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Item 1A. Risk Factors

2021-03-31 compared with 2020-03-30 · 433 added, 578 removed, 523 unchanged (66% of the section changed)

investment in our common stock involves significant risks.

You should carefully consider the risks and uncertainties and the risk

factors set forth in the documents and reports filed with the SEC and the risks described below before you make an investment

decision regarding our common stock.

An investment

in our common stock involves significant risks.

You should carefully consider the risks and uncertainties and the risk factors

set forth in the documents and reports filed with the SEC and the risks described below before you make an investment decision

regarding our common stock.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial

may also affect our business operations.

Risks Related to Pharmaceutical

Development Segment

Related to Pharmaceutical Development Segment

Enteris’

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Enteris’

success depends on its and any licensees’

success depends on its and any of its licensees’

ability to commercialize their products that will generate revenues sufficient

to sustain and grow its operations.

Most of our product candidates are in early stages of development and have not been out-licensed.

successful development of these products is expected to take several more years.

to sustain and grow Enteris’

Most of our product candidates are in early stages of development and have not

been out-licensed.

The development of these products is expected to take several more years.

Similarly, neither Enteris nor any

potential licensee may ever develop and commercialize any other peptide or small molecule product that helps us achieve profitability

Even if Enteris and/or a licensee is successful in developing such a product, it is likely that development

of any product will take several years.

Even if Enteris and/or a licensee is successful in developing such a product, it is likely that development of any

product will take several years.

Enteris’

ability to achieve growth is dependent on a number of factors,

including Enteris and its licensees’

ability to complete development efforts and obtain regulatory approval for additional

product candidates.

ability to achieve growth is dependent on a number of factors, including Enteris’

and its licensees’

ability to complete development efforts and obtain regulatory approval for additional product candidates.

Enteris’

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the approval may not be on a timely basis.

Even if any of Enteris’

licensees are successful in their

development efforts, they may not be able to obtain the necessary regulatory approval for their product candidates.

Drug Administration (“FDA”) must approve the commercial manufacture and sale of pharmaceutical products in the United

Similar regulatory approvals are required for the sale of pharmaceutical products outside of the United States.

Enteris’

if any of Enteris’

licensees are successful in their development efforts, they may not be able to obtain the necessary regulatory

approval for their product candidates.

The Food and Drug Administration (“FDA”) must approve the commercial manufacture

and sale of pharmaceutical products in the United States.

Similar regulatory approvals are required for the sale of pharmaceutical

products outside of the United States.

None of Enteris’

partners’

products have been approved for sale in the United States or may ever receive the approvals necessary

for commercialization.

Additional human testing must be conducted on our partners’

product candidates before they can be

approved for commercial sale and such testing requires the investment of significant resources.

Any delay in receiving, or failure

to receive, these approvals would adversely affect Enteris’

products have been approved for sale in the United

States, and they may never receive the approvals necessary for commercialization.

Additional human testing must be conducted on

our partners’

product candidates before they can be approved for commercial sale and such testing requires the investment

of significant resources.

Any delay in receiving, or failure to receive, these approvals would adversely affect Enteris’

ability to generate product revenues.

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earn as a result.

In the United States and some foreign jurisdictions, there have

been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or

delay marketing approval for Enteris’

the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed

changes regarding the healthcare system that could prevent or delay marketing approval for Enteris’

partners’

product candidates, restrict or regulate post-approval activities and affect

our partners’

ability to profitably sell their product candidates.

Legislative and regulatory proposals have been made to expand

post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

We do not know whether additional

legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact

of such changes on the marketing approvals of our partners’

candidates, restrict or regulate post-approval activities and affect our partners’

ability to profitably sell their product

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional

activities for pharmaceutical products.

We do not know whether additional legislative changes will be enacted, or whether FDA

regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our

partners’

product candidates, if any, may be.

In addition, increased scrutiny

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject

our partners to more stringent product labeling and post-marketing testing and other requirements.

the United States, the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products.

The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based

on average sales prices for drugs.

In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies

where they can limit the number of drugs that will be covered in any therapeutic class.

As a result of this legislation and the

expansion of federal coverage of drug products, Enteris expects that there will be additional pressure to contain and reduce costs.

These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that our partners

receive for their product candidates and could seriously harm our business.

While the MMA applies only to drug benefits for Medicare

beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement

rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private

The Patient Protection and Affordable Care Act, as amended by the

Health Care and Education Affordability Reconciliation Act of 2010 or, collectively, the Health Care Reform Law, is a sweeping

law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against

fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees

on the healthcare industry and impose additional health policy reforms.

The Health Care Reform Law revised the definition of “average

manufacturer price”

for reporting purposes, which could increase the amount of Medicaid drug rebates to states.

the law imposed a significant annual fee on companies that manufacture or import branded prescription drug products.

Health Care Reform Law remains subject to legislative efforts to repeal, modify or delay the implementation of the law.

if the Health Care Reform Law is repealed or modified, or if implementation of certain aspects of the Health Care Reform Law are

delayed, such repeal, modification or delay may, materially adversely impact our business, strategies, prospects, operating results

or financial condition.

We are unable to predict the full impact of any repeal, modification or delay in the implementation of

the Health Care Reform Law on our business at this time.

Due to the substantial regulatory changes that will need to be implemented

by the Centers for Medicare & Medicaid Services and others, and the numerous processes required to implement these reforms,

we cannot predict which healthcare initiatives will be implemented at the federal or state level, the timing of any such reforms,

or the effect such reforms or any other future legislation or regulation will have on our business.

addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted.

We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts

that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected

value of certain development projects and reduce or eliminate Enteris’

profitability.

In addition, increased scrutiny by the U.S.

Congress of the FDA’s approval

process may significantly delay or prevent marketing approval, as well as subject our partners to more stringent product labeling

and post-marketing testing and other requirements.

Enteris’

technology or

products could give rise to product liability claims.

While Enteris does not have a commercial product, Enteris’

business exposes us to the risk of product liability claims from human testing and the manufacturing of pharmaceutical tablets

currently used in clinical trials.

The administration of drugs to humans, whether in clinical trials or commercially, can result

in product liability claims even if Enteris’

technology or products could give rise to product liability claims.

Enteris does not have a commercial product, Enteris’

business exposes us to the risk of product liability claims from human

testing and the manufacturing of pharmaceutical tablets currently used in clinical trials.

The administration of drugs to humans,

whether in clinical trials or commercially, can result in product liability claims, even if Enteris’

or Enteris’

partners’

products are not actually at fault for causing an

products are not actually at fault for causing an injury.

Furthermore, Enteris’

products may cause, or may appear to cause, adverse side effects or potentially dangerous drug

interactions that we may not learn about or understand fully until the drug is actually manufactured and sold.

Product liability

claims can be expensive to defend and may result in large judgments against us.

Even if a product liability claim is not successful,

the adverse publicity, time and expense involved in defending such a claim may interfere with our business.

We may not have sufficient

resources to defend against or satisfy these claims.

While we currently maintain product liability insurance coverage, the amount

of coverage may not be sufficient to protect us against losses or may be unavailable in the future on acceptable terms, if at all.

products may cause, or may appear to cause,

adverse side effects or potentially dangerous drug interactions that we may not learn about or understand fully until the drug

is actually manufactured and sold.

Product liability claims can be expensive to defend and may result in large judgments against

Even if a product liability claim is not successful, the adverse publicity, time and expense involved in defending such a

claim may interfere with our business.

We may not have sufficient resources to defend against or satisfy these claims.

currently maintain product liability insurance coverage, the amount of coverage may not be sufficient to protect us against losses

or may be unavailable in the future on acceptable terms, if at all.

