What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-31 compared with 2020-03-30 · 311 added, 314 removed, 163 unchanged (79% of the section changed)

MARKET FOR REGISTRANT’S

COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES .

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES .

January 22, 2020, our common stock became listed on the Nasdaq Capital Market, under the symbol “SWKH.”

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Issuer Purchases of Equity

On December 21, 2018, the Board authorized a share repurchase program

under which the Company was authorized to repurchase up to $3.5 million of the Company’s outstanding shares of common stock,

or approximately 312,497 common shares, in accordance with all applicable securities laws and regulations, including Rule 10b-18

of the Securities Exchange Act.

The December 21, 2018 share repurchase program expired on May 31, 2019.

On September 5, 2019, the

Board authorized another share repurchase program of up to $2.1 million, which expired on February 29, 2020.

of December 31, 2019, the Company repurchased 229,466 shares of its outstanding common stock.

Of the total 229,466 shares, 149,900

were repurchased under the share repurchase program at a total cost of $1.5 million, or $9.72 per share.

of Shares Purchased

Price per Share

Total Number of

Shares Purchased as

Part of Publicly

Announced Plan

Maximum Number

of Shares That May

Yet Be Purchased

Under the Plan

September 30, 2019

October 1, 2019 through October 31, 2019

November 1, 2019 through November 30, 2019

December 1, 2019 through December 31, 2019

SELECTED FINANCIAL

December 21, 2018, the Board authorized a share repurchase program under which the Company was authorized to repurchase up to

$3.5 million of the Company’s outstanding shares of common stock, or approximately 312,497 common shares, in accordance

with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act.

The December 21, 2018

share repurchase program expired on May 31, 2019 and was renewed on September 5, 2019 and March 26, 2020.

Under the March 26,

2020 share repurchase program, the Board authorized the repurchase of up to $2.0 million worth of common shares.

of December 31, 2020, the Company repurchased an aggregate 384,368 shares of its outstanding common stock, including three privately

negotiated purchases outside of the share repurchase programs, at a total cost of $4.2 million or $11.06 per share.

expired on September 30, 2020.

SELECTED FINANCIAL DATA

Not Applicable.

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion and analysis should be read in conjunction with our financial statements and the related notes.

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expressions to identify forward-looking statements.

We have organized our operations into two segments:

Finance Receivables

and Pharmaceutical Development.

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

Please refer to Item 8.

Financial Statements, Notes 1 and 11 of the Notes to the Consolidated Financial Statements for further

information regarding segment information.

COVID-19 Considerations

are subject to risks related to public health crises such as the global pandemic associated with COVID-19.

Our Pharmaceutical

Development segment has seen a reduction in its productivity as well as delays in receiving some of its needed supplies as a direct

result of the pandemic and the impact on key vendors.

This slow-down is likely to continue in the near term until such time as

certain restrictions that have been imposed on us and our suppliers are lifted.

Such events may result in business disruption

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

refer to Part I, Item 1A, Risk Factors , for additional information on risk factors related to the pandemic or other risks

that could impact our business and results of operations.

have organized our operations into two segments:

Finance Receivables and Pharmaceutical Development.

These segments reflect the

way we evaluate our business performance and manage our operations.

Please refer to Part II, Item 8, Financial Statements ,

Notes 1 and 12 of the Notes to the Consolidated Financial Statements for further information regarding segment information.

Receivables Segment

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from three sources:

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

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

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

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

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

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

from equity-related investments in the life science sector.

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the marketing efforts of a partner company.

Our structured debt investments may include warrants or other features, giving

us the potential to realize enhanced returns on a portion of our portfolio.

Our structured debt investments may include warrants or other features, giving us

the potential to realize enhanced returns on a portion of our portfolio.

