a

scope exception, as it is not considered indexed to the Company’s stock.

As such, the warrants are reflected as a warrant

liability in the unaudited condensed consolidated balance sheets.

The Company recorded a nominal loss for the six months ended

June 30, 2020.

The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions:

warrants expired on September 6, 2020.

Company determined the fair value of the warrants as of December 31, 2019 using the Black-Scholes option pricing model with the

following assumptions:

Dividend rate

2 unchanged sentences

Expected volatility

changes on the value of the warrant liability during the six months ended June 30, 2020 were as follows (in thousands):

changes on the value of the warrant liability during the nine months ended September 30, 2020 were as follows (in thousands):

Fair value –

2 unchanged sentences

Fair value –

June 30, 2020

September 30, 2020

Commitments and Contingencies

of June 30, 2020, the Company’s unfunded commitments were as follows (in millions):

Aimmune Therapeutics, Inc.

(“Aimmune”)

of September 30, 2020, the Company’s unfunded commitments were as follows (in millions):

eTon Pharmaceuticals, Inc.

(“eTon”)

Total unfunded commitments

2 unchanged sentences

are only subject to being advanced as long as an event of default does not exist.

As of August 11, 2020, the aggregate unfunded

commitment increased to $8.0 million due to the expiration of SWK Funding’s commitment to Aimmune and SWK Funding’s

amendment with eTon subsequent to quarter ended June 30, 2020 (please refer to Note 12, Subsequent Events for further

details on SWK Funding’s amendment with eTon).

Stockholders’

Compensation Plans

the six months ended June 30, 2020 and 2019, the Company’s Board of Directors (the “Board”) approved compensation for

Board services by granting 10,506 and 5,725 shares, respectively, of common stock as compensation for the non-employee directors.

During the six months ended June 30, 2020 and 2019, the Company recorded approximately $0.2 million and $0.1 million, respectively,

the nine months ended September 30, 2020 and 2019, the Company’s Board of Directors (the “Board”) approved compensation

for Board services by granting 13,595 and 10,069 shares, respectively, of common stock as compensation for the non-employee directors.

During the nine months ended September 30, 2020 and 2019, the Company recorded approximately $0.3 million and $0.1 million, respectively,

in Board stock-based compensation expense.

The aggregate stock-based compensation expense, including the quarterly Board grants,

recognized by the Company for the six months ended June 30, 2020 and 2019 was $0.4 million and $0.2 million, respectively.

the six months ended June 30, 2020, the Company issued 5,200 shares of its common stock valued at $0.1 million to two of its employees

as partial payment in lieu of cash for their 2019 bonuses.

recognized by the Company for the nine months ended September 30, 2020 and 2019 was $0.5 million and $0.3 million, respectively.

the nine months ended September 30, 2020, the Company issued 5,200 shares of its common stock valued at $0.1 million to two of

its employees as partial payment in lieu of cash for their 2019 bonuses.

Share Repurchase

2 unchanged sentences

The March 26, 2020 share repurchase

program will expire not later than September 30, 2020.

program expired on September 30, 2020.

Fair Value Measurements

10 unchanged sentences

three hierarchy levels.

Level 1 Unadjusted

quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency

and volume to provide pricing information on an ongoing basis.

prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the

full term of the asset or liability.

This category includes quoted prices for similar assets or liabilities in active markets

and quoted prices for identical or similar assets or liabilities in inactive markets.

inputs are not corroborated by market data.

This category is comprised of financial and non-financial assets and liabilities

whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally

less readily observable from objective sources.

Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and

volume to provide pricing information on an ongoing basis.

Level 2 Quoted

prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full

term of the asset or liability.

This category includes quoted prices for similar assets or liabilities in active markets and quoted

prices for identical or similar assets or liabilities in inactive markets.

3 Unobservable inputs are not corroborated by market data.

This category is comprised of financial and non-financial assets and

liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that

are generally less readily observable from objective sources.

into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred.

no transfers between any levels during the six months ended June 30, 2020.

no transfers between any levels during the nine months ended September 30, 2020.

following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying

4 unchanged sentences

valuation models, key inputs to those models and significant assumptions utilized.

and cash equivalents

carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’

common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).

Cash and cash equivalents

The carrying amounts

reported in the balance sheet for cash and cash equivalents approximate those assets’

Marketable Investments

Certain common

equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).

fair values of finance receivables are estimated using discounted cash flow analyses, using market rates at the balance sheet

20 unchanged sentences

a significantly lower or higher fair value measurement.

of June 30, 2020 and December 31, 2019, the Company’s contingent consideration was recorded at its estimated fair value of $16.3

of September 30, 2020 and December 31, 2019, the Company’s contingent consideration was recorded at its estimated fair value of

$16.5 million and $14.5 million, respectively.