Enteris is a biopharmaceutical company, its operations are subject to extensive government regulation.

Our research, development and production activities, as well as

those of our collaborators and licensees, are subject to significant regulation by federal, state, local and foreign governmental

The regulatory approval process for a pharmaceutical product requires substantial resources and may take many years.

research, development and production activities, as well as those of our collaborators and licensees, are subject to significant

regulation by federal, state, local and foreign governmental authorities.

The regulatory approval process for a pharmaceutical

product requires substantial resources and may take many years.

Our partners’

inability to obtain approvals or delays in obtaining approvals would adversely affect our ability to manufacture

products, and to receive revenue from milestone payments, product sales or royalties.

The FDA and other regulatory agencies may inspect the Enteris production

facility at any time to ensure compliance with current good manufacturing practice guidelines.

These guidelines require that Enteris

conduct its production operations in strict compliance with established rules for manufacturing and quality controls.

agencies can suspend production operations and product sales if they find significant or repeated deviations from these guidelines.

A suspension would likely cause Enteris to incur additional costs or delays in product development and manufacturing.

In addition, Enteris is subject to the U.S.

Foreign Corrupt Practices Act, which prohibits corporations and

individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity.

It is illegal to pay, offer to pay or authorize the payment of anything of value to any foreign government official, government

staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person

working in an official capacity.

inability to obtain approvals or delays in

obtaining approvals would adversely affect our ability to manufacture products, and to receive revenue from milestone payments,

product sales or royalties.

Enteris’

present and future business is, and will continue to be, subject to various other

laws, rules and/or regulations applicable to us as a result of our domestic and international business.

present and future business is, and will continue to be, subject to various other laws,

rules and/or regulations applicable to us as a result of our domestic and international business.

FDA and other regulatory agencies may inspect the Enteris production facility at any time to ensure compliance with current good

manufacturing practice guidelines.

These guidelines require that Enteris conduct its production operations in strict compliance

with established rules for manufacturing and quality controls.

Any of these agencies can suspend production operations and product

sales if they find significant or repeated deviations from these guidelines.

A suspension would likely cause Enteris to incur

additional costs or delays in product development and manufacturing.

Enteris’

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its patents and patent applications, our investment in those technologies may not yield the benefits that we expect.

Enteris may be unable to retain

key employees or recruit additional qualified personnel.

Because of the specialized scientific nature of the business, Enteris

is highly dependent upon qualified scientific, technical, production and managerial personnel.

There is intense competition for

qualified personnel in Enteris’

line of business.

There can be no guarantee that existing compensation will serve to

prevent Enteris’

employees, including its key employees, from resigning.

Enteris may not be able to attract and

retain the qualified personnel necessary to maintain and develop its business.

The loss of the services of existing personnel,

as well as the failure to recruit additional key personnel in a timely manner, could harm Enteris’

programs and business.

if members of Enteris’

key management team or employees generally were to be affected by the global outbreak the novel coronavirus

(referred to hereafter as COVID-19), this could significantly impair Enteris’

ability to execute its business.

Insurance coverage is increasingly

more costly and difficult to obtain or maintain.

While Enteris currently has insurance for its business, property

and its products, insurance is increasingly more costly and narrower in scope, and Enteris may be required to assume more risk

in the future.

If Enteris is the subject of claims or suffers a loss or damage in excess of its insurance coverage, Enteris

may be required to share that risk in excess of its insurance limits.

If Enteris is the subject of claims or suffers

a loss or damage that is outside of its insurance coverage, Enteris may incur significant uninsured costs associated with loss

or damage that could have an adverse effect on its operations and financial position.

Furthermore, any claims made on any

Enteris insurance policies may impact its ability to obtain or maintain insurance coverage at reasonable costs or at all.

may not be able to renew its existing insurance on terms that are acceptable to Enteris, if at all.

If Enteris is unable

to maintain adequate insurance coverage this would have a material adverse effect on its ability to sustain operations.

If Enteris encounters issues

with its suppliers or if licensees of its technology encounter issues with their contract manufacturers, Enteris may need to qualify

alternative manufacturers or suppliers, which could impair Enteris’

encounters issues with its suppliers or if licensees of its technology encounter issues with their contract manufacturers, Enteris

may need to qualify alternative manufacturers or suppliers, which could impair Enteris’

and its licensees’

ability to sufficiently and

timely manufacture and supply pharmaceutical products.

Enteris relies

on third parties to supply the raw materials needed to manufacture its existing and potential products, including suppliers that

are located in Asia.

Enteris is undertaking efforts to validate alternate suppliers, but may be unsuccessful in these efforts.

Current and future licensees of Enteris’

technology generally rely on third party suppliers and contract manufacturers to

manufacture drug products that utilize Enteris’

to sufficiently and timely manufacture and supply pharmaceutical products.

relies on third parties to supply the raw materials needed to manufacture its existing products, and expects to rely on third

parties to supply raw materials for potential future products, including suppliers that are located in Asia.

Enteris is undertaking

efforts to validate alternate suppliers, but may be unsuccessful in these efforts.

Current licensees of Enteris’

generally rely, and future licensees are expected to rely, on third party suppliers and contract manufacturers to manufacture

drug products that utilize Enteris’

technology as well.

Any business interruptions resulting from geopolitical actions,

including war and terrorism, adverse public health developments such as COVID-19, or natural disasters including earthquakes, typhoons,

floods and fires and Enteris’

business interruptions resulting from geopolitical actions, including war and terrorism, adverse public health developments such

as COVID-19, or natural disasters including earthquakes, typhoons, floods and fires, and Enteris’

or its licensees’

inability to identify and validate alternate suppliers and contract

manufacturers, could affect supply chains.

Any reliance on suppliers may involve several risks, including a potential inability

to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality.

Any unanticipated

disruption caused by problems at suppliers could delay shipment of any of Enteris’

inability to identify and validate alternate suppliers and contract manufacturers, could affect supply chains.

Any reliance on

suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production

costs, delivery schedules, reliability and quality.

unanticipated disruption caused by problems at suppliers could delay shipment of any of Enteris’

or its licensees’

drug candidates

or drug products, which could increase Enteris’

drug candidates or drug products, which could increase Enteris’

or its licensees’

cost of goods sold or result in lost or decreased

sales, royalties or milestone payments to Enteris.

cost of goods sold or result in

lost or decreased sales, royalties or milestone payments to Enteris.

Enteris’

production facilities have been impacted by COVID-19, and any future impacts might adversely affect its operations and financial

experienced a reduction in its productivity as well as delays in receiving some of its needed supplies as a direct result of COVID-19

and the impact it had on key vendors.

Enteris could experience similar delays in the future due to the impact of governmental

restrictions and other impacts of COVID-19 on its vendors.

Any such events may result in business disruption and reduced revenues,

any of which could materially affect our business, financial condition and results of operations.

are continuously monitoring our own operations and intend to take appropriate actions to mitigate the risks arising from the COVID-19

pandemic, but there can be no assurances that we will be successful in doing so.

To the extent we are able to obtain information

about and maintain communications with our customers, suppliers, vendors and other business partners, we will seek to minimize

disruptions to our Pharmaceutical Development segment’s supply chain.

Risks Related to Finance Receivables

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principal invested in credit and royalty transactions.

Most of our assets are expected to be royalty streams or debt backed

by royalty streams or revenue interests paid by small- and middle-market businesses, which are highly speculative and involve a

high degree of risk of credit loss.

In addition, we may own royalties or invest in debt backed by royalties or revenue interests

that are derived by products that are early in their commercial launch, face intense competition or are subject to other risks,

which similarly involve a high degree of risk of principal loss.