Pharmaceutical

Development Segment

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

SWK Products, our wholly-owned

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

Enteris is a clinical

stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies,

the Peptelligence ®

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

leveraging Peptelligence ®

, which enables the oral delivery of molecules that are typically injected, including

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

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

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

oral drug delivery technologies, the Peptelligence®

Since its founding in 2013, Enteris has advanced multiple internal

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

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

strategy is to utilize the Peptelligence®

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

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

First, we intend to out-license

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

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

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

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

First, we intend to out-license our technology to

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

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

therapeutic treatments where Peptelligence®

enables oral delivery, resulting in meaningful improvements for patients

and caregivers.

We also generate income by providing customers pharmaceutical development services, formulation and manufacturing

with the ultimate goal of generating new out-license agreements of our technology.

“Business,”

included in Part I, Item 1 of this report for further discussion of our overall business and strategy.

enables oral delivery, resulting in meaningful improvements for patients and caregivers.

We also generate income by providing customers pharmaceutical development, formulation and manufacturing with the ultimate goal

of generating new out-license agreements of our technology.

Receivables Portfolio Overview

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except rate, share and per share data):

Royalty Purchases and Financings

Licensed Technology

Funded Amount

Income Recognized During 2019

Active Investment as of December 31, 2019

Purchases and

Other Financings

Investment as

of December 31,

Beleodaq®

Oncology treatment

Besivance®

Ophthalmic antibiotic

Best ABT, Inc.

Oncology diagnosis

(2), (3), (4)

NSAID migraine treatment

Forfivo XL®

Depressive disorder treatment

Opioid overdose treatment

Secured Royalty Financing

(Marketable Investment)

Women’s health

Tissue Regeneration Therapeutics

Umbilical cord banking

Maturity Date

Income Recognized During 2019

Active Investment as of December 31, 2019

Acerus Pharmaceuticals, Inc.

Aimmune Therapeutics, Inc.

B&D Dental Corporation

First Lien Equipment Loan

BIOLASE, Inc.

CeloNova BioSciences, Inc.

Cheetah Medical, Inc.

DxTerity Diagnostics, Inc.

Epica International, Inc.

eTon Pharmaceuticals, Inc.

EyePoint Pharmaceuticals, Inc.

Harrow Health, Inc.

Keystone Dental, Inc.

Solsys Medical LLC

Misonix, Inc.

Tenex Health, Inc.

Thermedx, LLC

Thermedx, LLC Term Loan

Synthetic Royalty

Coflex®/Kybella®/Zalviso®

stenosis/Submental fullness

migraine treatment

disorder treatment

macular edema

overdose treatment

Royalty Financing (Marketable Investment)

Women’s

products royalty

Investment as

of December 31,

Misonix, Inc.

Warrants to Purchase Stock

Number of Shares

Exercise Price per Share

Change in Fair Value During 2019

Active Investment as of December 31, 2019

Acerus Pharmaceuticals, Inc.

B&D Dental Corporation

BIOLASE, Inc.

CeloNova BioSciences, Inc.

DxTerity Diagnostics, Inc.

Epica International, Inc.

eTon Pharmaceuticals, Inc.

EyePoint Pharmaceuticals, Inc.

Harrow Health, Inc.

Tenex Health, Inc.

Finance Receivables

Marketable Investments

Value of Warrant Assets

Assets/Revenues

for credit loss of $609 was recognized during the year ended December 31, 2019.

Pharmaceuticals, Inc.

Therapeutics, Inc.

Dental Corporation

Lien Equipment Loan

BioSciences, Inc.

Diagnostics, Inc.

International, Inc.

Pharmaceuticals, Inc.

Medical, Inc.

Investment in TRT

Value During 2020

Investment as of

December 31, 2020

Regeneration Therapeutics (“TRT”)

to Purchase Stock

Investment as

of December 31, 2020

Pharmaceuticals, Inc.

Dental Corporation

BioSciences, Inc.

Diagnostics, Inc.

International, Inc.

Pharmaceuticals, Inc.

Medical, Inc.