16 unchanged sentences

non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3.

following table presents financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 (in

following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2020

(in thousands):

Quoted Prices

5 unchanged sentences

Contingent consideration payable

Warrant liability

following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31,

8 unchanged sentences

Warrant liability

changes on the value of the warrant assets during the six months ended June 30, 2020 were as follows (in thousands):

changes on the value of the warrant assets during the nine months ended September 30, 2020 were as follows (in thousands):

Fair value –

2 unchanged sentences

Fair value –

June 30, 2020

September 30, 2020

Company holds warrants issued to the Company in conjunction with certain term loan investments.

5 unchanged sentences

of assumptions were used in the models to determine fair value:

Risk-free rate range

Expected life (years)

Expected volatility range

of June 30, 2020 and December 31, 2019, the Company had three royalties, Besivance®, Best, and Cambia®, that were deemed

to be impaired based on reductions in carrying values in prior periods.

Risk-free rate

Expected life

(years) range

Expected volatility

of September 30, 2020 and December 31, 2019, the Company had three royalties, Besivance®, Best, and Cambia®, that were

deemed to be impaired based on reductions in carrying values in prior periods.

The following table presents these royalties measured

at fair value on a nonrecurring basis as of June 30, 2020 and December 31, 2019 (in thousands):

at fair value on a nonrecurring basis as of September 30, 2020 and December 31, 2019 (in thousands):

Quoted Prices

or Liabilities

June 30, 2020

September 30, 2020

Impaired royalties

1 unchanged sentence

Impaired royalties

were no liabilities measured at fair value on a nonrecurring basis as of June 30, 2020 and December 31, 2019.

were no liabilities measured at fair value on a nonrecurring basis as of September 30, 2020 and December 31, 2019.

following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying

2 unchanged sentences

instruments and derivative financial instruments.

of June 30, 2020 (in thousands):

of September 30, 2020 (in thousands):

Financial Assets

5 unchanged sentences

Contingent consideration payable

Warrant liability

of December 31, 2019 (in thousands):

7 unchanged sentences

Warrant liability

Revenue Recognition

Company’s Pharmaceutical Development segment recognizes revenues received from contracts with its customers by revenue source,

as we believe it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow.

The Company’s Finance

Receivables segment does not have any revenues received from contracts with customers.

The following table provides the contract

revenue recognized by revenue source for the three and nine months ended September 30, 2020 (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Pharmaceutical Development Segment

License Agreement

Total Contract Revenue

of September 30, 2020 and December 31, 2019, the Company recorded $2.7 million and $0.1 million, respectively, of accounts

receivable related to its contract revenue.

Contract Assets and Liabilities

contract liabilities represent advance consideration received from customers and are recognized as revenue when the related

performance obligation is satisfied.

The Company’s contract liabilities are presented as deferred revenues and are

included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets (in thousands):

September 30,

Pharmaceutical Development Segment

Deferred revenue

Total Contract Liabilities

refer to Notes 1 and 3 for further details on the Company’s deferred revenue and License Agreement, respectively.

did not have any contract assets nor did it have any contract liabilities related to the License Agreement as of September

30, 2020 or December 31, 2019.

Segment Information

financial and descriptive information is required to be provided about reportable operating segments, considering

a “management approach”

financial and descriptive information is required to be provided about reportable operating segments, considering a “management

approach”

concept as the basis for identifying reportable segments.

The management approach is based

on the way that management organizes the segments within the Company for making operating decisions, allocating resources, and

assessing performance.

Consequently, the segments are evident from the structure of the Company’s internal organization, focusing

on financial information that the Company’s chief operating decision-makers use to make decisions about the Company’s operating

The management approach is based on the way that management

organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance.

Consequently,

the segments are evident from the structure of the Company’s internal organization, focusing on financial information that

the Company’s chief operating decision-makers use to make decisions about the Company’s operating matters.

described in Note 1, SWK Holdings Corporation and Summary of Significant Accounting Policies, the Company has determined

7 unchanged sentences

following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Pharmaceutical

4 unchanged sentences

General and administrative

Other income, net

Other income (expense), net

Benefit for income taxes

Net income (loss)

Six months ended June 30, 2020

Nine months ended September 30, 2020

Pharmaceutical

5 unchanged sentences

General and administrative

Other expense, net

Other income (expense), net

Provision for income taxes

4 unchanged sentences

Subsequent Events

Pharmaceuticals, Inc.

August 11, 2020, SWK Funding entered into an amendment to the credit agreement with eTon to increase the maximum principal amount

of the term loan to $15.0 million.

SWK Funding funded $2.0 million at closing of the amendment, bringing the drawn balance to

$7.0 million.

eTon may draw up to $8.0 million of the remaining commitment upon eTon receiving certain FDA product approval milestones.

The amendment provides for a reduction in the interest rate between 0.75 percent to 2.25 percent, dependent upon eTon achieving

certain FDA product approval milestones and financial performance metrics.

In connection with the amendment, SWK Funding also

received a warrant to purchase shares of eTon common stock.

August 12, 2020, SWK Funding entered into an amendment to the credit agreement with BIOLASE, Inc.