These risks are likely to increase during volatile economic periods

such as those currently being experienced globally due to COVID-19.

of the assets of our Finance Receivables segment are, and are expected to continue to be, royalty streams or debt backed by royalty

streams or revenue interests paid by small- and middle-market businesses, which are highly speculative and involve a high degree

of risk of credit loss.

In addition, we may own royalties or invest in debt backed by royalties or revenue interests that are

derived by products that are early in their commercial launch, face intense competition or are subject to other risks, which similarly

involve a high degree of risk of principal loss.

We operate in a highly competitive

market for investment opportunities.

large number of entities compete with us to advance capital to the companies we target.

We compete with non-bank financial institutions,

federal or state chartered banks, venture debt funds, venture capital funds, private equity funds, pharmaceutical royalty and

other investment funds, business development companies, and investment banks.

Additionally, because competition for investment

opportunities generally has increased among alternative investment vehicles, particularly those seeking yield investments, such

as hedge funds, those entities have begun to invest in areas they have not traditionally invested in, including investments in

royalties and debt backed by royalties, which may overlap with our business strategy.

As a result of these new entrants, competition

for investment opportunities in our target markets has intensified, which is a trend we expect to continue.

Many of our existing and potential competitors are substantially

larger and have considerably greater financial, technical and marketing resources than we do.

For example, some competitors may

have a lower cost of funds and access to funding sources that are not available to us.

In addition, some of our competitors may

have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and

establish more or fuller relationships with potential business partners than us.

Furthermore, many of our competitors are not subject

to the maintenance of an exception or exemption from regulation as an investment company, which may allow them more flexibility

in advancing capital to companies we may also target such as advancing debt capital that is not repaid by royalty streams or revenue

We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business,

financial condition and results of operations.

large number of entities compete with us to advance capital to the companies our Finance Receivables segment targets.

with non-bank financial institutions, federal or state chartered banks, venture debt funds, venture capital funds, private equity

funds, pharmaceutical royalty and other investment funds, business development companies, and investment banks.

Additionally,

because competition for investment opportunities generally has increased among alternative investment vehicles, particularly those

seeking yield investments, such as hedge funds, those entities have begun to invest in areas they have not traditionally invested

in, including investments in royalties and debt backed by royalties, which may overlap with our business strategy.

of these new entrants, competition for investment opportunities in our target markets has intensified, which is a trend we expect

of our Finance Receivables segment’s existing and potential competitors are substantially larger and have considerably greater

financial, technical and marketing resources than we do.

For example, some competitors may have a lower cost of funds and access

to funding sources that are not available to us.

In addition, some of our competitors may have higher risk tolerances or different

risk assessments, which could allow them to consider a wider variety of investments and establish more or fuller relationships

with potential business partners than us.

Furthermore, many of our competitors are not subject to the maintenance of an exception

or exemption from regulation as an investment company, which may allow them more flexibility in advancing capital to companies

we may also target such as advancing debt capital that is not repaid by royalty streams or revenue interests.

We cannot assure

you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results

of operations.

Also, as a result of existing and increasing competition and our competitors’

ability to provide a total financing package solution, inclusive of both debt and equity capital, we may not be able to take advantage

of attractive business opportunities from time to time, and we can offer no assurance that we will be able to identify and make

investments that are consistent with our business objectives.

ability to provide a total

financing package solution, inclusive of both debt and equity capital, we may not be able to take advantage of attractive business

opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are

consistent with our business objectives.

do not seek to compete primarily based on the cost of the capital that we provide, and we believe that some of our competitors

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the royalty streams and revenue interests in which we invest may be risky, and we could lose all or part of our investment.

of our assets are expected to be royalty streams or debt backed by royalty streams or revenue interests paid by our partner companies.

Some of our partner companies to which we advance debt, whether it be backed by royalties, revenue interests or be general obligations

of the issuer, have relatively short or no operating histories.

These companies are and will be subject to all of the business

risk and uncertainties associated with any new business enterprise, including the risk that these companies may not reach their

operating objectives and the value of our investment in them may decline substantially or fall to zero.

of our finance receivables assets are expected to be royalty streams or debt backed by royalty streams or revenue

interests paid by our partner companies.

Some of our partner companies to which we advance debt, whether it be backed by royalties,

revenue interests or be general obligations of the issuer, have relatively short or no operating histories.

These companies are

and will be subject to all of the business risk and uncertainties associated with any new business enterprise, including the risk

that these companies may not reach their operating objectives and the value of our investment in them may decline substantially

or fall to zero.

addition, the small and middle-market companies to which we are targeting to advance debt are subject to a number of other significant

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actions and market conditions, as well as general economic downturns;

they are more likely to depend on the management talents and efforts

of a small group of persons;

therefore, the death, disability, resignation or termination of one or more of these persons could

have a material adverse impact on our partner company, and in turn, on us;

are more likely to depend on the management talents and efforts of a small group of persons;

therefore, the death, disability, resignation or termination of one or more of these

persons could have a material adverse impact on our partner company, and in turn, on

may have less predictable operating results, may from time to time be parties to litigation,

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and the management of such company may take risks or otherwise act in ways that do not serve our interests.

crises, such as COVID-19, may have a material adverse impact on our partner companies.

has impacted, and may continue to impact the ability of our borrowers or the marketers of products upon which we derive our royalty

income to raise capital in order to fund their operations during the pandemic.

Disruptions to our partner companies may impair

their ability to fulfill their obligations to us and could result in increased risk of delinquencies, defaults, declining collateral

values associated with our existing loans, and impairments or losses on our loans.

Any such impairment could increase our credit

risk and adversely affect the assets and results of operations of our Finance Receivables segment.

Economic recessions or downturns

could impair the ability of our partner companies to repay loans, which, in turn, could increase our non-performing assets, decrease

the value of our assets, reduce our volume of new loans and have a material adverse effect on our results of operations.

economic conditions may affect our activities and the operation and value of our portfolio companies.

Economic slowdowns or recessions

may result in a decrease of institutional equity investment, which would limit our lending opportunities.

Furthermore, many of

our portfolio companies are susceptible to economic or industry centric slowdowns or recessions and may be unable to repay our

debt investments during these periods.

Therefore, our non-performing assets are likely to increase, and the value of our

portfolio is likely to decrease during these periods.

Adverse economic conditions may also decrease the value of collateral securing

some of our debt investments and the value of our equity investments.

Economic slowdowns or recessions could lead to financial

losses in our portfolio and a material decrease in revenues, net income and assets.

Unfavorable economic conditions could also

increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to

portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults

and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other

agreements and jeopardize the portfolio company’s ability to meet its obligations under the loans that we hold.

expenses to the extent necessary to recover our investment upon default or to negotiate new terms with a defaulting portfolio

These events could harm our financial condition and operating results.

period of market disruption may have a material adverse effect on our business, financial condition, results of operations and

In addition, unfavorable economic conditions, including rising interest rates, may also increase our funding costs,

limit our access to capital markets or negatively impact our ability to obtain financing, particularly from the debt markets.

make investments in unsecured debt backed by royalties or revenue interests, those investments might not generate sufficient cash

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In certain circumstances, we

may not be able to fund transactions without the participations of such third parties.

may not be able to fund transactions without the participation of such third parties.

In the event that we are unable to find

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factors relating to the licensees that are beyond our control.

we have a limited number of assets, which subjects our aggregate returns, and the value of our common stock, to a greater risk

of significant loss if any of our debt securities declines in value or if any of our royalty investments substantially underperforms

our expectations.

consequence of our currently limited number of assets is that the aggregate returns we realize may be significantly adversely

affected if one or more of our significant partner company investments perform poorly or if we need to write down the value of

any one significant investment.

our Finance Receivables segment has a limited number of assets, which subjects our aggregate returns, and the value of our common

stock, to a greater risk of significant loss if any of our debt securities declines in value or if any of our royalty investments

substantially underperforms our expectations.