Income Recognized

Total Finance Receivables

Investment in TRT

Total Marketable Investments

Fair Value of Warrant Assets

Total Assets/Revenues

considered impaired.

on nonaccrual.

for credit loss of $1,600 was recognized during the year ended December 31, 2019.

is currently in default.

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

The convertible

feature is at the option of TRT.

Please see Part II, Item 8, Financial Statements , Note 14 of the notes to the

consolidated financial statements for further details.

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

Loan was repaid in October 2020.

is evaluating strategic alternatives for the business.

The loan is currently in default.

amendment May 7, 2019 to fund an additional $2,500.

Warrant strike price reduced to $1.00 per November 2019 amendment.

loan repaid on October 25, 2019, which included $1,199 of exit fees and $197 of warrant proceeds.

Amended facility to allow DxTerity to pay in kind the interest payments

due in January 2019 and April 2019 subject to DxTerity raising additional subordinated capital, which it accomplished.

also allowed DxTerity to pay in-kind the interest payments due in October 2019, January 2020 and April 2020, subject to DxTerity

raising additional subordinated capital.

loan repaid on February 13, 2019, which included $3,454 of interest, deferred origination fees, prepayment, and exit fees.

amendment on May 24, 2019, which decreased the contract rate to 10.0 percent, subject to further reduction dependent up achieving

certain leverage ratios, increased the LIBOR floor to 2.0 percent, and extended the maturity date to July 2023.

amendment and commitment letter May 2, 2019 to allow Misonix to assume the loan upon the closing of the Solsys acquisition.

Funded $2,500 on May 2, 2019, $2,500 on September 26, 2019, post Solsys raising $4,000 of equity capital, and $5,000 on September

27, 2019 at closing of the acquisition.

On December 24, 2020, funded an additional $5,000.

royalty was paid off during the year, with $357 of the consideration in the form of a PIK note.

amendment May 13, 2019 whereby the royalty rates applicable to FC2’s net sales were reduced by 50 percent for the next

four payment periods to accommodate Veru’s growth working capital needs.

The royalty rates return to the original levels

in 2020 and subsequently increase in 2021.

Total aggregate amount due by maturity was increased to 176.25 percent of the aggregate

amount advanced.

pre-emptive equity rights in Solsys’

$4,000 equity raise under the warrants for $159 worth of Series E shares.

cashless exercise of Solsys warrants for Series D shares.

Received an aggregate 109,472 registered shares of Misonix common

stock for the preferred stock at closing of the acquisition of Solsys by Misonix.

12,662 shares are held in escrow by Misonix,

subject to reduction pursuant to the acquisition agreement and will be released within 15 to 18 months post closing of the

Remaining 96,810 shares are subject to one year lock-up, which expires on September 27, 2020.

retired the facility in April 2020 with its final scheduled payment.

executed an amendment on May 15, 2020, which consolidated first, second and third warrants, for a total of 550,977 shares

at $0.39198 per share.

amended the facility to allow DxTerity to pay in-kind the interest payments due in October 2019, January 2020 and April 2020,

subject to DxTerity raising additional subordinated capital, which DxTerity did not accomplish by the required date.

resulted in a default under the credit agreement.

DxTerity paid the interest and principal payments due in July 2020, October

2020 and January 2021, and we are currently working with DxTerity to remedy the default.

executed an amendment on August 11, 2020 to increase the maximum principal amount of the term loan from $10,000 to

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

$2,000 was funded at closing.

executed an amendment on March 27, 2020, which extended the maturity date to November 2022.

otherwise specified, our senior secured debt assets generally are repaid by a revenue interest that is charged on a company’s

quarterly net sales and royalties.

Critical Accounting Policies

and Estimates

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,

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On an on-going basis, we evaluate our estimates, including those

related to revenue recognition, stock-based compensation, impairment of financing receivables and long-lived assets, impairment

of goodwill and identifiable intangible assets, valuation of warrants, contingent consideration, income taxes and contingencies

and litigation, among others.

We base our estimates on historical experience and on various other assumptions that we believe

to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under

different assumptions or conditions.