(“BIOLASE”) to extend

the interest only period by one year, extend the maturity date by six months and reset liquidity and financial performance covenants.

The amendment also requires BIOLASE to make a principal payment in the amount of $0.7 million.

Trio Healthcare

October 22, 2020, SWK Funding closed a royalty purchase agreement with Trio Healthcare Limited.

SWK Funding paid

$3.9 million at closing in exchange for 100 percent of royalties paid on sales of a portfolio of ancillary ostomy products

until a certain royalty cap has been received by SWK Funding.

SWK Funding is also entitled to receive a residual

royalty after the royalty cap has been achieved until the tenth anniversary of the date on which the royalty cap was achieved.

Aimmune Therapeutics,

On October 20,

2020, Aimmune Therapeutics, Inc.

repaid its term loan.

SWK Funding received approximately $4.4 million at payoff for its portion

of the term loan, which included accrued interest, a prepayment penalty and exit fees.

MANAGEMENT’S

3 unchanged sentences

to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual

Report on Form 10-K for the year ended December 31, 2019 (“Annual Report”), as well as our unaudited condensed

consolidated financial statements and the accompanying notes included in this report.

Report on Form 10-K for the year ended December 31, 2019 (“Annual Report”), as well as our unaudited condensed consolidated

financial statements and the accompanying notes included in this report.

Considerations

19 unchanged sentences

Starting in July 2020, the governor of New Jersey began a phased re-opening of the state’s

economy, though much non-essential activities remain limited, which continues to impact operations.

Other disruptions or potential

disruptions include restrictions on our personnel and personnel of our customers and suppliers to travel and access customers;

economy, though some non-essential activities remain limited, which continues to impact operations.

We continue to monitor COVID-19

recommendations mandated by the governor’s office.

Other disruptions or potential disruptions include restrictions on our personnel

and personnel of our customers and suppliers to travel and access customers;

delays in product development efforts;

and additional government requirements or other incremental mitigation efforts that may

further impact our business.

and additional

government requirements or other incremental mitigation efforts that may further impact our business.

the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, the widespread

22 unchanged sentences

These segments reflect the

way the Company evaluates it business performance and manages its operations.

Please refer to Part I, Item I, F inancial Statements ,

Note 11 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment information.

way we evaluate our business performance and manage our operations.

Please refer to Part I, Item I, Financial Statements ,

Note 12 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment

Receivables Segment

4 unchanged sentences

from three sources:

(1) primarily owning or financing through debt investments, royalties or revenue interests generated

by the sales of life science products and related intellectual property, (2) receiving interest and other income by advancing

capital in the form of secured debt to companies in the life science sector, and (3) to a lesser extent, realizing capital appreciation

(1) primarily owning or financing through debt investments, royalties or revenue interests generated by the

sales of life science products and related intellectual property, (2) receiving interest and other income by advancing capital

in the form of secured debt to companies in the life science sector, and (3) to a lesser extent, realizing capital appreciation

from equity-related investments in the life science sector.

6 unchanged sentences

Development Segment

August 26, 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris.

SWK Products, a wholly-owned

subsidiary of SWK, entered into a merger agreement pursuant to which Enteris became a wholly-owned subsidiary of SWK.

is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug

delivery technologies, the Peptelligence®

Since its founding in 2013, Enteris has advanced multiple internal and

external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including

peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation.

August 26, 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris, which became our wholly-owned

Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary

oral drug delivery technologies, the Peptelligence®

Since its founding in 2013, Enteris has advanced multiple internal

and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected,

including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation.

strategy is to utilize the Peptelligence®

platform to create a wholly-owned portfolio of milestone and royalty income, and

thus increase our net income and book value, by out-licensing our technology in two ways.

First, we intend to out-license our

technology to pharmaceutical companies to create novel and important oral therapeutic treatments for a wide variety of indications.

Second, we intend to out-license to pharmaceutical companies our internally developed reformulations of approved, off-patent injectable

platform to create a portfolio of milestone and royalty income, and thus increase

our net income and book value, by out-licensing our technology in two ways.

First, we intend to out-license our technology to

pharmaceutical companies to create novel and important oral therapeutic treatments for a wide variety of indications.

we intend to out-license to pharmaceutical companies our internally developed reformulations of approved, off-patent injectable

therapeutic treatments where Peptelligence®

3 unchanged sentences

Receivables Portfolio Overview

table below provides an overview of our outstanding finance receivables transactions as of, and for the six months ended June

table below provides an overview of our outstanding finance receivables transactions as of, and for the nine months ended September

30, 2020 (in thousands, except rate, share and per share data).

Purchases and

Royalty Purchases

Beleodaq®

3 unchanged sentences

Oncology diagnosis

Coflex®/Kybella®

Spinal stenosis/Submental

NSAID migraine treatment

3 unchanged sentences

Secured Royalty Financing

(Corporate Debt Security)

(Marketable Investment)

Women’s health

1 unchanged sentence

Umbilical cord banking

Acerus Pharmaceuticals,

Aimmune Therapeutics,

Revenue Recognized

Acerus Pharmaceuticals, Inc.