Finance Receivables segment’s total investment in companies may be significant, individually or in the aggregate.

A consequence

of our currently limited number of assets in our Finance Receivables segment is that the aggregate returns we realize may be significantly

adversely affected if one or more of our significant partner company investments perform poorly or if we need to write down the

value of any one significant investment, which may be more severe than if we had made smaller investments in more companies.

financial results could be materially adversely affected if these portfolio companies or any of our other significant portfolio

companies encounter financial difficulty and fail to repay their obligations or to perform as expected.

Our allowance

for credit losses may prove inadequate.

quality of our financing receivables depends on the credit-worthiness of our partner companies and their ability to fulfill their

quality of our finance receivables depends on the credit-worthiness of our partner companies and their ability to fulfill their

obligations to us.

We maintain an allowance for credit losses on specific financing receivables to provide for credit defaults

and non-performance.

We maintain an allowance for credit losses on specific finance receivables to provide for credit defaults and

non-performance.

The amount of our allowance reflects management’s judgment of losses inherent in the portfolio.

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If the credit quality of our partner companies declines, if the risk profile of a market, industry, or group of partner

companies changes significantly, or if the markets for financing receivables or other collateral deteriorates significantly, our

companies changes significantly, or if the markets for finance receivables or other collateral deteriorates significantly, our

allowance for credit losses may prove inadequate, which could have a material adverse effect on our business, results of operations,

and financial condition.

models that we use in our business are poorly designed, our business or results of operations may be adversely affected.

rely on quantitative models to measure risks and to estimate certain financial values.

Models may be used in such processes as

determining the pricing of various products, grading loans and extending credit, measuring interest rate and other market risks,

predicting losses, assessing capital adequacy, and calculating regulatory capital levels, as well as to estimate the value of

financial instruments and balance sheet items.

Poorly designed or implemented models present the risk that our business decisions

based on information incorporating models will be adversely affected due to the inadequacy of that information.

our subsidiaries are party to various financing arrangements, commercial contracts and other arrangements that under certain circumstances

give, or in some cases may give, the counterparty the ability to exercise rights and remedies under such arrangements which, if

exercised, may have material adverse consequences.

and our subsidiaries are party to various financing arrangements, commercial contracts and other arrangements, such as securitization

transactions, derivatives transactions, funding facilities, and agreements for the purchase or sale of assets, that give, or in

some cases may give, the counterparty the ability to exercise rights and remedies upon the occurrence of certain events.

events may include a material adverse effect or material adverse change (or similar event), a breach of representations or warranties,

a failure to disclose material information, a breach of covenants, certain insolvency events, a default under certain specified

other obligations, or a failure to comply with certain financial covenants.

The counterparty could have the ability, depending

on the arrangement, to, among other things, require early repayment of amounts owed by us or our subsidiaries and in some cases

payment of penalty amounts, or require the repurchase of assets previously sold to the counterparty.

Additionally, a default under

financing arrangements or derivatives transactions that exceed a certain size threshold in the aggregate may also cause a cross-default

under instruments governing our other financing arrangements or derivatives transactions.

If the ability of any counterparty to

exercise such rights and remedies is triggered and we are unsuccessful in avoiding or minimizing the adverse consequences discussed

above, such consequences could have a material adverse effect on our business, results of operations, and financial condition.

rates of many of our term loans to partner companies are priced using a spread over LIBOR.

the London interbank offered rate, is the basic rate of interest used in lending between banks on the London interbank market

and is widely used as a reference for setting the interest rate on loans globally.

We typically use LIBOR as a reference rate

in term loans we extend to partner companies such that the interest due to us pursuant to a term loan extended to a partner company

is calculated using LIBOR.

Most of our term loan agreements with partner companies contain a stated minimum value for LIBOR.

of December 31, 2020, 87 percent of the term loans with our partner companies utilized LIBOR, including a stated minimum of LIBOR,

as a reference rate.

July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that

it intends to phase out LIBOR by the end of 2021.

Further on March 5, 2021, the FCA issued an announcement confirming that all

35 LIBOR benchmark settings currently published by the Intercontinental Exchange Benchmark Administration, the authorized administrator

for LIBOR (“ICE”), will either cease to be provided or will no longer be representative after certain specified dates,

with the one-month, three-month and six-month USD LIBOR settings will no longer be representative immediately after June 30, 2023;

the majority of other LIBOR benchmark settings will cease immediately after December 31, 2021.

The Company generally utilizes

the three-month USD LIBOR rate as the reference rate in credit agreements with partner companies.

While the FCA may require ICE

to publish “synthetic”

LIBOR rates after the specified cessation dates for each respective reference rate, it is unclear

if after June 30, 2023 whether or not the three-month USD LIBOR rate will cease to exist or if new methods of calculating LIBOR

will be established such that it continues to exist after June 30, 2023.

Federal Reserve, in conjunction with the Alternative

Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, is considering replacing U.S.

dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities, known as the Secured

Overnight Funding Rate (“SOFR”).

SOFR is observed and backward looking, which stands in contrast with LIBOR under

the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting

panel members.

Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account

bank credit risk (as is the case with LIBOR).

SOFR is therefore likely to be lower than LIBOR and is less likely to correlate

with the funding costs of financial institutions.

In conjunction with the FCA’s March 5, 2021 announcement, the International

Swaps and Derivatives Association, Inc., a trade organization of participants in the market for over-the-counter derivatives (“ISDA”),

announced a fallback protocol whereby LIBOR-priced derivatives contracts utilizing its standard derivatives contracts would replace

LIBOR with SOFR plus an applicable margin for the specified LIBOR rate;

ISDA’s fallback margin for the three month LIBOR

is 0.26161 percent.

Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question.

future of LIBOR at this time is uncertain.

the widely-publicized pending cessation of LIBOR as a global reference rate benchmark, many financial institutions continue to leverage

LIBOR in financing contracts, including SWK.

If LIBOR ceases to exist, we may need to renegotiate the credit agreements with our

partner companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

Our term loans typically contain provisions to facilitate the transition to such new standard.

If affected credit agreements with our

partner companies are unable to be renegotiated, our investments may bear interest at a lower rate, subject to any contractual minimum

LIBOR floors, which would decrease investment income and potentially the value of such investments.

In addition, any further changes

or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which

could have an adverse impact on the market value for or value of any LIBOR-linked loans and other financial obligations or extensions

of credit held by or due to us and could have a material adverse effect on our business, financial condition and results of operations.

Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and investment income

cannot yet be determined.

in LIBOR rates could have an adverse impact on the ability of our partner companies to service their debt obligations to us.

of our debt transactions contain LIBOR-based floating interest rates with minimum LIBOR floors.

The minimum LIBOR floor insulates

partner companies from an increase in LIBOR until the reference LIBOR rate reaches the minimum floor threshold, typically one

to two percent.

If LIBOR increases above the floor rate, the net effect will be an increase in the interest cost to the borrower.

Most of our borrower partners do not hedge their LIBOR rate exposure, and as a result of an increase of LIBOR above the minimum

floor threshold, they will experience an increase in the effective interest rate of their debt obligations to us.

If LIBOR increases

materially, the increased cost of debt service will similarly increase materially.

If our partner companies are not adequately

capitalized or are unable to generate sufficient income from operations, the increased debt burden caused by increased LIBOR rates

could materially and adversely affect the operations of a partner company, which in turn, would impair our ability to timely collect

principal and interest payments owed to us.

in the price of the common stock of our publicly traded holdings and the price at which we sell such holdings may affect the price

of our common stock.

generally hold equity interests in companies that are publicly traded.