The accounting estimates and assumptions discussed in this section are those that we consider

to be the most critical to an understanding of our consolidated financial statements because they inherently involve significant

judgments and uncertainties.

related to revenue recognition, stock-based compensation, impairment of finance receivables and long-lived assets, impairment

of goodwill and identifiable intangible assets, valuation of warrants and investments, contingent consideration, income taxes

and contingencies and litigation, among others.

We base our estimates on historical experience and on various other assumptions

that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates

under different assumptions or conditions.

The accounting estimates and assumptions discussed in this section are those that we

consider to be the most critical to an understanding of our consolidated financial statements because they inherently involve

significant judgments and uncertainties.

For a discussion of our significant accounting policies, refer to Note 1 of the Notes

to the Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

to the Consolidated Financial Statements in Part II, Item 8, Financial Statements and Supplementary Data .

Allowance for Loan Losses

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relevant performance period, pursuant to the underlying contract.

Other administrative service revenues are recognized

when contractual obligations are fulfilled or as services are provided.

Other administrative service revenues are recognized when contractual

obligations are fulfilled or as services are provided.

Pharmaceutical

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short maturities.

Cost Method Investment

Company holds an investment in TRT.

The common stock of TRT does not have a readily determinable fair value and is measured at cost minus

impairment, if any.

Management regularly evaluates the recoverability of its investment in TRT based on TRT’s performance and financial

position, including the status of its intellectual property and related intellectual property licensing agreements.

During the year ended

December 31, 2020, the Company evaluated the recoverability of its investment in TRT and determined there were no indicators of impairment.

recognition of certain net deferred tax assets of our reporting entities are dependent upon, but not limited to, the future profitability

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in the statement of operations in the period it is determined an adjustment is required.

refer to Note 12 of the Notes to the Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary

Recent Accounting Pronouncements

a discussion of recent accounting pronouncements, refer to Note 1 of the Notes to the Consolidated Financial Statements in Item

8, Financial Statements and Supplementary Data .

While our ability to predict the impact on our business from COVID-19 is limited at this time, we believe

our consolidated income generated by our operations will be more than our consolidated operational expenses.

Receivables Segment

We believe the income generated by our Finance Receivables segment’s

current portfolio will be more than its operational expenses, and we expect to grow our book value going forward.

We continue to

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

that the income generated by such future investments would be earned with minimal additional operational expenses.

to predict the impact from COVID-19 on our portfolio is limited at this time.

Pharmaceutical Development Segment

We expect the Pharmaceutical Development segment’s income

to offset its operational expenses.

The segment’s income, however, is dependent up our third party licensee’s achieving

the clinical and operational milestones pursuant to which we receive milestone payments under the license agreements from our licensees.

Our ability to predict the impact from COVID-19 on our licensees’

businesses, and thus the potential timing of milestone

payments to us, is limited at this time.

Comparison of the Years

Ended December 31, 2019 and 2018

refer to Note 13 of the Notes to the Consolidated Financial Statements in Part II, Item 8, Financial Statements and Supplementary

Accounting Pronouncements

a discussion of recent accounting pronouncements, refer to Note 1 of the Notes to the Consolidated Financial Statements in Part

II, Item 8, Financial Statements and Supplementary Data .

Finance Receivables

believe the income generated by our Finance Receivables segment’s current portfolio will be more than its operational expenses,

and we expect to grow our book value going forward.

We continue to evaluate multiple attractive opportunities that, if consummated,

we believe would similarly generate additional income.

We expect that the income generated by such future investments would be

earned with minimal additional operational expenses.

Pharmaceutical

Development Segment

expect the Pharmaceutical Development segment’s income to offset its operational expenses.