Aimmune Therapeutics, Inc.

B&D Dental Corporation

First Lien Equipment

First Lien Equipment Loan

BIOLASE, Inc.

CeloNova BioSciences,

DxTerity Diagnostics,

Epica International,

eTon Pharmaceuticals,

CeloNova BioSciences, Inc.

DxTerity Diagnostics, Inc.

Epica International, Inc.

eTon Pharmaceuticals, Inc.

Harrow Health, Inc.

9.0% - 12.0 %

Keystone Dental, Inc.

Misonix, Inc.

10.0% - 12.3 %

Tenex Health, Inc.

3 unchanged sentences

Misonix, Inc.

Exercise Price

Change in Fair Value

Warrants to Purchase Stock

Exercise Price

Acerus Pharmaceuticals, Inc.

6 unchanged sentences

eTon Pharmaceuticals, Inc.

EyePoint Pharmaceuticals, Inc.

2 unchanged sentences

Tenex Health, Inc.

Revenue Recognized

Total Finance Receivables

4 unchanged sentences

on nonaccrual.

expense of $163 was recognized during the six months ended June 30, 2020.

expense of $163 was recognized during the nine months ended September 30, 2020.

August 21, 2020, the royalty purchase agreement was terminated in exchange for TRT common equity and a convertible note.

see Part 1, Item 1, Financial Statements , Note 4 of the notes to the unaudited condensed consolidated financial statements

for further details.

accordance with credit agreement, $3,000 was funded on January 16, 2020.

First amendment to credit agreement was signed on

May 28, 2020, allowing 4Web to pay in-kind the interest due in May 2020.

accordance with credit agreement, $2,500 was funded on February 19, 2020.

Loan was repaid in October 2020.

is evaluating strategic alternatives for the business.

3 unchanged sentences

at $0.39198 per share.

We executed an amendment on August 12, 2020, which requires BIOLASE to make a principal payment in the amount of $700.

The August 2020

amendment also extended the interest only period by twelve months and the maturity date by six months.

amended the facility to allow DxTerity to pay in kind the interest payments due in January 2019 and April 2019, subject to

4 unchanged sentences

This resulted in a default under the credit agreement.

paid the interest payment due in July 2020, and we are currently working with DxTerity to remedy the default.

We executed an amendment on August

11, 2020 to increase the maximum principal amount of the term loan to $15,000.

eTon may draw up to $8,000 upon reaching certain

milestones outlined in the amendment.

The amendment allows provides for a decrease in the interest rate to between 0.75 and

2.25 percent, also dependent upon eTon achieving certain milestones outlined in the amendment.

We funded $2,000 at closing.

paid the interest payments due in July 2020 and October 2020, and we are currently working with DxTerity to

remedy the default.

executed an amendment on August 11, 2020 to increase the maximum principal amount of the term loan to $15,000.

eTon may draw

up to $8,000 upon reaching certain milestones outlined in the amendment;

$2,000 was funded at closing.

accordance with credit agreement, $608 was funded on April 1, 2020.

8 unchanged sentences

We believe there have been no new critical accounting policies or material changes to our

existing critical accounting policies and estimates during the six months ended June 30, 2020, compared to those discussed in

our Annual Report on Form 10-K for the year ended December 31, 2019.

existing critical accounting policies and estimates during the nine months ended September 30, 2020, compared to those discussed

in our Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

1 unchanged sentence

for a listing of recent accounting pronouncements and their potential impact to our consolidated financial statements.

of the Three Months Ended June 30, 2020 and 2019 (in millions)

Three Months Ended June 30,

of the Three Months Ended September 30, 2020 and 2019 (in millions)

Three Months Ended

September 30,

Interest expense

3 unchanged sentences

General and administrative expense

Other income, net

(Benefit) provision for income taxes

Other (expense) income, net

Benefit for income taxes

Consolidated net income

generated revenues of $7.9 million and $5.7 million for the three months ended June 30, 2020 and 2019, respectively, which

consisted primarily of interest and fees earned on our finance receivables.

The $2.2 million increase primarily consists of a

$1.8 million net increase in royalty income and a $1.6 million increase in fees and interest earned on our finance receivables

due to funding new and existing loans.

The increase in revenue was offset by a $1.3 million decrease in interest and fees earned

on finance receivables that were paid off or paid down since the second quarter of 2019.

generated revenues of $10.6 and $6.3 million for the three months ended September 30, 2020 and 2019, respectively.

For the three

months ended September 30, 2020, revenues consisted primarily of $7.9 million of interest, fees and royalties earned on our finance

receivables and $2.8 million recognized from our pharmaceutical development segment.

For the three months ended September 30,

2019, revenues consisted primarily of $6.2 million of interest, fees and royalties earned on our finance receivables and $0.1

million received from our pharmaceutical development segment, which was acquired in the third quarter of 2019.