Fluctuations in the market prices of the common stock of

publicly traded holdings may affect the price of our common stock.

Historically, the market prices of our publicly traded holdings

have been highly volatile and subject to fluctuations unrelated or disproportionate to operating performance.

Finance Receivables segment generally holds equity interests in companies that are publicly traded.

Fluctuations in the market

prices of the common stock of publicly traded holdings may affect the price of our common stock.

Historically, the market prices

of our publicly traded holdings have been highly volatile and subject to fluctuations unrelated or disproportionate to operating

addition, we may be unable to sell our holdings of public equities at then-quoted market prices.

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company holdings on a timely basis.

Our financial

condition and results of operations will depend on our ability to manage future growth of our Finance Receivables segment effectively.

ability to achieve our business objectives depends on our ability to grow, which depends, in turn, on our Finance Receivables

segment’s ability to continue to identify, analyze and invest in royalties and/or debt backed by royalties or revenue interests

that meet our investment criteria.

Accomplishing this result on a cost-effective basis is largely a function of our structuring

of transactions and our access to financing on acceptable terms.

As we continue to grow, we will need to continue to hire, train,

supervise and manage new employees.

Failure to manage our future growth effectively could have a materially adverse effect on

our business, financial condition and results of operations.

Risks Related

to Our Business and Structure

acquisition of Enteris might not be successful.

August 2019, Enteris, a biotechnology company offering innovative formulation solutions utilizing its proprietary oral drug

delivery technology, became our wholly-owned subsidiary.

We acquired Enteris with the intent of expanding its

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.

Enteris currently generates revenue from

near-term fee-for-service feasibility studies, and by entering into license agreements with third parties permitting them to

utilize the Enteris technology in their drug development efforts.

Prior to the acquisition, Enteris entered into a

non-exclusive commercial license agreement with Cara Therapeutics (“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 territory.

Until the second anniversary of the entry into the License Agreement, Cara has the right, but not the obligation, to

terminate its obligation to pay any royalties under the License Agreement in exchange for a lump sum payment.

Enteris is actively pursuing new revenue and licensing opportunities, there can be no assurance that Enteris will be able to

enter into any such agreements.

Even if Enteris is able to enter into such agreements, there can be no assurance

as to the terms and conditions of any such agreement.

As a result, the acquisition of Enteris may not be

successful or effectively implemented.

If Enteris is unsuccessful, it could have a material adverse effect on our

financial condition, results of operations and cash flow.

Our financial

condition and results of operations will depend on our ability to manage our future growth effectively.

ability to achieve our business objectives depends on our ability to grow, which depends, in turn, on our ability to continue

to identify, analyze and invest in royalties and/or debt backed by royalties or revenue interests that meet our investment criteria.

Accomplishing this result on a cost-effective basis is largely a function of our structuring of transactions and our access to

financing on acceptable terms.

As we continue to grow, we will need to continue to hire, train, supervise and manage new employees.

Failure to manage our future growth effectively could have a materially adverse effect on our business, financial condition and

results of operations.

to use NOL carryforwards to offset future taxable income for U.S.

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tax liability may increase.

As of December 31, 2019, we had NOL carryforwards for U.S.

income tax purposes of $360.4 million.

federal NOL carryforwards, if not offset against future income, will expire by

2032, with the majority of such NOLs expiring by 2021.

We may recognize additional NOLs in the future.

In order to utilize the

NOLs, the Company must generate taxable income that can offset such carryforwards.

of December 31, 2020, we had NOL carryforwards for U.S.

federal income tax purposes of $289.4 million.

federal NOL carryforwards,

if not offset against future income, will expire by 2037, with approximately half of such NOLs expiring by December 31, 2021.

recognize additional NOLs in the future.

In order to utilize the NOLs, the Company must generate taxable income that can offset such

carryforwards.

Internal Revenue Service (“IRS”) has not audited our tax returns for any of the years during the carryforward period.

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plan that is intended to protect the NOLs, whether or not an ownership change occurs is not entirely within our control.

March 3, 2021, our Board determined J.

Carlo Cannell and Cannell Capital LLC (together, “Cannell”) to be an “Exempt

Person”

(and not deemed to be an “Acquiring Person”) under the Rights Agreement.

This determination was a result

of a determination by the our Board that Cannell’s current beneficial ownership of our common stock, as disclosed on Schedule

13G filed by Cannell with the SEC on February 16, 2021, would not jeopardize or endanger the availability to us or our NOLs.

no assurance can be given that the IRS would agree with such determination.

Our Board’s determination was and is specific

to the manner of ownership of our common stock disclosed on the Schedule 13G, and is contingent on Cannell, and any of its Affiliates

and Associates (as defined in the Rights Agreement), not changing its manner of ownership or acquiring aggregate beneficial ownership

of any shares of our common stock in addition to those disclosed on the Schedule 13G.

an ownership change occurs, the amount of the taxable income for any post-change year that may be offset by a pre-change loss

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dependent upon our key management personnel for our future success.

We depend on the diligence, skill and network of business contacts

of our senior management and their access to the investment professionals and the information and deal flow generated by these

investment professionals in the course of their investment and portfolio management activities.

Our senior management team evaluates,

negotiates, structures, closes, monitors and services our investments.

Our success depends to a significant extent on the continued

service of this senior management team, in particular, Winston L.

depend on the diligence, skill and network of business contacts of our senior management and their access to the investment professionals

and the information and deal flow generated by these investment professionals in the course of their investment and portfolio

management activities.

Our senior management team evaluates, negotiates, structures, closes, monitors and services our investments.

Our success depends to a significant extent on the continued service of this senior management team, in particular, Winston L.

Black, Chief Executive Officer.

His departure could have a material

adverse effect on our ability to achieve our business objectives.

In addition, we have very few employees, so the loss of any employee

could be disruptive to our business.

In addition, if members of our key management team were to be affected by COVID-19, this could

significantly impair our ability to execute our business.

His departure could have a material adverse effect on our ability to achieve our business objectives.

In addition, we have very few employees, so the loss of any employee could be disruptive to our business.

We are taking precautions

to protect the safety and well-being of our employees, including enhancing our standard operating procedures at Enteris to provide

for additional cleaning and hygiene measures, as well as, social distancing.

However, no assurance can be given that the steps

being taken will be adequate or deemed to be appropriate, nor can we predict the level of disruption which will occur to our employees’

ability to service the finance receivables portfolio or Enteris’

are unable to obtain additional debt or equity financing on commercially reasonable terms our business could be materially adversely

As of December 31, 2019, we had $11.2 million of cash and cash equivalents

on the balance sheet plus $20.0 million available to be borrowed under our credit facility.

As of March 23, 2020, we drew $15.0

million under our credit facility, which increased our cash balance to $23.6 million.

We have limited capital to execute our business

strategy and have obtained debt financing to fund future growth and obtain funds which may be made available for investments.

we are unable to enter into new debt or equity financing arrangements on commercially reasonable terms, our liquidity may be reduced

significantly, and as a result, our ability to implement and grow our business strategy could be materially impacted.

of December 31, 2020, we had $3.0 million of cash and cash equivalents on the balance sheet plus $8.2 million available to be

borrowed under our credit facility.

As of March 25, 2021, the Company drew an additional $9.0 million under the Loan Agreement

(as defined in Part II, Item 8, Financial Statements , Note 6 of the notes to the consolidated financial statements),

and $10.3 million was available for borrowing.

Our current credit facility matures on June 30, 2021.

We have limited

capital to execute our business strategy and have obtained debt financing to fund future growth and obtain funds which may be

made available for investments.