The segment’s income, however,

is dependent up our third party licensee’s achieving the clinical and operational milestones pursuant to which we receive

milestone payments under the license agreements from our licensees.

of the Years Ended December 31, 2020 and 2019

(in millions)

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Pharmaceutical manufacturing, research and development expense

Change in fair value of acquisition-related contingent consideration

Depreciation and amortization expense

General and administrative expense

Other income (expense), net

Benefit for income taxes

Other (expense) income, net

Income tax benefit

Consolidated net income

generated revenues of $30.7 million and $26.0 million for the year ended December 31, 2019 and 2018, respectively, which primarily

consisted of interest and fees earned on our finance receivables.

The net $4.7 million increase in revenue is primarily due to

a $7.2 million increase in interest and fees earned on new and existing finance receivables and $3.8 million in exit and prepayment

fees from two loans that were paid off during 2019.

In addition, our revenue for the year ended December 31, 2019 includes $0.6

million of revenue generated by our pharmaceutical development segment.

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

in interest and fees earned on finance receivables that were paid off or paid down since the fourth quarter of 2018, including

$3.2 million of prepayment, interest and exit fees earned on two finance receivables that were paid off in 2018.

Royalty income

also declined by $1.5 million primarily due to an expected reduction in Forfivo®

royalties, driven by the introduction of

a generic competitor, combined with small declines in other royalty income.

generated revenues of $36.7 and $30.7 million for the years ended December 31, 2020 and 2019, respectively.

ended December 31, 2020, revenues consisted primarily of $30.8 million of interest, fees and royalties earned on our finance receivables

and $5.9 million from our Pharmaceutical Development segment.

For the year ended December 31, 2019, revenues consisted primarily

of $30.1 million of interest, fees and royalties earned on our finance receivables and $0.6 million received from our Pharmaceutical

Development segment, which was acquired in the third quarter of 2019.

The net $6.0 million increase in total revenues includes

an $0.7 million increase in interest, fees and royalties earned on our finance receivables.

The total increase in 2020 revenues

also included $5.0 million of milestone revenue related to Enteris’

license agreement with Cara.

Provision for Credit Losses

and Impairment Expense

During the year ended December 31, 2019, we recognized credit loss

provision expense of $0.6 million related to the Besivance®

royalty, which was due to increases in sales chargebacks and various

rebates (gross sales to net sales deductions) and lower sales volumes.

We also recognized credit loss provision expense of $1.6

million on our Best royalty, which was due to reduced future sales expectations.

the year ended December 31, 2018, we recognized impairment expense of $2.5 million and $5.3 million related to the Hooper first

lien and ABT second lien, respectively.

Of the $5.3 million impairment expense related to ABT, $2.0 million reflects exit costs

that were paid upon completion of the sale process.

In addition to recognizing an allowance for credit losses of $5.0 million,

we also recognized an allowance for credit losses of $1.2 million on a royalty purchase.

refer to Item 8, Financial Statements and Supplementary Data , Note 3 of the Notes to the Consolidated Financial Statements

for further information regarding the allowance for credit losses and impairments taken during the years ended December 31, 2019

recognized impairment expense of $0.2 million on our debt securities during the year ended December 31, 2020.

the year ended December 31, 2019, we recognized credit loss provision expense of $0.6 million related to the Besivance®

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

We also recognized credit loss provision expense of $1.6 million on our Best ABT, Inc.

(“Best”) royalty, which

was due to reduced future sales expectations.

refer to Part II, Item 8, Financial Statements and Supplementary Data , Notes 3 and 5 of the Notes to the

Consolidated Financial Statements for further information regarding the allowance for credit losses and impairments taken during

the years ended December 31, 2020 and 2019.

expense consists of unused line of credit and maintenance fees, as well as amortization of debt issuance costs on our revolving

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Interest expense increased to $0.5 million for the year ended December 31, 2020 from $0.3 million for the year

December 31, 2018.

We entered into the credit facility agreement in June 2018, which accounts for the slight increase in interest

expense during the year ended December 31, 2019 compared to the year ended December 31, 2018.

ended December 31, 2019.

In March and December of 2020, we drew $15.0 million and $12.0 million, respectively, on our revolving

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

this accounted

for the $0.2 million increase in interest expense.