The $4.3 million

increase in total revenues during the 2020 period included $2.5 million of milestone revenue related to Enteris’

license agreement

with Cara, a $0.9 million net increase in royalty income and a $0.7 million net increase in fees and interest earned on our finance

receivables due to additional funding on existing loans.

expense consists of interest on amounts borrowed, unused line of credit and maintenance fees, as well as amortization of debt

issuance costs on our revolving line of credit.

Interest expense was $0.2 million and $0.1 million for the three months ended

June 30, 2020 and 2019, respectively.

On March 17, 2020, we drew $15.0 million on our revolving credit facility in order to support

existing business partners and to finance future investment opportunities, which accounts for the $0.1 million increase in interest

Interest expense was $0.1 million for both the three months ended September 30,

2020 and 2019.

Pharmaceutical

1 unchanged sentence

Pharmaceutical

manufacturing, research and development expense totaling $1.0 million was incurred by our Pharmaceutical Development segment,

which was acquired in the third quarter of 2019.

and Amortization

and amortization increased by $3.4 million due to the increase in fixed and intangible assets that were obtained in the acquisition

of Enteris, which was acquired in the third quarter of 2019.

and Administrative

and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff,

Board of Directors, legal and audit expenses, and corporate governance.

General and administrative expenses increased to $2.6

million for the three months ended June 30, 2020 from $1.3 million for the three months ended June 30, 2019, which was due

to a $0.8 million increase in salaries, benefits and stock-based compensation expense;

a $0.2 million increase in general office,

insurance and rent expense;

and a $0.3 million increase in accounting, audit, legal and other professional fees.

in general and administrative expenses were primarily due to the addition of Enteris, which was acquired in the third quarter

in Fair Value of Warrants and Marketable Investments

income, net for the three months ended June 30, 2020 reflected a net fair market value gain of $0.6 million on our warrant

derivatives and a net fair market value gain of $0.4 million on our Misonix common stock.

income for the three months ended March 31, 2019 reflected a net fair market value gain of $0.7 million on our warrant derivatives.

manufacturing, research and development expense totaling $1.2 million was incurred by our Pharmaceutical Development segment during

the three months ended September 30, 2020, compared to $0.3 million for the period following our acquisition of Enteris through

September 30, 2019.

in Fair Value of Contingent Consideration

change in the fair value of the contingent consideration for the three months ended June 30, 2020 was $1.8 million.

change in the fair value of the contingent consideration for three months ended September 30, 2020 was $0.2 million.

The contingent

1 unchanged sentence

due to Enteris pursuant to the License Agreement (please refer to Part I, Item 1, Financial Statements , Note 3 of the notes

to the unaudited condensed consolidated financial statements for further information on contingent consideration and the acquisition

The contingent consideration was remeasured to fair value as of June 30, 2020.

to the unuadited condensed consolidated financial statements for further information on contingent consideration and the acquisition

The contingent consideration was remeasured to fair value as of September 30, 2020.

The carrying amount of the liability

may fluctuate significantly, and actual amounts paid may be materially different from the estimated value of the liability.

Tax Expense (Benefit) Expense

the three months ended June 30, 2020, we recognized an income tax benefit of $1.0 million when compared to $0.7

million income tax expense for the three months ended June 30, 2019, which represented effective tax rates of negative 7.38

percent and 14.0 percent, respectively.

The provision for income taxes during interim reporting periods is calculated

by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income or loss for the interim reporting

The annual effective tax rate is adjusted for nondeductible expenses and other permanent differences, including changes

in fair value in our acquisition-related contingent consideration, warrant derivatives and equity securities, which resulted

in a $1.7 million decrease in income tax expense during the three months ended June 30, 2020 when compared

to the same period of the prior year.

of the Six Months Ended June 30, 2020 and 2019 (in millions)

Six Months Ended June 30,

and Amortization

and amortization increased by $2.3 million as a result of a full quarter of depreciation and amortization of property and equipment

and intangible assets that were obtained in the acquisition of Enteris, which was consummated on August 26, 2019.

and Administrative

and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff,

Board of Directors, legal, accounting and audit expenses, and corporate governance.

General and administrative expenses decreased

to $2.5 million for the three months ended September 30, 2020 from $2.7 million for the three months ended September 30, 2019,

which was primarily due to a $1.1 million decrease in state tax, legal, accounting and other professional fees related to the

Enteris acquisition.

The decrease was offset by a $0.9 million increase in general office, rent, salaries and benefits expense,

which included a $0.2 million increase in the performance-based bonus accrual.

Income (Expense), Net

income (expense), net for the three months ended September 30, 2020 reflected a net fair market value gain of $0.1 million on

our warrant derivatives and a net fair market value loss of $0.2 million on our Misonix common stock.

income for the three months ended September 30, 2019 reflected a net fair market value loss of $1.2 million on our warrant derivatives

and a net fair market value gain of $1.8 million on our Misonix common stock.

the three months ended September 30, 2020, we recognized an income tax benefit of $0.5 million when compared to $0.6 million income

tax benefit for the three months ended September 30, 2019, which represented effective tax rates of negative 48.1 percent and

17.1 percent, respectively.