If we are unable to enter into new debt or equity financing arrangements on commercially reasonable

terms, our liquidity may be reduced significantly, and as a result, our ability to implement and grow our business strategy could

be materially impacted.

of leverage may limit our operational flexibility and increase our overall risk, which may adversely affect our business and results

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We will fail to realize the full value of such assets in a distressed sale.

Economic recessions or downturns

could impair the ability of our partner companies to repay loans, which, in turn, could increase our non-performing assets, decrease

the value of our assets, reduce our volume of new loans and have a material adverse effect on our results of operations.

of our partner companies may be susceptible to economic slowdowns or recessions in both the U.S.

and foreign countries and may

be unable to repay our loans during such periods.

Adverse economic conditions also may decrease the value of collateral securing

some of our loans and the value of our equity investments.

Economic slowdowns or recessions could lead to financial losses in

our portfolio and a decrease in revenues, net income and assets.

Unfavorable economic conditions also could increase our funding

costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.

partner company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults

and, potentially, termination of the partner company’s loans and foreclosure on its secured assets, which could trigger

cross-defaults under other agreements and jeopardize the partner company’s ability to meet its obligations under the debt

securities that we hold.

We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms

with a defaulting partner company.

In addition, if a partner company goes bankrupt, even though we may have structured our investment

as senior debt or secured debt, depending on the facts and circumstances, including the extent to which we actually provided significant

“managerial assistance,”

if any, to that partner company, a bankruptcy court might re-characterize our debt holding

and subordinate all or a portion of our claim to that of other creditors.

In addition, the proceeds from asset sales received

in bankruptcy court proceedings or otherwise in a distressed asset sale may not fully repay our debt claims.

In the event that

such proceeds include equity securities of the company acquiring the company to which we had previously loaned money, our ultimate

recovery would be subject to equity market risk and operational risk of such acquiring company.

These events could materially

adversely affect our financial condition and operating results.

companies may face intense competition, including competition from companies with greater financial resources, more extensive

research and development, manufacturing, marketing and service capabilities and greater numbers of qualified and experienced managerial

and technical personnel.

They may need additional financing which they are unable to secure and which we are unable or unwilling

to provide, or they may be subject to adverse developments unrelated to the technologies they acquire.

during any period of economic stress, we may be required to defer interest payments on loans to our partner companies for a period

of time or capitalize deferred interest payments into additional principal balance of loans (“PIK interest”) with

our partner companies.

In these circumstances, an increase in PIK interest will generally reflect a significant increase of credit

risk associated with our investments in partner companies.

Even if the accounting conditions for income accrual are met, a partner

company could still default when our actual collection is supposed to occur at the maturity of the obligation, which could lead

to future losses.

Additionally, we may advance additional capital to our partner companies to support their operations during

times of economic crisis in order to preserve the value of our collateral.

To the extent PIK interest constitutes a material portion

of our revenue or we support our partners with additional capital, our cash flow may decrease and our liquidity may suffer.

fail to maintain adequate internal control over financial reporting, it could result in a material misstatement of the Company’s

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and financial condition.

our subsidiaries are party to various financing arrangements, commercial contracts and other arrangements that under certain circumstances

give, or in some cases may give, the counterparty the ability to exercise rights and remedies under such arrangements which, if

exercised, may have material adverse consequences.

and our subsidiaries are party to various financing arrangements, commercial contracts and other arrangements, such as securitization

transactions, derivatives transactions, funding facilities, and agreements for the purchase or sale of assets, that give, or in

some cases may give, the counterparty the ability to exercise rights and remedies upon the occurrence of certain events.

events may include a material adverse effect or material adverse change (or similar event), a breach of representations or warranties,

a failure to disclose material information, a breach of covenants, certain insolvency events, a default under certain specified

other obligations, or a failure to comply with certain financial covenants.

The counterparty could have the ability, depending

on the arrangement, to, among other things, require early repayment of amounts owed by us or our subsidiaries and in some cases

payment of penalty amounts, or require the repurchase of assets previously sold to the counterparty.

Additionally, a default under

financing arrangements or derivatives transactions that exceed a certain size threshold in the aggregate may also cause a cross-default

under instruments governing our other financing arrangements or derivatives transactions.

If the ability of any counterparty to

exercise such rights and remedies is triggered and we are unsuccessful in avoiding or minimizing the adverse consequences discussed

above, such consequences could have a material adverse effect on our business, results of operations, and financial condition.

rates of many of our term loans to partner companies are priced using a spread over LIBOR.

the London interbank offered rate, is the basic rate of interest used in lending between banks on the London interbank market

and is widely used as a reference for setting the interest rate on loans globally.

We typically use LIBOR as a reference rate

in term loans we extend to partner companies such that the interest due to us pursuant to a term loan extended to a partner company

is calculated using LIBOR.

Most of our term loan agreements with partner companies contain a stated minimum value for LIBOR.

of December 31, 2019, 100 percent of the term loans with our partner companies utilized LIBOR, including a stated minimum of LIBOR,

as a reference rate.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority,

which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear if at that time whether

or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of

financial institutions, is considering replacing U.S.

dollar LIBOR with a new index calculated by short-term repurchase

agreements, backed by Treasury securities, known as the Secured Overnight Funding Rate (“SOFR”).

SOFR is observed and

backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate

and relies, to some degree, on the expert judgment of submitting panel members.

Given that SOFR is a secured rate backed by government

securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR).

SOFR is therefore likely

to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions.

Whether or not SOFR attains

market traction as a LIBOR replacement tool remains in question.

As such, the future of LIBOR at this time is uncertain.

ceases to exist, we may need to renegotiate the credit agreements with our partner companies that utilize LIBOR as a factor in

determining the interest rate to replace LIBOR with the new standard that is established.

If affected credit agreements with our

partner companies are unable to be renegotiated, our investments may bear interest at a lower rate, which would decrease investment

income and potentially the value of such investments.

In addition, any further changes or reforms to the determination or supervision

of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the

market value for or value of any LIBOR-linked loans and other financial obligations or extensions of credit held by or due to us

and could have a material adverse effect on our business, financial condition and results of operations.

Due to the uncertainty

of the replacement for LIBOR, the potential effect of any such event on our cost of capital and investment income cannot yet be

relating to the LIBOR calculation process may adversely affect the value of our portfolio of the LIBOR-indexed, floating-rate

debt securities.

the recent past, concerns have been publicized that some of the member banks surveyed by the British Bankers’

(“BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting

or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or

to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting

inter-bank lending rates higher than those they actually submitted.

A number of BBA member banks have entered into settlements

with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators

and governmental authorities in various jurisdictions are ongoing.

by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined.

as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio

of LIBOR-indexed, floating-rate debt securities.

In addition, any further changes or reforms to the determination or supervision

of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the

market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

A rise in LIBOR rates could

have an adverse impact on the ability of our partner companies to service their debt obligations to us.

of our debt transactions contain LIBOR-based floating interest rates with minimum LIBOR floors.

The minimum LIBOR floor insulates

partner companies from an increase in LIBOR until the reference LIBOR rate reaches the minimum floor threshold, typically one

to two percent.

If LIBOR increases above the floor rate, the net effect will be an increase in the interest cost to the borrower.

Most of our borrower partners do not hedge their LIBOR rate exposure, and as a result of an increase of LIBOR above the minimum

floor threshold, they will experience an increase in the effective interest rate of their debt obligations to us.

If LIBOR increases

materially, the increased cost of debt service will similarly increase materially.

If our partner companies are not adequately

capitalized or are unable to generate sufficient income from operations, the increased debt burden caused by increased LIBOR rates

could materially and adversely affect the operations of a partner company, which in turn, would impair our ability to timely collect

principal and interest payments owed to us.

The liquidity,

market price and volume of our stock are volatile.

Our common stock is now listed on the Nasdaq Capital Market (“Nasdaq”).

The liquidity of our common stock may be adversely affected, and purchasers of our common stock may have difficulty selling our

common stock, if our common stock does not continue to trade on Nasdaq or another national securities exchange.

Nasdaq maintains

certain minimum continued listing standards.

If we are not able to continue to satisfy the continued listing standards, or qualify

for an exemption to such standards, then we could be subject non-compliance status or de-listing.

common stock is now listed on the Nasdaq Capital Market (“Nasdaq”).

The liquidity of our common stock may be adversely

affected, and purchasers of our common stock may have difficulty selling our common stock, if our common stock does not continue

to trade on Nasdaq or another national securities exchange.

Nasdaq maintains certain minimum continued listing standards.

are not able to continue to satisfy the continued listing standards, or qualify for an exemption to such standards, then we could

be subject non-compliance status or de-listing.

trading price of our common stock could be subject to wide fluctuations in response to quarter-to-quarter variations in our operating

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a large amount of our common stock.

of December 31, 2019, funds affiliated with Carlson owned (including the 100,000 shares of common stock underlying the warrant

held by Double Black Diamond Offshore Ltd.

(“Double Black”)), in the aggregate 70.5 percent of our combined issued

and outstanding common stock, unvested restricted stock, and common stock underlying the warrant.

Due to the large percentage

of ownership by funds affiliated with Carlson, including Double Black, they have the ability to control or exert significant influence

of December 31, 2020, funds affiliated with Carlson owned in the aggregate 71.1 percent of our combined issued and outstanding

common stock and unvested restricted stock.

Due to the large percentage of ownership by funds affiliated with Carlson, including

Double Black Diamond Offshore Ltd.

(“Double Black”), they have the ability to control or exert significant influence

over our management and policies, such as the election of our directors, the appointment of new management and the approval of

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are substantial sales of shares of our common stock, the price of our common stock could decline.

The price of our common stock could decline if there are substantial

sales of our common stock, particularly sales by our directors, executive officers, employees, and significant stockholders including

funds associated with Carlson.

Carlson owns an aggregate of 70.7 percent (9,193,766 common shares including 100,000 common shares

issuable upon exercise of a warrant).

price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors,

executive officers, employees, and significant stockholders including funds associated with Carlson.

Carlson owns an aggregate

of 71.1 percent (9,093,766, common shares).

Pursuant to a Stockholders’

Agreement entered into on August 18, 2014 and a Registration

Rights Agreement entered into on September 6, 2013, we filed a Registration Statement on Form S-3 with the SEC on February 3, 2020,

which became effective on February 19, 2020, to register all of the common stock owned by funds affiliated with Carlson for sale

freely in the public market from time to time.

Agreement entered into on August 18, 2014 and a

Registration Rights Agreement entered into on September 6, 2013, we filed a Registration Statement on Form S-3 with the SEC on

February 3, 2020, which became effective on February 19, 2020, to register all of the common stock owned by funds affiliated with

Carlson for sale freely in the public market from time to time.

market price of our common stock could decline as a result of the sale of a substantial number of our shares of common stock in

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Additionally,

we have a stockholder rights plan that is intended to protect our ability to utilize our NOL carryforwards and which would also

make it difficult for a third party to acquire a significant number of shares of our common stock.

we have a stockholder rights plan, as amended, that is intended to protect our ability to utilize our NOL carryforwards and which

would also make it difficult for a third party to acquire a significant number of shares of our common stock.

certificate of incorporation and bylaws include provisions that may deter an unsolicited offer to purchase us.

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(or “Qualifying Assets”).

In complying with Section 3(c)(5)(A), one of our subsidiaries, SWK

Funding LLC (“SWK Funding”), relies on an interpretation that royalty interests that entitle SWK Funding to collect

royalty receivables that are directly based on the sales price of specific biopharmaceutical products that use intellectual property

covered by specific license agreements are Qualifying Assets under Section 3(c)(5)(A).

This interpretation was promulgated by the

SEC staff in a no-action letter issued to Royalty Pharma on August 13, 2010.

The assets acquired by SWK Funding therefore, are

limited by the provisions of the 1940 Act and SEC staff interpretations thereunder.

If the SEC or its staff in the future adopts

a contrary interpretation or otherwise restricts the conclusions in the staff’s no-action letter such that royalty interests

are no longer treated as Qualifying Assets for purposes of Section 3(c)(5)(A), SWK Funding could be required to restructure its

activities or sell certain of its assets, potentially negatively affecting our performance.

As a result, our business will be material

and adversely affected if SWK Funding fails to qualify for Section 3(c)(5)(A).

complying with Section 3(c)(5)(A), one of our subsidiaries, SWK Funding LLC (“SWK Funding”), relies on an interpretation

that royalty interests that entitle SWK Funding to collect royalty receivables that are directly based on the sales price of specific

biopharmaceutical products that use intellectual property covered by specific license agreements are Qualifying Assets under Section

This interpretation was promulgated by the SEC staff in a no-action letter issued to Royalty Pharma on August 13,

The assets acquired by SWK Funding therefore, are limited by the provisions of the 1940 Act and SEC staff interpretations

If the SEC or its staff in the future adopts a contrary interpretation or otherwise restricts the conclusions in the

staff’s no-action letter such that royalty interests are no longer treated as Qualifying Assets for purposes of Section

3(c)(5)(A), SWK Funding could be required to restructure its activities or sell certain of its assets, potentially negatively

affecting our performance.

As a result, our business will be material and adversely affected if SWK Funding fails to qualify for

Section 3(c)(5)(A).

rules and interpretations of the SEC and the courts, relating to the definition of “investment company”

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with Investments in the Health Care and Life Sciences Industries

health epidemics, pandemics or outbreaks, including the recent novel coronavirus pandemic (COVID-19), could adversely affect our

health epidemics, pandemics or outbreaks, including COVID-19, could adversely affect our business.

health epidemics, pandemics or outbreaks, and the resulting business or economic disruptions resulting therefrom, could adversely

impact our business as well as our ability to raise capital.

In December 2019, COVID-19 was identified in Wuhan, China.

continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 100 countries,

including the United States.

The impact of this pandemic has been and will likely continue to be extensive in many aspects of

society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as

businesses and capital markets around the world.

The impact of COVID-19 has been and will likely continue to be extensive

in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global

economy, as well as businesses and capital markets around the world.

extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted

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economic and labor instability in the countries in which we or our partner companies operate.

While we cannot presently predict the scope and severity of any

potential business shutdowns or disruptions, if we or any of our partner companies, including their suppliers, manufacturers and

other third parties in our partners’

global supply chain, clinical trial sites, regulators, surgeons, ASCs, potential business

development partners and other third parties with whom our partners conduct business, were to experience shutdowns or other business

disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively

For example, Enteris sources certain excipients from China utilized in products utilizing Peptelligence®.

is currently seeking alternative supplies of these excipients outside of China.

While COVID-19 has not yet lead to supply chain

disruptions for Enteris, if Enteris is unable to source needed excipients or other components required to manufacture pharmaceutical

products, it may have a material adverse effect on our business, results of operations, and financial condition.

In addition, any

staffing interruptions resulting from geopolitical actions, including war and terrorism, adverse public health developments such

as COVID-19, or natural disasters including earthquakes, typhoons, floods and fires, could have a material adverse effect on our

and our partners’

The pandemic’s impact on the medical community and the global

economy could have an adverse impact on our partner companies’

sales and execution of clinical trials, including sales of

pharmaceuticals upon which we derive royalties and milestones, which could lead to financial losses in both of our reporting segments,

and a decrease in our revenues, net income and assets.

If, for example, COVID-19 results in elective medical procedures, such as

dental procedures or tenotomies, being postponed or canceled outright, our partner companies that market products for such procedures

would suffer potentially similar abrupt and substantial decreases in revenue and corresponding operating losses, which in turn

may result in our partners being unable to repay our loans during such periods.

Additionally, for example, Enteris’

agreements with third parties typically include milestone payments to Enteris that are payable upon the successful conclusion of

a clinical trial.

Delays or cancellation of these clinical trials caused by COVID-19 may result in delays or non-payment of milestones

under the License Agreement.

Further, a decrease in patient visits to doctors or medical procedures broadly may result in a decrease

in sales of pharmaceutical products upon which we derive royalties, potentially reducing our revenues, net income and assets.

abrupt and substantial change in economic conditions also may decrease the value of collateral securing some of our loans and

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ability to raise capital.

Several measures are currently being proposed by the US and other

governments to address the current COVID-19 pandemic and its economic impacts.

At this time, it is impossible to predict the success

of these measures and whether or not they will have unforeseen negative consequences for our business.

For example, some proposals

in the US Congress contemplate a debt-servicing holiday for borrowers for an unspecified period of time.

If this type of measure

becomes law, our partner companies may defer making payments under our term loans, which would decrease our cash flows, revenues,

net income, assets and liquidity.

measures are currently being proposed by the US and other governments to address the current COVID-19 pandemic and its economic

At this time, it is impossible to predict the success of these measures and whether or not they will have unforeseen

negative consequences for our business.

For example, some proposals in the US Congress contemplate a debt-servicing holiday for

borrowers for an unspecified period of time.

If this type of measure becomes law, our partner companies may defer making payments

under our term loans, which would decrease our cash flows, revenues, net income, assets and liquidity.

and life science industries are subject to extensive government regulation, litigation risk, reimbursement risk and certain other

risks particular to those industries.

We have invested and plan to continue investing in cash flow streams

produced by life science products that are subject to extensive regulation by the FDA, similar foreign regulatory authorities,

and to a lesser extent, other federal and state agencies.

If any of these products and the companies which manage such products

fails to comply with applicable regulations, they could be subject to significant penalties and claims that could materially and

adversely affect their sales levels and operations.

Medical devices and drugs are subject to the expense, delay and uncertainty

of the regulatory approval process in order to reach the market and, even if approved, these products may not be accepted in the

In addition, governmental budgetary constraints effecting the regulatory approval process, new laws, regulations or

judicial interpretations of existing laws and regulations might adversely affect a partner company or product in this industry.

have invested and plan to continue investing in cash flow streams produced by life science products that are subject to extensive

regulation by the FDA, similar foreign regulatory authorities, and to a lesser extent, other federal and state agencies.

of these products and the companies which manage such products fails to comply with applicable regulations, they could be subject

to significant penalties and claims that could materially and adversely affect their sales levels and operations.

Medical devices

and drugs are subject to the expense, delay and uncertainty of the regulatory approval process in order to reach the market and,

even if approved, these products may not be accepted in the marketplace.

In addition, governmental budgetary constraints effecting

the regulatory approval process, new laws, regulations or judicial interpretations of existing laws and regulations might adversely

affect a partner company or product in this industry.

products and services provided by pharmaceutical, medical device and diagnostics companies are generally subject to the ability

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adverse effect on our business, financial condition and results of operations.

Changes in healthcare laws and other regulations applicable to some

of our partner companies’

businesses may constrain their ability to offer their products and services.

Changes in healthcare or other laws and regulations applicable to

the businesses of some of our partner companies may occur that could increase their compliance and other costs of doing business,

require significant systems enhancements, or render their products or services less profitable or obsolete, any of which could

have a material adverse effect on their results of operations.

There has also been an increased political and regulatory focus

on healthcare laws in recent years, and new legislation could have a material effect on the business and operations of some of

our partner companies.

Additionally, because of the continued uncertainty surrounding the

healthcare industry under the Trump Administration, including the potential for further legal challenges or repeal of existing

legislation, we cannot quantify or predict with any certainty the likely impact on our portfolio companies, our business model,

prospects, financial condition or results of operations.

We also anticipate that Congress, state legislatures, and third-party

payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and

adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system.

We cannot assure you as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the

impact of any such potential legislation on certain of our portfolio companies, our business model, prospects, financial condition

or results of operations.

in healthcare laws and other regulations applicable to some of our partner companies’

businesses may constrain their ability

to offer their products and services.

in healthcare or other laws and regulations applicable to the businesses of some of our partner companies may occur that could

increase their compliance and other costs of doing business, require significant systems enhancements, or render their products

or services less profitable or obsolete, any of which could have a material adverse effect on their results of operations.

has also been an increased political and regulatory focus on healthcare laws in recent years, and new legislation could have a

material effect on the business and operations of some of our partner companies.

also anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare

delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting

additional fundamental changes in the healthcare delivery system.

We cannot assure you as to the ultimate content, timing, or

effect of changes, nor is it possible at this time to estimate the impact of any such potential legislation on certain of our

portfolio companies, our business model, prospects, financial condition or results of operations.

The potential

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or the magnitude of their payments to us.

Our pharmaceutical portfolio companies and pharmaceutical royalties

are subject to risks associated with the pricing for prescription drugs.

It is uncertain whether pharmaceutical products customers

generally will continue to utilize established prescription drug pricing methods, or whether other pricing benchmarks will be adopted

for establishing prices within the industry.

Legislation may lead to changes in the pricing for Medicare and Medicaid programs.

Regulators have conducted investigations into the use of prescription drug pricing methods for federal program payment, and whether

such methods have inflated drug expenditures by the Medicare and Medicaid programs.

Federal and state proposals have sought to

change the basis for calculating payment of certain drugs by the Medicare and Medicaid programs.

Additionally, President Trump

has taken actions and made statements that suggest he plans to seek repeal of all or portions of the Affordable Care Act, or the

There is currently uncertainty with respect to the impact any such repeal may have and any resulting changes may take time

to unfold, which could have an impact on coverage and reimbursement for healthcare items and services covered by plans that were

authorized by the ACA.

We cannot predict the ultimate content, timing or effect of any such legislation or executive action or

the impact of potential legislation or executive action on us.

Any changes to the method for calculating prescription drug costs

may reduce the revenues of our pharmaceutical portfolio companies, which could in turn impair their ability to timely make any

principal and interest payments owed to us.

Additionally, any such changes to pharmaceutical product reimbursement similarly could

reduce the revenues of the pharmaceutical products from which we receive royalties.

pharmaceutical portfolio companies and pharmaceutical royalties are subject to risks associated with the pricing for prescription

It is uncertain whether pharmaceutical products customers generally will continue to utilize established prescription drug

pricing methods, or whether other pricing benchmarks will be adopted for establishing prices within the industry.

may lead to changes in the pricing for Medicare and Medicaid programs.

Regulators have conducted investigations into the use of

prescription drug pricing methods for federal program payment, and whether such methods have inflated drug expenditures by the

Medicare and Medicaid programs.

Federal and state proposals have sought to change the basis for calculating payment of certain

drugs by the Medicare and Medicaid programs.

We cannot predict the ultimate content, timing or effect of any such legislation

or executive action or the impact of potential legislation or executive action on us.

Any changes to the method for calculating

prescription drug costs may reduce the revenues of our pharmaceutical portfolio companies, which could in turn impair their ability

to timely make any principal and interest payments owed to us.

Additionally, any such changes to pharmaceutical product reimbursement

similarly could reduce the revenues of the pharmaceutical products from which we receive royalties.

UNRESOLVED STAFF COMMENTS

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-K

Item 1A. Risk Factors