The initial $15.0 million drawn in March 2020 was repaid by August 17, 2020.

As of December 31, 2020 $11.8 million was outstanding on the line of credit, and $8.2 million was available for borrowing.

Pharmaceutical

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Pharmaceutical

manufacturing, research and development expense totaling $1.2 million was incurred by our pharmaceutical development segment,

which was acquired during the year ended December 31, 2019.

manufacturing, research and development expense totaling $4.3 million was incurred by our Pharmaceutical Development segment during

the year ended December 31, 2020, compared to $1.2 million for the period following our acquisition of Enteris through December

Change in Fair Value of Contingent

Consideration

change in the fair value of the contingent consideration for the year ended December 31, 2020 was $4.4 million.

The contingent

consideration is the earnout related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to

Enteris pursuant to the License Agreement with Cara for oral formulation rights to Enteris’

Peptelligence®

technology to develop

and commercialize Oral KORSUVA™

in any indication worldwide, excluding South Korea and Japan (please refer to Part II, Item

8, Financial Statements , Note 2 of the Notes to the Consolidated Financial Statements for further information on contingent

consideration and the acquisition of Enteris).

The contingent consideration was remeasured to fair value throughout 2020.

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

value of the liability.

and Amortization

and amortization increased by $5.0 million due to the increase in fixed and intangible assets that were obtained in the acquisition

of Enteris, which was acquired during the year ended December 31, 2019.

and amortization increased by $7.1 million due to the increase in property and equipment and intangible assets that were obtained

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

Please refer to Part II, Item 8, Financial

Statements , Note 2 of the Notes to the Consolidated Financial Statements for further information on the acquisition of Enteris.

General and Administrative

General and administrative expenses consist primarily of compensation,

stock-based compensation and related costs for management, staff, Board of Directors, legal and audit expenses, and corporate governance.

General and administrative expenses increased to $7.4 million for the year ended December 31, 2019 from $4.9 million for the year

ended December 31, 2018.

The primary increase was due to an increase in salaries, stock-based compensation and benefits expense

of $0.7 million, which includes a $0.1 million increase in the performance-based bonus accrual;

a $1.1 million increase in legal,

accounting and other professional fees incurred primarily in connection with our acquisition of Enteris;

and a $0.4 million increase

in office and rent and state income tax expense due to the addition of the Enteris facility in New Jersey.

and administrative expenses consist primarily of compensation;

stock-based compensation and related costs for management, staff

and Board of Directors;

legal, accounting and audit expenses;

and corporate governance.

General and administrative expenses increased

to $10.5 million for the year ended December 31, 2020 from $7.4 million for the year ended December 31, 2019.

The increase in

general and administrative expense was primarily due to a $2.3 million increase in salaries, benefits and stock-based compensation

expense, which included a $0.7 million increase in the performance-based bonus accrual;

and a $1.0 million increase in general

office, insurance and rent expense.

The overall increase in general and administrative expense was primarily due to the addition

of Enteris, which was acquired in the third quarter of 2019, along with our 2020 uplisting to the Nasdaq Stock Market.

Income (Expense), Net

income, net for the year ended December 31, 2019 reflected a $0.4 million net fair market value gain on our warrant derivatives,

a $0.2 million gain realized upon exercising the warrant related to our Cheetah Medical, Inc.

investment, and a $1.6 million net

fair market value gain on our Misionix common stock.

income (expense), net for the year ended December 31, 2020 reflected a $0.6 million net fair market value loss on our warrant derivatives,

a $0.1 million gain realized related to our warrant in prior borrower Cheetah Medical, Inc.

and the release of certain acquisition-related

cash proceeds from escrow, and a $0.6 million net fair market value loss on our Misonix common stock.

income, net for the year ended December 31, 2019 reflected a net fair market value gain of $0.4 million on our warrant derivatives

and a $0.2 million gain realized upon exercising the warrant related to our Cheetah Medical, Inc.

investment and a $1.6 million

net fair market value gain on our Misonix common stock.

The $1.6 million gain on our Misonix common stock resulted from the exchange

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dilution of our Solsys warrants, into Misonix shares pursuant to the terms of the acquisition agreement.

income (expense), net for the year ended December 31, 2018 reflected a net fair market value gain of $0.5 million on our warrant

derivatives and a net fair market value loss of $1.0 million loss on our equity securities.

During the year ended December 31,

2018, a net $0.1 million loss was realized on the write off of three warrants and one equity security, offset by a nominal gain

on the sale of equity securities.

Income Tax Provision (Benefit)

At December 31, 2019 and 2018, our cumulative gross deferred tax

asset was $82.3 million and $85.3 million, respectively.

Based on historical and expected future operating performance, we concluded

that it was more likely than not that we will not be able to realize the full benefit of the U.S.

federal and state deferred tax

assets in the future.

The valuation allowance against deferred tax assets was $51.7 million and $62.6 million as of December 31,

2019 and 2018, respectively.

We believe it is more likely than not that we will realize approximately $25.8 million of benefit

from the U.S.

December 31, 2020 and 2019, our cumulative gross deferred tax asset was $67.8 million and $82.3 million, respectively.

historical and expected future operating performance, we concluded that it was more likely than not that we will not be able to

realize the full benefit of the U.S.

federal and state deferred tax assets in the future.

As of December 31, 2019, we had NOLs for federal income tax purposes

of $360.4 million.

The federal NOL carryforwards, if not offset against future income, will expire by 2037, with the majority expiring

Approximately $4.0 million of the $360.4 million can be carried forward indefinitely.

We also had federal research credit

carryforwards of $3.0 million.

The federal research credits will expire by 2039, with the majority of such credits expiring by

The valuation allowance against deferred

tax assets was $37.5 million and $51.7 million as of December 31, 2020 and 2019, respectively.

We believe it is more likely than

not that we will realize approximately $27.5 million of benefit from the U.S.

federal and state deferred tax assets in the future.

of December 31, 2020, we had NOLs for federal income tax purposes of $289.4 million.

The federal NOL carryforwards, if not offset

against future income, will expire by 2037, with approximately half expiring by December 2021.

Approximately $4.0 million of the

$289.4 million can be carried forward indefinitely.

We also had federal research credit carryforwards of $3.0 million.

research credits will expire by 2039, with the majority of such credits expiring by 2029.

and Capital Resources

of December 31, 2019, we had $11.2 million in cash and cash equivalents, compared to $20.2 million in cash and cash equivalents

as of December 31, 2018.

The primary driver of the net decrease in our cash balance was $50.1 million, net of origination costs

and fees, of new and add-on investment funding and $21.4 million in cash paid for the acquisition of Enteris.

The net decrease

was offset by $71.2 million of interest, fees, and principal payments generated by our finance receivables, which included $39.1

million received from the payoff of three terms loans.

of December 31, 2020, we had $3.0 million in cash and cash equivalents, compared to $11.2 million in cash and cash

equivalents as of December 31, 2019.

The primary driver of the net decrease in our cash balance was $42.7 million, net of

origination costs and fees, of new and add-on investment funding;

$18.1 million of accounts payable, which included $3.9

million of capital expenditures to upgrade the Enteris facility, benefits and payroll expense;

and $2.0 million to

repurchase shares of our common stock in the open market.

The net decrease was offset by $43.6 million of interest, fees, and

principal payments generated by our finance receivables, which included $4.4 million received from the payoff of one term

a net $4.4 million of payments generated by our Pharmaceutical Development segment;

and $11.8 million of net borrowings

under our revolving credit facility.

As of December 31, 2020, we had $8.2 million of availability on our revolving credit

As of March 31, 2021, current capital, combined with expected cash flows from operations, will

be sufficient to meet the company’s operating requirements for at least the next 12 months.

Primary Driver of Cash

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

of generating income by providing capital to a broad range of life science companies, institutions and inventors, as well as the

success of our Pharmaceutical Development segment.

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

model of generating income by providing capital to a broad range of life science companies, institutions and inventors, as well

as the success of our Pharmaceutical Development segment.

We generate income primarily from four sources:

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

science products and related intellectual property;

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

in the life science sector;

Pharmaceutical

development, manufacturing, and licensing activities utilizing the Peptelligence®

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

life science sector.

As of December 31, 2019, our portfolio contains $172.8 million of

finance receivables and $2.3 million of marketable investments.

Primarily owning or

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

Receiving interest and

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

Pharmaceutical development,

manufacturing, and licensing activities utilizing the Peptelligence®

To a lesser extent,

realizing capital appreciation from equity-related investments in the life science sector.

of December 31, 2020, our finance receivables portfolio contains $204.5 million of finance receivables, $1.5 million of marketable investments

and $3.5 million of convertible notes receivable.

We expect these assets to generate positive cash flows in 2021.

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

Since the timing of any investment is difficult to predict, we may not be able to generate positive cash flow above what

our existing assets will produce in 2020.

continuously monitor the short and long-term financial position of our finance receivables portfolio.

In addition, the majority of our

finance receivables portfolio are debt instruments that carry floating interest rates with a LIBOR-based interest rate floor.

in interest rates, including the levels of LIBOR rates or the replacement of LIBOR with another reference rate, may affect the interest

income for debt instruments with floating rates.

We believe we are well positioned to benefit should market interest rates rise in the

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

Since the timing of any investment is difficult to predict, our Finance Receivables segment may not be able to generate positive

cash flow above what our existing assets are expected to produce in 2021.

We do not assume any near-term repayments from borrowers,

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

of December 31, 2020, our Pharmaceutical Development segment did not have a significant impact on our cash flow.

We expect the Pharmaceutical

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

customer relationships;

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

upon the success of our technology licensees’

We expect the

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

agreements and customer relationships;

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

and dependent upon the success of our technology licensees’

pharmaceutical development candidates.

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

in global economic activity caused by COVID-19, we cannot predict with this with certainty.

We entered into a $20.0 million revolving credit facility in June

We intend to borrow funds to make investments to the extent we determine that additional capital would allow us to take advantage

of additional investment opportunities.

The total undrawn amount of the credit facility as of December 31, 2019, was $20.0 million,

and based on available future investment opportunities, we may seek to increase our revolving credit facility.

As of March 23,

2020, we drew $15.0 million under the loan agreement, which increased our cash balance to $23.6 million.

Off-Balance Sheet Arrangements

Also, the COVID-19 pandemic

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

licensees’

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

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

As of December 31, 2020, $11.8 million was outstanding under the

credit facility, and $8.2 million was available for borrowing.

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

under the credit facility, incurred and paid $0.1 million of interest and fees and made principal payments of $11.2 million.

March 25, 2021, $10.3 million was available for borrowing.

Our credit facility matures on June 30, 2021.

We are exploring options

with respect to a new credit facility.

Sheet Arrangements

the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded

3 unchanged sentences

Such transactions are used primarily to manage partner companies’

requests for funding and take the form of loan

commitments and lines of credit.

requests for funding and take the form

of loan commitments and lines of credit.

contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be

2 unchanged sentences

policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

of December 31, 2019, our unfunded commitments were $14.8 million.

Please refer to Item 8, Financial Statements and Supplementary

Data , Note 8 of the Notes to the Consolidated Financial Statements for further information regarding the Company’s commitments

and contingencies.

Please refer to Part II,

Item 8, Financial Statements, Note 8 of the Notes to the Consolidated Financial Statements.

of December 31, 2020, we did not have any unfunded commitments.

Please refer to Part II, Item 8, Financial Statements ,

Note 8 of the Notes to the Consolidated Financial Statements for further information regarding the Company’s commitments and contingencies.

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 5. Market for Registrant’s Common Equity