The provision for income taxes during interim reporting periods is calculated by applying an estimate

of the annual effective tax rate for the full fiscal year to ordinary income or loss for the interim reporting period.

effective tax rate is adjusted for nondeductible expenses and other permanent differences, including changes in fair value in

our acquisition-related contingent consideration, warrant derivatives and equity securities.

The change in the estimated annual

effective tax rate was primarily the result of a decrease in forecasted pretax income for the three months ended September 30,

2020 when compared to the three months ended September 30, 2019.

of the Nine Months Ended September 30, 2020 and 2019 (in millions)

Nine Months Ended September 30,

Provision for credit losses and impairment expense

3 unchanged sentences

Depreciation and amortization expense

General and administrative

General and administrative expense

Other (expense) income, net

Provision for income taxes

Consolidated net (loss) income

generated revenues of $15.2 million and $15.0 million for the six months ended June 30, 2020 and 2019, respectively.

increase in revenue was primarily the result of a $2.2 million net increase in royalty income, a $1.9 million net increase in

fees and interest earned on our finance receivables due to funding on new and existing loans, and a $0.3 million increase from

our pharmaceutical development segment.

The increase in revenue was offset by a $4.2 million decrease in interest and fees earned

on finance receivables that were paid off or paid down since the second quarter of 2019.

(Benefit) provision for income taxes

Consolidated net income

generated revenues of $25.8 and $21.4 million for the nine months ended September 30, 2020 and 2019, respectively.

months ended September 30, 2020, revenues consisted primarily of $22.7 million of interest, fees and royalties earned on our finance

receivables and $3.1 million recognized from our pharmaceutical development segment.

For the nine months ended September 30, 2019,

revenues consisted primarily of $21.2 million of interest, fees and royalties earned on our finance receivables and $0.1 million

received from our pharmaceutical development segment, which was acquired in the third quarter of 2019.

The increase in revenue

was primarily the result of a $7.3 million increase in interest, fees and royalties earned on our finance receivables due to additional

funding on existing loans and the addition of one term loan and one new royalty since the third quarter of 2019.

Of the $7.3 million

increase, $2.0 million of revenue was received from Veru, Inc.

The total increase in revenue also included $2.5 million of milestone

revenue related to Enteris’s license agreement with Cara.

The increase in revenue was partially offset by a $4.8 million decrease

in interest and fees earned on finance receivables that were either paid off or paid down since the third quarter of 2019.

for Credit Losses and Impairment Expense

recognized impairment expense of $0.2 million on our debt securities during the six months ended June 30, 2020.

Please refer to

Part I, Item I, Financial Statements , Note 5 of the Notes to the unaudited condensed consolidated financial statements

for further information regarding the provision for credit loss recognized during the six months ended June 30, 2020.

the six months ended June 30, 2019, we recognized credit loss provision expense of $0.6 million related to the Besivance®

recognized impairment expense of $0.2 million on our debt securities during the nine months ended September 30, 2020.

to Part I, Item I, Financial Statements , Note 5 of the Notes to the unaudited condensed consolidated financial statements

for further information regarding the provision for credit loss recognized during the nine months ended September 30, 2020.

the nine months ended September 30, 2019, we recognized credit loss provision expense of $0.6 million related to the Besivance®

royalty, which was due to increases in sales chargebacks and various rebates (gross sales to net sales deductions) and lower sales

1 unchanged sentence

costs on our revolving line of credit.

Interest expense was $0.3 million and $0.2 million for the six months ended June 30, 2020

Interest expense was $0.4 million and $0.3 million for the nine months ended September

30, 2020 and 2019, respectively.

On March 17, 2020, we drew $15.0 million on our revolving credit facility in order to support existing

business partners and to finance future investment opportunities, which accounts for the $0.1 million increase in interest expense.

On March 17, 2020, we drew $15.0 million on our revolving credit facility in order to support

existing business partners and to finance future investment opportunities, which accounts for the $0.1 million increase in interest

The line of credit was repaid by August 17, 2020, and no amount was outstanding on the line of credit as of September

Pharmaceutical

1 unchanged sentence

Pharmaceutical

manufacturing, research and development expense totaling $2.2 million was incurred by our Pharmaceutical Development segment,

which was acquired in the third quarter of 2019.

and Amortization

and amortization increased by $6.9 million due to the increase in fixed and intangible assets that were obtained in the acquisition

of Enteris, which was acquired in the third quarter of 2019.

and Administrative

and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff,

Board of Directors, legal and audit expenses, and corporate governance.

General and administrative expenses increased to $5.7

million for the six months ended June 30, 2020 from $2.6 million for the six months ended June 30, 2019, which was due to a $1.5

million increase in salaries, benefits and stock-based compensation expense;

a $0.7 million increase in general office, insurance

and rent expense;

an $0.8 million increase in accounting, audit, legal and other professional fees;

and a $0.1 million increase

in business development expense.

The increase in general and administrative expenses were primarily due to the addition of Enteris,

which was acquired in the third quarter of 2019, along with our recent uplisting to the Nasdaq Stock Market.

Income (Expense), Net

in Fair Value of Warrants and Marketable Investments

income (expense), net for the six months ended June 30, 2020 reflected a net fair market value loss of $1.2 million on our warrant

derivatives and a net fair market value loss of $0.5 million on our Misonix common stock.

We believe that the net fair market

value losses in our warrant derivative and common stock holdings is primarily attributable to the impact the COVID-19 pandemic

has had on global markets.

income for the six months ended June 30, 2019 reflected a $1.0 million net fair market value gain on our warrant derivatives.

manufacturing, research and development expense of $3.3 million was incurred by our Pharmaceutical Development segment during

the nine months ended September 30, 2020, compared to $0.3 million for the period following our acquisition of Enteris through

September 30, 2019.

in Fair Value of Contingent Consideration

change in the fair value of the contingent consideration for the six months ended June 30, 2020 was $1.8 million.

change in the fair value of the contingent consideration for the nine months ended September 30, 2020 was $2.0 million.

The contingent

1 unchanged sentence

due to Enteris pursuant to the License Agreement (please refer to Part I, Item 1, Financial Statements , Note 3 of the notes

to the unaudited condensed consolidated financial statements for further information on contingent consideration and the acquisition

The contingent consideration was remeasured to fair value as of June 30, 2020.

to the unuadited condensed consolidated financial statements for further information on contingent consideration and the acquisition

The contingent consideration was remeasured to fair value as of September 30, 2020.

The carrying amount of the liability

may fluctuate significantly, and actual amounts paid may be materially different from the estimated value of the liability.

Tax Provision

the six months ended June 30, 2020 and 2019, we recognized income tax expense of $0.3 million and $1.8 million, respectively.

The $1.5 million decrease in income tax expense is primarily the result of our pre-tax loss position for the six months ended

June 30, 2020 compared to our pre-tax loss income position for the six months ended June 30, 2019.

and Amortization

and amortization increased by $9.2 million due to the increase in property and equipment and intangible assets that were obtained

in the acquisition of Enteris, which was acquired in the third quarter of 2019.

and Administrative

and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff,

Board of Directors, legal, accounting and audit expenses, and corporate governance.

General and administrative expenses increased

to $8.2 million for the nine months ended September 30, 2020 from $5.3 million for the nine months ended September 30,

2019, which was due to a $2.1 million increase in salaries, benefits and stock-based compensation expense;

a $1.0 million increase

in general office, insurance and rent expense;

and an $0.2 million increase in accounting, audit, legal and other professional

The increase in general and administrative expenses was primarily due to the addition of Enteris, which was acquired in

the third quarter of 2019, along with our recent uplisting to the Nasdaq Stock Market.

Income (Expense), Net

income (expense), net for the nine months ended September 30, 2020 reflected a net fair market value loss of $1.2 million on our

warrant derivatives and a net fair market value loss of $0.7 million on our Misonix common stock.

We believe that the net fair

market value losses in our warrant derivative and common stock holdings is primarily attributable to the impact the COVID-19 pandemic

has had on global markets.

income for the nine months ended September 30, 2019 reflected a $0.1 million net fair market value loss on our warrant derivatives

and a $1.8 million gain on our Misonix common stock.

Tax (Benefit) Expense

the nine months ended September 30, 2020 and 2019, we recognized income tax benefit of $0.2 million and income tax expense

of $1.2 million, respectively, which represented effective tax rates of negative 48.1 percent and 17.1 percent, respectively.

The provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective

tax rate for the full fiscal year to ordinary income or loss for the interim reporting period.

The annual effective tax rate is

adjusted for nondeductible expenses and other permanent differences, including changes in fair value in our acquisition-related

contingent consideration, warrant derivatives and equity securities.

The decrease in income tax expense was primarily the

result of a decrease in forecasted pretax income for the nine months ended September 30, 2020 when compared to the nine

months ended September 30, 2019.

Income tax expense for the nine months ended September 30, 2019 also included a $1.2

million adjustment to our deferred tax asset and other discrete items that resulted from the acquisition of Enteris.

and Capital Resources

of June 30, 2020, we had $17.2 million in cash and cash equivalents, compared to $11.2 million in cash and cash equivalents as

of December 31, 2019.

The primary driver of the increase in our cash balance was the result of a $15.0 million draw on our credit

facility and receipt of $15.6 million of interest, principal, and royalty payments received on our finance receivables.

was offset by $8.0 million of interest and principal payments made on our credit facility;

$6.0 million of investment funding,

net of deferred fees and origination expenses;

of September 30, 2020, we had $9.3 million in cash and cash equivalents, compared to $11.2 million in cash and cash equivalents

as of December 31, 2019.

The primary driver of the decrease in our cash balance was $12.5 million of investment funding, net of

deferred fees and origination expenses;

$10.8 million of salaries, employee benefits and accounts payable;

and $1.1 million

to repurchase shares of the Company’s common stock on the open market.

to purchase property and equipment for the expansion of the Enteris manufacturing facility;

$2.0 million to repurchase shares

of the Company’s common stock on the open market;

and a net $0.2 million of interest, fees and other costs related

to our credit facility.

The decrease in cash was partially offset by $25.1 million of interest, fees, principal and royalty

payments received on our finance receivables and $1.1 million received from our pharmaceutical development segment.

ability to generate cash in the future depends primarily upon our success in implementing our Finance Receivable segment business

2 unchanged sentences

We generate income primarily from four sources:

Primarily owning or financing through debt

investments, royalties generated by the sales of life science products and related intellectual property;

Receiving interest and other income by

advancing capital in the form of secured debt to companies in the life science sector;

Pharmaceutical development, manufacturing,

and licensing activities utilizing the Peptelligence®

To a lesser extent, realizing capital appreciation

from equity-related investments in the life science sector.

of June 30, 2020, our finance receivables portfolio contains $178.4 million of finance receivables and $1.6 million of

marketable investments.

owning or financing through debt investments, royalties generated by the sales of life

science products and related intellectual property;

interest and other income by advancing capital in the form of secured debt to companies

in the life science sector;

Pharmaceutical

development, manufacturing, and licensing activities utilizing the Peptelligence®

a lesser extent, realizing capital appreciation from equity-related investments in the

life science sector.

As of September

30, 2020, our finance receivables portfolio contains $183.2 million of finance receivables and $1.4 million of marketable investments.

We expect these assets to generate positive cash flows in 2020.

However, the COVID-19 pandemic has created

substantial uncertainty in the global markets and economy;

therefore, we will continue to monitor the short and long-term impact

this may have on our finance receivables portfolio.

In addition, the majority of our finance receivables portfolio are debt instruments

that carry floating interest rates with a LIBOR-based interest rate floor.

Changes in interest rates, including LIBOR rates, may

affect the interest income for debt instruments with floating rates.

We believe we are well positioned to benefit should market

interest rates rise in the future.

However, the COVID-19 pandemic has created substantial uncertainty

in the global markets and economy;

therefore, we will continue to monitor the short and long-term impact this may have on our

finance receivables portfolio.

In addition, the majority of our finance receivables portfolio are debt instruments that carry

floating interest rates with a LIBOR-based interest rate floor.

Changes in interest rates, including LIBOR rates, may affect the

interest income for debt instruments with floating rates.

We believe we are well positioned to benefit should market interest

rates rise in the future.

continue to evaluate multiple attractive opportunities that, if consummated, we believe would similarly generate additional income.

3 unchanged sentences

and as a result, no assurances can be given that actual results would not differ materially from the statement above.

of June 30, 2020, our Pharmaceutical Development segment did not have a material impact on our overall ability to generate

positive cash flow.

We expect the Pharmaceutical Development segment to generate positive cash flow above its expenses from

proceeds received under its license agreements and customer relationships;

however, the timing of the receipt of payments under

the license agreements is uncertain and dependent upon the success of our technology licensees’

pharmaceutical development

Also, the COVID-19 pandemic has resulted in disruption and delays to pharmaceutical clinical trials in general and

may impact the expected timing of our technology licensees’

ability to achieve milestones upon which we receive income pursuant

to our license agreements.

of September 30, 2020, our Pharmaceutical Development segment did not have a material impact on our cash flow.

We expect the Pharmaceutical

Development segment to generate positive cash flow above its expenses from proceeds received under its license agreements and

customer relationships;

however, the timing of the receipt of payments under the license agreements is uncertain and dependent

upon the success of our technology licensees’

pharmaceutical development candidates.

Also, the COVID-19 pandemic has resulted

in disruption and delays to pharmaceutical clinical trials in general and may impact the expected timing of our technology licensees’

ability to achieve milestones upon which we receive income pursuant to our license agreements.

we expect in the aggregate that the Company will generate positive cash flow in excess of our expenses, given the abrupt decline

1 unchanged sentence

entered into a $20.0 million revolving credit facility in June 2018.

On March 17, 2020, the Company drew $15.0 million

on our revolving credit facility in order to support existing business partners and to finance future investment opportunities.

As of August 10, 2020, $4.9 million was outstanding under the revolving credit facility and $15.1 million was available for borrowing.

On March 17, 2020, the Company drew $15.0 million on its

revolving credit facility in order to support existing business partners and to finance future investment opportunities.

of credit was repaid by August 17, 2020.

As of September 30, 2020, no amount was outstanding under the revolving credit facility,

and $20.0 million was available for borrowing.

Sheet Arrangements

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements