What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-05-17 · 543 added, 492 removed, 469 unchanged (69% of the section changed)

1 unchanged sentence

HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

CONDENSED CONSOLIDATED BALANCE SHEETS

thousands, except par value and share data)

Current assets:

6 unchanged sentences

Marketable investments

Investment in TRT

Cost method investment

Deferred tax asset, net

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5,000,000 shares authorized;

no shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par value;

250,000,000 shares authorized;

12,795,607 and 12,792,586 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

12,798,547 and 12,792,586 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

( 4,173,066 )

( 4,190,425 )

Total stockholders equity

2 unchanged sentences

HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

thousands, except per share data)

Three Months Ended

Six Months Ended

Finance receivables interest income, including fees

5 unchanged sentences

Pharmaceutical manufacturing, research and development expense

Change in fair value of acquisition-related contingent consideration

Depreciation and amortization expense

4 unchanged sentences

Unrealized net gain (loss) on equity securities

Income (loss) before provision for income taxes

Provision for income taxes

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Consolidated net income (loss)

3 unchanged sentences

HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(in thousands, except share data)

Three Months Ended March 31, 2021

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

thousands, except share data)

Six Months Ended June 30, 2021

Additional Paid-

6 unchanged sentences

( 4,187,036 )

Three Months Ended March 31, 2020

Stock-based compensation

Issuance of common stock

Balances at June 30, 2021

$ ( 4,173,066 )

Six Months Ended June 30, 2020

Additional Paid-

7 unchanged sentences

( 4,200,287 )

Stock-based compensation

Issuance of common stock in lieu of payment of employee cash bonuses

Issuance of common stock

Repurchases of common stock in open market

Balances at June 30, 2020

$ ( 4,199,411 )

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Cash flows from operating activities:

6 unchanged sentences

Change in fair value of equity securities

Change in fair value of acquisition-related contingent consideration

Loan discount amortization and fee accretion

7 unchanged sentences

Cash flows from investing activities:

Investment in equity securities

Investment in finance receivables

2 unchanged sentences

Purchases of property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Net (payments) proceeds from credit facility

Net (payments on) proceeds from credit facility

Payment of acquisition-related contingent consideration

Repurchases of common stock, including fees and expenses

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

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of Operations

Holdings Corporation (the Company) was incorporated in July 1996 in California and reincorporated in Delaware in September

Holdings Corporation (the Company) was incorporated in July 1996 in California and reincorporated in Delaware in

September 1999.

In July 2012, the Company commenced its strategy of building a specialty finance and asset management business.

In August 2019,

the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property licensing

In August 2019, the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual

property licensing business.

The Companys operations comprise two reportable segments:

Finance Receivables and Pharmaceutical

Development. The Company allocates capital to each segment in order to generate income through the sales of life science products

by third parties.

The Company is headquartered in Dallas, Texas, and as of March 31, 2021, the Company had 34 employees.

Finance Receivables

and Pharmaceutical Development. The Company allocates capital to each segment in order to generate income through

the sales of life science products by third parties.

The Company is headquartered in Dallas, Texas, and as of June 30, 2021, the

Company had 35 employees.

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

and substantial asset.

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

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

expiration dates.

As such, it is possible that the Company might pursue additional strategies that it believes might result in the ability

to utilize more of the NOLs.

of May 10, 2021, the Company and its partners have executed transactions with 42 different parties under its specialty finance strategy,

funding an aggregate $587 million in various financial products across the life science sector.

The Companys portfolio includes

senior and subordinated debt backed by royalties and synthetic royalties paid by companies in the life science sector, and purchased

royalties generated by sales of life science products and related intellectual property.

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

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

to their respective expiration dates.

As such, it is possible that the Company might pursue additional strategies that it believes

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

of August 11, 2021, the Company and its partners have executed transactions with 42 different parties under its specialty

finance strategy, funding an aggregate $600.0 million in various financial products across the life science sector.

The Companys

portfolio includes senior and subordinated debt backed by royalties and synthetic royalties paid by companies in the life science

sector, and purchased royalties generated by sales of life science products and related intellectual property.

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

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.

Peptelligence®

utilizes a unique multifaceted

approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility

and permeability of therapeutics with low oral bioavailability.

Peptelligence®

is protected by an extensive patent estate that extends

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

around its proprietary oral drug delivery technologies, the Peptelligence® platform.

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.

Peptelligence® utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules,

addressing the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability.

Peptelligence®

is protected by an extensive patent estate that extends until 2036.

of Presentation and Principles of Consolidation

Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United

The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling

financial interest as of the financial statement date.

Normally a controlling financial interest reflects ownership of a majority of

the voting interests.

The Company consolidates a variable interest entity (VIE) when it possesses both the power to direct

the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses

that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially

be significant to the VIE, after elimination of intercompany accounts and transactions.

Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in

the United States (GAAP).

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

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

Normally a controlling financial

interest reflects ownership of a majority of the voting interests.

The Company consolidates a variable interest entity (VIE)

when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and

the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the

right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts

and transactions.

Company owns interests in various partnerships and limited liability companies, or LLCs.

The Company consolidates its investments in

these partnerships or LLCs, where the Company, as the general partner or managing member, exercises effective control, even though the

Companys ownership may be less than 50 percent, the related governing agreements provide the Company with broad powers, and the

other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company.

Company has reviewed each of the underlying agreements to determine if it has effective control.

If circumstances change and it is determined

this control does not exist, any such investment would be recorded using the equity method of accounting.

Although this would change

individual line items within the Companys consolidated financial statements, it would have no effect on its operations and/or

total stockholders equity attributable to the Company.

The Company consolidates its investments

in these partnerships or LLCs where the Company, as the general partner or managing member, exercises effective control, even

though the Companys ownership may be less than 50 percent, the related governing agreements provide the Company with broad

powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to

remove the Company.

The Company has reviewed each of the underlying agreements to determine if it has effective control.

If circumstances

change and it is determined this control does not exist, any such investment would be recorded using the equity method of accounting.

Although this would change individual line items within the Companys consolidated financial statements, it would have no

effect on its operations and/or total stockholders equity attributable to the Company.

Interim Financial Information

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that, in the opinion of management, are necessary for a fair presentation of the interim financial information.

The results of operations

for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the

year ending December 31, 2021.

Certain information and footnote disclosures normally included in financial statements prepared in accordance

with GAAP have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (SEC).

These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the audited

consolidated financial statements and notes included in the Companys Annual Report on Form 10-K for the year ended December 31,

2020, filed with the SEC on March 31, 2021.

preparation of the Companys consolidated financial statements in conformity with GAAP requires the Company to make estimates and

assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported

amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions are required in the determination

of revenue recognition;

The results of

operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter

or for the year ending December 31, 2021.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with GAAP have been condensed or omitted under the rules and regulations of the Securities and Exchange

Commission (SEC).

These unaudited condensed consolidated financial statements and notes included herein should be

read in conjunction with the audited consolidated financial statements and notes included in the Companys Annual Report

on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021.

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

and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements

and the reported amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions are required

in the determination of revenue recognition;

stock-based compensation;

valuation of accounts receivable;

impairment of finance receivables;

impairment of finance

long-lived assets;

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and contingencies and litigation, among others.

Some of these judgments can be subjective and complex, and consequently, actual results

may differ from these estimates.

The Companys estimates often are based on complex judgments, probabilities and assumptions that

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

For any given individual estimate or assumption made

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

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

As future events and their effects cannot be determined with precision, the Companys estimates and assumptions may prove to be

incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause changes to those estimates and assumptions.

Market conditions, such as illiquid credit markets, health crises such as the COVID-19 global pandemic, volatile equity markets, and

economic downturns, can increase the uncertainty already inherent in the Companys estimates and assumptions.

The Company adjusts

its estimates and assumptions when facts and circumstances indicate the need for change.

Those changes generally will be reflected in

our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under the relevant

accounting standard.

It is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could

develop and support a range of alternative estimated amounts.

Some of these judgments can be subjective

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

The Companys estimates often are based on

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

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

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

As future events and their effects cannot be determined with precision, the Companys estimates and assumptions

may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause changes to those

estimates and assumptions.

Market conditions, such as illiquid credit markets, health crises such as the COVID-19 global pandemic,

volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Companys estimates

and assumptions.

The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change.

Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required

to be treated retrospectively under the relevant accounting standard.

It is possible that other professionals, applying reasonable

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

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

its specialty finance and asset management business offering customized

financing solutions to a broad range of life-sciences companies, and its business offering oral therapeutic formulation solutions built

around Enteris pharmaceutical Peptelligence®

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

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

Companys Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under

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

its specialty finance and asset management business offering

customized financing solutions to a broad range of life-sciences companies, and its business offering oral therapeutic formulation

solutions built around Enteris pharmaceutical Peptelligence® platform, which enables the oral delivery of molecules

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

Companys Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners,

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

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

non-refundable, upfront license

non-refundable,

upfront license fees;

reimbursement of certain costs;

customer option exercise fees;

development, regulatory and commercial milestone payments;

and royalties

on net sales of licensed products.

development, regulatory and commercial milestone

and royalties on net sales of licensed products.

revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue.

The Company classifies

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

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

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

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

and Development

and development expenses include the costs associated with internal research and development and research and development conducted for

the Company by third parties.

These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants, and supplies.

and development expenses include the costs associated with internal research and development and research and development conducted

for the Company by third parties.

These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants,

and supplies.

All research and development costs discussed above are expensed as incurred.

Third-party expenses reimbursed under research and development

contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research and development expense in

the consolidated statements of income.

Third-party expenses reimbursed under

research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research

and development expense in the consolidated statements of income.

Accounting Pronouncements

March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the potential

burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

ASU 2020-04 provides optional

expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met.

These transactions

(i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity.

2020-04, Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease

the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria

These transactions include:

(i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt

securities classified as held-to-maturity.

ASU 2020-04 is effective from March 12, 2020 through December 31, 2022.

An entity may elect to adopt the amendments for contract modifications

as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date

within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available

to be issued.

An entity may elect to apply the amendments in ASU 2020-04 to eligible hedging relationships existing as of the beginning

of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the

interim period that includes March 12, 2020.

The one-time election to sell, transfer, or both sell and transfer debt securities classified

as held-to-maturity may be made at any time after March 12, 2020 but no later than December 31, 2022.

The Company expects that it will

elect to apply some of the expedients and exceptions provided in ASU 2020-04;

however, the Company is still evaluating the guidance,

and therefore, the impact of the adoption of ASU 2020-04 on the Companys financial condition and results of operations has not

yet been determined.

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard adds an impairment

model, known as the current expected credit loss (CECL) model, that is based on expected losses rather than incurred losses.

Under this guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result

in more timely recognition of losses.

This ASU describes the impairment allowance as a valuation account that is deducted from the amortized

cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

Credit losses relating to available-for-sale debt securities should be measured in a manner similar to current GAAP;

however, the amendments

in this update require that credit losses be presented as an allowance rather than as a write-down, which will allow an entity the ability

to record reversals of credit losses in current period net income.

On November 15, 2019, the FASB issued ASU 2019-10, Financial

Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates, which finalized

various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies.

2019-10, the effective date for implementation of CECL for smaller reporting companies was extended to fiscal years, and interim periods

within those years, beginning after December 15, 2022.

The Company is currently evaluating the new guidance but believes it is likely

to incur more upfront losses on its portfolio under the new CECL model.

An entity may

elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes

or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March

12, 2020, up to the date that the financial statements are available to be issued.

An entity may elect to apply the amendments

in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020

and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020.

The one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made

at any time after March 12, 2020 but no later than December 31, 2022.

The Company expects that it will elect to apply some of

the expedients and exceptions provided in ASU 2020-04;

however, the Company is still evaluating the guidance, and therefore, the

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

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This standard adds an

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

than incurred losses.

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

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

This ASU describes the impairment allowance as a valuation

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

expected to be collected on the financial asset.

Credit losses relating to available-for-sale debt securities should be measured

in a manner similar to current GAAP;

however, the amendments in this update require that credit losses be presented as an allowance

rather than as a write-down, which will allow an entity the ability to record reversals of credit losses in current period net

On November 15, 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives

and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates, which finalized various effective date delays for private

companies, not-for-profit organizations, and certain smaller reporting companies.

Under ASU 2019-10, the effective date for implementation

of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after

December 15, 2022.

The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses

on its portfolio under the new CECL model.

Net Income (Loss) per Share

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

Diluted net income (loss)

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

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

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

per share amounts):

Diluted net income

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

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

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

except per share amounts):

Schedule of Computation of Basic and Diluted Net Income (Loss)

Three Months Ended

Six Months Ended

Net income (loss)

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Weighted-average diluted shares

Basic net income (loss) per share

Basic net income (loss)

Diluted net income (loss) per share

the three months ended March 31, 2021 and 2020, outstanding stock options and restricted stock units to purchase shares of common stock

in an aggregate of approximately 411,000 and 460,000, respectively, have been excluded from the calculation of diluted net income (loss)

per share as all such securities were anti-dilutive.

the three months ended June 30, 2021 and 2020, outstanding options to purchase shares of common stock and outstanding shares of

restricted stock in an aggregate of approximately 391,000 and 495,000 , respectively, have been excluded from the calculation of

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

For the six months ended June 30, 2021 and 2020,

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

401,000 and 483,000 , respectively, have been excluded from the calculation of diluted net income (loss) per share as all such

securities were anti-dilutive.

Finance Receivables, Net

receivables are reported at their determined principal balances net of any unearned income, cumulative charge-offs and unamortized deferred

fees and costs.

Unearned income and deferred fees and costs are amortized to interest income based on all cash flows expected using the

effective interest method.

of March 31, 2021 and December 31, 2020, the Company had a credit loss allowance of $8.4 million.

Of the total $8.4 million, $1.2 million

and $0.6 million are associated with the Companys Cambia®

and Besivance®

royalties, respectively.

The remaining $6.6 million

is related to the ABT Molecular Imaging, Inc.

receivables are reported at their determined principal balances net of any unearned income, cumulative charge-offs and unamortized

deferred fees and costs.

Unearned income and deferred fees and costs are amortized to interest income based on all cash flows

expected using the effective interest method.

of June 30, 2021 and December 31, 2020, the Company had a credit loss allowance of $8.4 million.

Of the total $8.4 million, $ 1.2

million and $ 0.6 million are associated with the Companys Cambia® and Besivance® royalties, respectively.

The remaining

$ 6.6 million is related to the ABT Molecular Imaging, Inc.

(ABT), now known as Best ABT, Inc.

(Best), second lien term loan

that was recognized in order to reflect the Best royalty at its estimated fair value of $3.7 million.

The carrying values of finance

receivables are as follows (in thousands):

March 31, 2021

second lien term loan that was recognized in order to reflect the Best royalty at its estimated fair value of $ 3.6 million.

The carrying values of finance receivables are as follows (in thousands):

Schedule of carrying value of finance receivables

June 30, 2021

December 31, 2020

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Total carrying value

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

March 31, 2021

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

Schedule of analysis of nonaccrual and performing loans by portfolio segment

June 30, 2021

December 31, 2020

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Total carrying value

of March 31, 2021, the Company had two finance receivables in nonaccrual status:

(1) the term loan to B&D Dental Corporation (B&D),

with a net carrying value of $8.3 million and (2) the Best royalty, with a net carrying value of $3.7 million.

nonaccrual status, the B&D term loan was not considered impaired as of March 31, 2021 and December 31, 2020.

The Company collected

$0.2 million on the Best royalty during the three months ended March 31, 2021, which was credited toward the royaltys carrying

The Company did not collect any cash on its nonaccrual royalties during the three months ended March 31, 2020.

(Please see B&D,

Best and Besivance below for further details regarding nonaccrual and impaired finance receivables).

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

amount of $6.0 million funded upon close, net of an arrangement fee of $60,000.

The loan was scheduled to mature on December 10, 2018.

Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D.

As of March 31, 2021,

the total amount funded was $8.3 million.

B&D is currently evaluating strategic options, including a potential sale of the business.

is currently in default under the terms of the credit agreement, and as a result, the Company classified the loan to nonaccrual status

as of September 30, 2015.

During 2016 and 2018, the Company executed three additional amendments to the loan to advance an additional

$0.7 million in order to directly pay critical vendors and protect the value of the collateral.

The Company periodically obtains third-party

valuations of B&D.

As a result of the third-party valuations and facts and circumstances regarding B&Ds operations, including

its intellectual property position, improved profitability and working capital position, the Company believes its collateral position

is greater than the unpaid balance;

thus, accrued interest has not been reversed nor has an allowance been recorded as of March 31, 2021.

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

International, Inc., for aggregate consideration of (i) $500,000, paid over ten years in equal quarterly installments, plus (ii) a ten

percent royalty on ABTs net sales, including any commercialized improvements made to ABTs technology, paid quarterly for

the ten year period from closing pursuant to a royalty security agreement by and between Best and SWK Funding LLC, a wholly-owned subsidiary

of the Company (SWK Funding).

SWK Funding will receive 100 percent of the consideration.

On November 8, 2018, the Bankruptcy

Court approved the asset sale transaction, and the Company has no further funding liabilities.

the year ended December 31, 2018, the Company re-evaluated its collateral position, considering the expected outcome of ABTs Chapter

11 process, and as a result, the Company recognized an impairment expense of $5.3 million to write off the second lien term loan, as

well as provision for credit losses of $5.0 million to reflect the Best royalty at its estimated fair value of $5.7 million.

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

the Company recognized a provision for credit losses of $1.6 million.

The estimated fair value as of March 31, 2021 is $3.7 million.

Investment in Tissue Regeneration Therapeutics, Inc.

June 13, 2013, the Company purchased royalties from Tissue Regeneration Therapeutics, Inc.

(TRT) related to its technology

licenses in the family cord banking services sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon

the achievement of royalty receipts-based milestones.

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

licensee ended as a result of the licensee terminating a technology license.

SWK and TRT continue to evaluate both options in regard

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

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

equity and a convertible note.

The convertible note carries no interest, can be redeemed in cash without penalty at any time by TRT,

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

The convertible feature is at

the option of TRT.

of March 31, 2021, the Company does not believe there is an impairment of the carrying value of the investment in TRT.

The Company evaluated

several factors in this determination, including input from intellectual property counsel regarding the strength of the related intellectual

property, advancements with TRTs intellectual property estate and technology license agreements generally, continued receipt of

Canadian licensee royalty payments and a third party valuation of the Companys investment in TRT.

As of March 31, 2021, there

were no adjustments to the carrying amount of $3.5 million.

of June 30, 2021, the Company had two finance receivables in nonaccrual status:

(1) the term loan to B&D Dental Corporation

(B&D), with a net carrying value of $ 8.3 million and (2) the Best royalty, with a net carrying value of

$ 3.6 million.

Although in nonaccrual status, the B&D term loan was not considered impaired as of June 30, 2021 and December

The Company collected $0.3 million on the Best royalty during the six months ended June 30, 2021, which was credited

toward the royaltys carrying value.

Marketable Investments

in available-for-sale corporate debt securities and equity securities as of March 31, 2021 and December 31, 2020 consist of the following

(in thousands):

in available-for-sale corporate debt securities and equity securities as of June 30, 2021 and December 31, 2020 consist of the

following (in thousands):

Schedule of marketable investments

June 30, 2021

December 31, 2020

Corporate debt securities

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Total marketable investments

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

debt securities as of March 31, 2021 and December 31, 2020, are as follows (in thousands):

March 31, 2021

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

corporate debt securities as of June 30, 2021 and December 31, 2020, are as follows (in thousands):

Schedule of available-for-sale securities reconciliation

June 30, 2021

December 31, 2020

following table presents unrealized net income (loss) on equity securities during the three months ended March 31, 2021 and 2020 (in

following table presents unrealized net income (loss) on equity securities during the three and six months ended June 30, 2021

and 2020 (in thousands):

Schedule of Proceeds from sales, gross unrealized gains and gross unrealized losses for available-for-sale securities

Three Months Ended

Six Months Ended

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

Goodwill and Intangible Assets

was no change in the carrying amount of goodwill from December 31, 2020 to March 31, 2021, and net book value remains at $8.4 million.

was no change in the carrying amount of goodwill from December 31, 2020 to June 30, 2021, and net book value remains at $8.4 million.

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

As of March 31, 2021, the Company concluded that

it is more likely than not that fair value of the reporting unit is greater than its carrying value, and goodwill is not considered to

following table summarizes the components of gross intangible assets, accumulated amortization and net intangible asset balances as of

March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

December 31, 2020

following table summarizes the gross book value, accumulated amortization and net book value balances of intangible assets as

of June 30, 2021 and December 31, 2020 (in thousands):

Schedule of Intangible Assets

Licensing Agreement (1)

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Total intangible assets

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

(Cara), for oral formulation rights to Enteris Peptelligence®

technology to develop and commercialize Oral

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

Cara is obligated to pay Enteris certain development,

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

expense related to intangible assets was $1.6 million and $3.4 million for the three months ended March 31, 2021 and 2020, respectively.

estimated future amortization expense related to intangible assets as of March 31, 2021 is as follows (in thousands):

to the acquisition, Enteris entered into a non-exclusive commercial license agreement (the

License Agreement) with Cara Therapeutics, Inc.

(Cara), for oral

formulation rights to Enteris Peptelligence® technology to develop and commercialize

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

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.

expense related to intangible assets was $ 0.7 million and $ 3.3 million for the three months ended June 30, 2021 and 2020, respectively.

Amortization expense related to intangible assets was $ 2.3 million and $ 6.8 million for the six months ended June 30, 2021 and

2020, respectively.

estimated future amortization expense related to intangible assets as of June 30, 2021 is as follows (in thousands):

Schedule of Intangible Asset Amortization Expense

Remainder of 2021

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Revolving Credit Facility

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

as a lender and the administrative agent (State Bank) pursuant to which State Bank provides the Company with up to a $20.0

million revolving senior secured credit facility, which the Company can draw down and repay until maturity, subject to borrowing base

Loan Agreement accrues interest at the Daily LIBOR Rate, with a floor of 1.00 percent, plus a 3.25 percent margin and principal is repayable

in full at maturity.

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

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

with up to a $20.0 million revolving senior secured credit facility, which the Company can draw down and repay until maturity,

subject to borrowing base eligibility.

Loan Agreement accrues interest at the Daily LIBOR Rate, with a floor of 1.00 percent, plus a 3.25 percent margin and principal

is repayable in full at maturity.

Interest is generally required to be paid monthly in arrears.

The Loan Agreement requires the payment of an unused

line fee of 0.50 percent, which is recorded as interest expense.

The Company paid $0.5 million in fees at closing, which have been capitalized

as deferred financing costs and are being amortized on a straight-line basis over the term of the Loan Agreement.

Loan Agreement has an advance rate against the Companys finance receivables portfolio, including 85 percent against senior first

lien loans, 70 percent against second lien loans and 50 percent against royalty receivables, subject to certain eligibility requirements

as defined in the Loan Agreement.

The Loan Agreement contains certain affirmative and negative covenants including minimum asset coverage

and minimum interest coverage ratios.

both the three months ended March 31, 2021 and 2020, the Company recognized $0.1 million of interest expense.

As of March 31, 2021,

$11.2 million was outstanding under the revolving credit facility, and $8.8 million was available for borrowing.

The credit facility

was paid off subsequent to quarter ended March 31, 2021, and $20.0 was available for borrowing as of May 10, 2021.

Agreement matures on June 30, 2021;

however, the Company has the option to extend the maturity date by 90 days.

continues to explore other options with respect to a new credit facility.

The Loan Agreement requires the

payment of an unused line fee of 0.50 percent, which is recorded as interest expense.

The Company paid $ 0.5 million in fees at

closing, which have been capitalized as deferred financing costs and are being amortized on a straight-line basis over the term

of the Loan Agreement.

Loan Agreement has an advance rate against the Companys finance receivables portfolio, including 85 percent against senior

first lien loans, 70 percent against second lien loans and 50 percent against royalty receivables, subject to certain eligibility

requirements as defined in the Loan Agreement.

The Loan Agreement contains certain affirmative and negative covenants including

minimum asset coverage and minimum interest coverage ratios.

the six months ended June 30, 2021 and 2020, the Company recognized $0.2 million and $0.3 million, respectively, of interest expense.

As of June 30, 2021, no amount was outstanding under the revolving credit facility, and $ 20.0 million was available for borrowing.

The Loan Agreement was amended on June 29, 2021 to extend the maturity date to September 27, 2021.

Subsequent to quarter ended

June 30, 2021, the Company paid a $ 16,750 amendment fee, which will be capitalized as a deferred financing cost that will be amortized

on a straight line basis over the remaining term of the Loan Agreement.

The Company continues to explore other options with respect

to a new credit facility.

Commitments and Contingencies

Consideration

Company recorded contingent consideration related to the August 2019 acquisition of Enteris and sharing of certain milestone and royalties

due to Enteris pursuant to the License Agreement (please refer to Note 6 for further details on the License Agreement).

Contingent consideration

is remeasured to fair value at each reporting date until the contingency is resolved, with changes in the estimated fair value recognized

As of March 31, 2021, the estimated fair value of the contingent consideration was $16.9 million.

The Company did not recognize

a change in the estimated fair value of its contingent consideration for the three months ended March 31, 2021.

of March 31, 2021, the Companys unfunded commitments were as follows (in millions):

Sincerus Pharmaceuticals, Inc.

The Company recorded contingent consideration related to the August

2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement.

consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in the estimated fair

value recognized in earnings.

As of June 30, 2021 and December 31, 2020, the fair value of contingent consideration was $ 10.7 million

and $ 16.9 million, respectively.

During the six months ended June 30, 2021, the Company recognized $10.0 million of revenue related to

the completion of a milestone under the License Agreement with Cara.

During the six months ended June 30, 2021, the Company paid $6.1

million of such amount to the seller of Enteris, pursuant to the earnout provisions of the merger agreement.

The Company also recognized

a $0.1 million change in the estimated fair value of its contingent consideration during the six months ended June 30, 2021.

of June 30, 2021, the Companys unfunded commitments were as follows (in millions):

Schedule of Unfunded Commitments

Trio Healthcare Ltd.

Ideal Implant, Inc.

Total unfunded commitments

of May 10, 2021, aggregate unfunded commitments increased to $3.9 million due to SWK Funding entering into a synthetic royalty agreement

with Ideal Implant, Inc.

(Ideal) on April 27, 2021 (please refer to Note 12 for further details on SWK Fundings royalty

agreement with Ideal).

Unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics

on or before a specified date or period of time per the terms of the royalty purchase or credit agreements, and in the case of loan transactions,

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

commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified

date or period of time per the terms of the royalty purchase or credit agreements, and in the case of loan transactions, are only

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

Fair Value Measurements

Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis.

Fair value is the price

that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date (exit price).

Fair value is the

price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date (exit price).

GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value.

value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority

to data lacking transparency (i.e., unobservable inputs).

An instruments categorization within the fair value hierarchy is based

on the lowest level of significant input to its valuation.

The following is a description of the three hierarchy levels.

The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and

the lowest priority to data lacking transparency (i.e., unobservable inputs).

An instruments categorization within the

fair value hierarchy is based on the lowest level of significant input to its valuation.

The following is a description of the

three hierarchy levels.

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

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

provide pricing information on an ongoing basis.

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

term of the asset or liability.

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

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

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

and volume to provide pricing information on an ongoing basis.

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

full term of the asset or liability.

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

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

inputs are not corroborated by market data.

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

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

observable from objective sources.

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

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

less readily observable from objective sources.

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

There were no transfers

between any levels during the three months ended March 31, 2021.

no transfers between any levels during the six months ended June 30, 2021.

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

unaudited condensed consolidated financial statements and the related market or fair value.

The disclosures include financial instruments

and derivative financial instruments, other than investment in affiliates.

are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation

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

The disclosures include financial

instruments and derivative financial instruments, other than investment in affiliates.

are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the

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

and cash equivalents

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

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

reflect the credit and interest rate-risk inherent in the finance receivables.

Projected future cash flows are calculated based upon

contractual maturity or call dates, projected repayments and prepayments of principal.

These receivables are classified as Level 3.

receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below.

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

date that reflect the credit and interest rate-risk inherent in the finance receivables.

Projected future cash flows are calculated

based upon contractual maturity or call dates, projected repayments and prepayments of principal.

These receivables are classified

Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected

Consideration

Company recorded contingent consideration related to the August 2019 acquisition of Enteris and sharing of certain milestone and royalties

due to Enteris pursuant to the License Agreement (please refer to Notes 6 and 8 for further details on the License Agreement and contingent

consideration, respectively).

fair value measurements of contingent consideration obligations arising from business combinations

are classified as Level 3 estimates under the fair value hierarchy as these items have been valued using unobservable inputs.

(a) the estimated amount and timing of projected cash flows;

(b) the probability of the achievement of the factors on which

the contingency is based;

Company recorded contingent consideration related to the August 2019 acquisition of Enteris and sharing of certain milestone and

royalties due to Enteris pursuant to the License Agreement.

fair value measurements of contingent consideration obligations arising from business combinations are classified as Level 3 estimates

under the fair value hierarchy as these items have been valued using unobservable inputs.

These inputs include:

(a) the estimated

amount and timing of projected cash flows;

(b) the probability of the achievement of the factors on which the contingency is based;

and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows.

increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

Significant increases or decreases

in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

Investments and Derivative Securities

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

following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 (in

following table presents financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 (in

Schedule of fair value assets measured on recurring basis

Quoted Prices

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Contingent consideration payable

changes in fair value of the warrant assets during the three months ended March 31, 2021 were as follows (in thousands):

Fair value –

December 31, 2020

changes in fair value of the warrant assets during the six months ended June 30, 2021 were as follows (in thousands):

Schedule of fair value assets measured on recurring basis unobservable input reconciliation

Fair value – December 31, 2020

Change in fair value

Fair value –

March 31, 2021

Fair value – June 30, 2021

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

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

March 31, 2021

Schedule of weighted average assumptions

June 30, 2021

December 31, 2020

7 unchanged sentences

74.3 % to 174.7 %

of March 31, 2021 and December 31, 2020, the Company had three royalties, Besivance®, Best, and Cambia®, that were deemed

of June 30, 2021 and December 31, 2020, the Company had three royalties, Besivance®, Best, and Cambia®, that were deemed

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

The following table presents these royalties measured

at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020 (in thousands):

at fair value on a nonrecurring basis as of June 30, 2021 and December 31, 2020 (in thousands):

Schedule of fair value assets and liabilities measured on nonrecurring basis

Quoted Prices

or Liabilities

March 31, 2021

June 30, 2021

December 31, 2020

were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020.

were no liabilities measured at fair value on a nonrecurring basis as of June 30, 2021 and December 31, 2020.

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

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instruments and derivative financial instruments measured at fair value on a recurring and non-recurring basis.

of March 31, 2021 (in thousands):

Schedule of fair value by balance sheet grouping

of June 30, 2021 (in thousands):

Financial Assets

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The following table provides the

contract revenue recognized by revenue source for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

contract revenue recognized by revenue source for the three and six months ended June 30, 2021 and 2020 (in thousands):

Schedule of Revenue Recognized by Revenue Source

Three Months Ended June 30,

Six Months Ended June 30,

Pharmaceutical Development Segment

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Total contract revenue

Assets and Liabilities

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

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

March 31, 2021

Schedule of Company's Contract Liabilities

June 30, 2021

December 31, 2020

2 unchanged sentences

Total contract liabilities

the three months ended March 31, 2021, the Company recognized $0.3 million of 2020 deferred revenue from satisfaction of performance

Please refer to Note 6 for further details on the Companys License Agreement.

The Company did not have any

contract assets nor did it have any contract liabilities related to the License Agreement as of March 31, 2021 or December 31,

the six months ended June 30, 2021, the Company recognized $ 0.3 million of 2020 deferred revenue from satisfaction of performance

The Company did not have any contract assets nor did it have any contract liabilities related to the License Agreement

as of June 30, 2021 or December 31, 2020.

Segment Information

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

Three Months Ended March 31, 2021

Schedule of Reportable Segments

Three Months Ended June 30, 2021

Pharmaceutical

Development and

Holding Company

Interest expense

Manufacturing, research and development

Depreciation and amortization

Change in fair value of acquisition-related contingent consideration

General and administrative

Other income, net

Income tax expense

Consolidated net income (loss)

Three Months Ended June 30, 2020

Pharmaceutical

Development and

Holding Company

Other revenue

1 unchanged sentence

Manufacturing, research and development

Depreciation and amortization expense

Depreciation and amortization

Change in fair value of acquisition-related contingent consideration

General and administrative

Other income, net

Provision for income taxes

Income tax benefit

Consolidated net income (loss)

Three Months Ended March 31, 2020

Six Months Ended June 30, 2021

Pharmaceutical

Development and

Holding Company

Other revenue

Interest expense

Manufacturing, research and development

Depreciation and amortization

Change in fair value of acquisition-related contingent consideration

General and administrative

Other income, net

Income tax expense

Consolidated net income (loss)

Six Months Ended June 30, 2020

Pharmaceutical

Development and

Holding Company

Other revenue

Provision for credit losses and impairment

1 unchanged sentence

Manufacturing, research and development

Depreciation and amortization expense

Depreciation and amortization

Change in fair value of acquisition-related contingent consideration

General and administrative

Other expense, net

Provision for income taxes

Income tax expense

Consolidated net income (loss)

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consolidated amounts.

Subsequent Events

April 1, 2021, SWK Funding received $6.5 million for the payoff of the Tenex Health, Inc.

term loan in connection with its sale.

The proceeds included accrued interest, proceeds from the termination of the warrant, and exit fees.

Implant, Inc.

April 27, 2021, SWK Funding closed a synthetic royalty purchase agreement with Ideal.

SWK Funding paid $3.0 million at closing

with another $2.0 available for borrowing should Ideal achieve certain milestones.

In exchange, SWK Funding will receive royalties

based on sales of implants.

April 30, 2021, Harrow Health, Inc.

repaid its term loan.

SWK Funding received approximately $9.4 million at payoff for its portion

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

Subsequent Event

August 11, 2021, the Board of Directors, upon the recommendation of its Compensation Committee, approved bonus agreements with certain

selected employees of the Company.

The bonus agreements provide for special bonuses in the event of the consummation of a strategic corporate

transaction by the Company that occurs before April 1, 2022.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

oral drug delivery technologies, the Peptelligence®

oral drug delivery technologies, the Peptelligence® platform.

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 portfolio of milestone and royalty income, and thus increase

strategy is to utilize the Peptelligence® 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.

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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.

therapeutic treatments where Peptelligence® 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

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Receivables Portfolio Overview

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

31, 2021 (in thousands, except rate, share and per share data).

Royalty Purchases and Other Financings

Beleodaq®

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

June 30, 2021 (in thousands, except rate, share and per share data).

Purchases and Other

Oncology treatment

Besivance®

Ophthalmic antibiotic

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Oncology diagnosis

Coflex®/Kybella®/Zalviso®

Spinal stenosis/Submental fullness

NSAID migraine treatment

Forfivo XL®

Depressive disorder treatment

Ideal Implant, Inc.

Diabetic macular edema

2 unchanged sentences

Womens health

Tissue Regeneration Therapeutics

Tissue Regeneration Therapeutics, Inc.

Umbilical cord banking

1 unchanged sentence

Ostomy products

Revenue Recognized

Maturity Date

Contract Rate

8 unchanged sentences

Harrow Health, Inc.

9.0% - 12.0 %

Keystone Dental, Inc.

Misonix, Inc.

10.0% - 12.3 %

Sincerus Pharmaceuticals, Inc.

1 unchanged sentence

Thermedx, LLC

Synthetic Royalty

Trio Healthcare Ltd.

Change in Fair Value

Misonix, Inc.

Sincerus Pharmaceuticals, Inc.

Change in Fair Value

Warrants to Purchase Stock

12 unchanged sentences

Harrow Health, Inc.

Tenex Health, Inc.

Income Recognized

Total finance receivables

Total marketable investments

Investment in Tissue Regeneration Therapeutics

Cost method investment

Fair value of warrant assets

Total assets/revenues

(1) Investment

considered impaired.

(2) Investment

on nonaccrual.

is evaluating strategic alternatives for the business.

The loan is currently in default.

loan was paid off on April 30, 2021.

Please see Part 1, Item 1, Financial Statements, Note 12 of the notes to the unaudited condensed

consolidated financial statements for further details).

loan was paid off on April 1, 2021.

Please see Part 1, Item 1, Financial Statements, Note 12 of the notes to the unaudited condensed

consolidated financial statements for further details).

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

quarterly net sales and royalties.

The first lien loan is currently in default.

date was amended to December 31, 2021 in July 2021.

loan was paid off during 2021.

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

on a companys quarterly net sales and royalties.

Accounting Policies and Estimates

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We believe there have been no new critical accounting

policies or material changes to our existing critical accounting policies and estimates during the three months ended March 31,

policies or material changes to our existing critical accounting policies and estimates during the six months ended June 30, 2021,

compared to those discussed in our Annual Report.

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

of the Three Months Ended March 31, 2021 and 2020 ( in millions )

Three Months Ended March 31,

of the Three Months Ended June 30, 2021 and 2020 ( in millions )

Three Months Ended June 30,

Interest expense

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, net

Income tax expense (benefit)

Consolidated net income

generated revenues of $22.3 million and $7.9 million for the three months ended June 30, 2021 and 2020, respectively,

which consisted of a $4.1 million increase in interest and fees earned on our finance receivables and a $10.3 million increase

in revenues from our Pharmaceutical Development segment.

The increase in Pharmaceutical Development segment revenue included $10.0

million of milestone revenue related to Enteris license agreement with Cara.

The $4.1 million increase in revenue attributable

to our Finance Receivables segment primarily consists of a $2.9 million net increase in royalty income and a $1.8 million net

increase in fees and interest earned on our finance receivables due to funding new and existing loans.

The increase in revenue

was partially offset by a $0.6 million decrease in interest and fees earned on finance receivables that were paid off or paid

down since the second quarter of 2020.

expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization

of debt issuance costs.

Interest expense for both the three months ended June 30, 2021 and 2020 was $0.1 million $0.2 million,

respectively.

Pharmaceutical

Manufacturing, Research and Development Expense

Pharmaceutical

manufacturing, research and development expense increased from $1.0 million for the three months ended 2020 to $1.5 million

for the three months ended June 30, 2021.

The $0.5 million increase was primarily due to an increase in manufacturing materials

for pipeline projects and clinical trials.

and Amortization

$2.6 million decrease in depreciation and amortization expense for the three months ended June 30, 2021 primarily consists

of a decrease in amortization expense related to the intangible assets of Enteris.

Amortization expense is aligned with the expected

future cash flows of the intangible assets.

and Administrative

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

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

General and administrative expenses increased to $3.4

million for the three months ended June 30, 2021 from $2.6 million for the three months ended 2020, which was due to a $0.3 million

increase in professional fees, a $0.1 million increase in salaries and benefits expense, and a $0.2 increase in overall office

and rent expense.

income, net for three months ended June 30, 2021 reflected a net fair market value gain of $0.6 million on our warrant derivatives

and a net fair market value gain of $0.3 million on our Misonix common stock.

Other income, net for the three months ended

June 30, 2020 reflected a net fair market value gain of $0.6 million on our warrant derivatives and a net fair market value

gain of $0.4 million on our Misonix common stock.

Tax Expense (Benefit)

the three months ended June 30, 2021 and 2020, we recognized income tax expense of $3.5 million and income tax benefit of $1.0 million,

respectively.

The $4.5 million increase in income tax expense is a result of higher taxable income for the three months ended

June 30, 2021 when compared to the same period of the prior year.

of the Six Months Ended June 30, 2021 and 2020 ( in millions )

Six Months Ended June 30,

Provision for credit losses and impairment expenses

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Pharmaceutical manufacturing, research and development expense

Change in fair value of acquisition-related contingent consideration

Depreciation and amortization expense

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Other income (expense), net

Provision for income taxes

Income tax expense

Consolidated net income (loss)

generated revenues of $9.4 million and $7.3 million for the three months ended March 31, 2021 and 2020, respectively, which

consisted of a $1.5 million increase in interest and fees earned on our finance receivables and a $0.5 million increase in revenues

from our Pharmaceutical Development segment.

The $1.5 million increase in revenue attributable to our Finance Receivables segment

primarily consists of a $1.0 million net increase in royalty income and a $0.9 million increase in fees and interest earned on

our finance receivables due to funding new and existing loans.

The increase in revenue was partially offset by a $0.4 million

decrease in interest and fees earned on finance receivables that were paid off or paid down since the second quarter of 2020.

generated revenues of $31.6 million and $15.2 million for the six months ended June 30, 2021 and 2020, respectively,

which consisted of a $5.6 million increase in interest and fees earned on our finance receivables and a $10.8 million increase

in revenues from our Pharmaceutical Development segment.

The increase in Pharmaceutical Development segment revenue included $10.0

million of milestone revenue related to Enteris license agreement with Cara.

The $5.6 million increase in revenue attributable

to our Finance Receivables segment primarily consists of a $4.2 million net increase in royalty income and a $2.3 million net

increase in fees and interest earned on our finance receivables due to funding new and existing loans.

The increase in revenue

was partially offset by a $0.9 million decrease in interest and fees earned on finance receivables that were paid off or paid

down since the second quarter of 2020.

for Credit Losses and Impairment Expense

did not recognize any credit loss provision or impairment expense during the three months ended March 31, 2021.

We recognized

impairment expense of $0.2 million on our available-for-sale debt security during the three months ended March 31, 2020.

did not recognize any credit loss provision or impairment expense during the six months ended June 30, 2021.

We recognized impairment

expense of $0.2 million on our available-for-sale debt security during the six months ended June 30, 2020.

expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization

of debt issuance costs.

Interest expense for both the three months ended March 31, 2021 and 2020 was $0.1 million.

Interest expense for the six months ended June 30, 2021 and 2020 was $0.2 million and $0.3 million,

respectively.

Pharmaceutical

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Pharmaceutical

manufacturing, research and development expense increased from $1.2 million for the three months ended March 31, 2020 to $1.5

million for three months ended March 31, 2021.

The $0.3 million increase was primarily due to an increase in purchases of manufacturing

manufacturing, research and development expense increased from $2.2 million for the six months ended June 30, 2020 to $3.1 million

for six months ended June 30, 2021.

The $0.9 million increase was primarily due to an increase in manufacturing materials

for pipeline projects and clinical trials.

and Amortization

$1.8 million decrease in depreciation and amortization expense for the three months ended March 31, 2021 primarily consists of

a decrease in amortization expense related to the intangible assets of Enteris.

$4.4 million decrease in depreciation and amortization expense for the six months ended June 30, 2021 primarily consists

of a decrease in amortization expense related to the intangible assets of Enteris.

Amortization expense is aligned with the expected

future cash flows of the intangible assets.

and Administrative

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

General and administrative expenses decreased to

$2.9 million for the three months ended March 31, 2021 from $3.0 million for the three months ended March 31, 2020, which

was due to a $0.2 million decrease in professional fees, office and rent expense, partially offset by a $0.1 million increase in

salaries, wages and benefits.

General and administrative expenses increased to $6.2 million

for the six months ended June 30, 2021 from $5.7 million for the six months ended June 30, 2020, which was due to a $0.2

million increase in salaries and benefits expense, a $0.2 million increase in professional fees, and a $0.2 million increase in

board fees and overall office and rent expenses.

Income (Expense), Net

income, net for three months ended March 31, 2021 reflected a net fair market value gain of $0.3 million on our warrant derivatives

income, net for six months ended June 30, 2021 reflected a net fair market value gain of $0.9 million on our warrant derivatives

and a net fair market value gain of $1.2 million on our Misonix common stock.

Other expense, net for the three months ended

March 31, 2020 reflected a net fair market value loss of $1.9 million on our warrant derivatives and a net fair market value

Other expense, net for the six months ended

June 30, 2020 reflected a net fair market value loss of $1.2 million on our warrant derivatives and a net fair market value

loss of $0.5 million on our Misonix common stock.

for Income Tax

the three months ended March 31, 2021 and 2020, we recognized income tax expense of $0.9 million and $1.3 million, respectively,

which represented effective tax rates of 21 percent and negative 37 percent, respectively.

The provision for income taxes during

interim reporting periods is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary

income or loss for the interim reporting period.

The annual effective tax rate is adjusted for nondeductible expenses and other

permanent differences, including changes in fair value on our warrant derivatives and equity securities, which resulted in a $0.4

million decrease in income tax expense during the three months ended March 31, 2021 when compared to the same period of the prior

During the six months ended June 30, 2021 and 2020, we recognized income tax expense of $4.5 million and $0.3 million, respectively.

The $4.2 million increase in income tax expense is a result of higher taxable income for the six months ended June 30, 2021 when compared

to the same period of the prior year.

and Capital Resources

of March 31, 2021, we had $1.6 million in cash and cash equivalents, compared to $3.0 million in cash and cash equivalents as

of December 31, 2020.

The primary driver of the $1.4 million decrease in our cash balance was $7.1 million of investment funding,

of June 30, 2021, we had $6.6 million in cash and cash equivalents, compared to $3.0 million in cash and cash equivalents as of

December 31, 2020.

The primary driver of the $3.6 million increase in our cash balance was $41.8 million of interest, fees,

principal and royalty payments received on our finance receivables and a net $3.9 million of payments generated by our

Pharmaceutical Development License Agreement with Cara ($10.0 million received from Cara less $6.1 million paid to the seller of Enteris, pursuant to the provisions of the merger agreement).

The increase was partially offset by $19.5 million of investment funding,

net of deferred fees and origination expenses;

$3.9 million of payments of accounts payable, payroll and benefits expense, including

$0.3 million to purchase property and equipment for the expansion of the Enteris manufacturing facility;

and $0.6 million of net

borrowings and repayments on our credit facility.

The decrease was partially offset by $10.4 million of interest, fees, principal

and royalty payments received on our finance receivables.

$11.3 million of payments of accounts payable, payroll and benefits expense,

including $1.1 million for Enteris internal pipeline projects;

and $11.8 million of net borrowings and repayments on our

credit facility.

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

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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;

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

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.

of March 31, 2021, our finance receivables portfolio contains $209.9 million of finance receivables, $2.4 million of marketable

development, manufacturing, and licensing activities utilizing the Peptelligence® platform;

a lesser extent, realizing capital appreciation from equity-related investments in the life science sector.

of June 30, 2021, our finance receivables portfolio contains $203.0 million of finance receivables, $2.6 million of marketable

investments, and $3.5 million related to our investment in Tissue Regeneration Therapeutics, Inc.

We expect these assets to generate

positive cash flows in 2021.

However, the COVID-19 pandemic has created substantial uncertainty in the global markets and economy;

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

the majority of our finance receivables portfolio are debt instruments that carry floating interest rates with a LIBOR-based interest

Changes in interest rates, including LIBOR rates, may affect the interest income for debt instruments with floating

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

of March 31, 2021, our Pharmaceutical Development segment did not have a material impact on our cash flow.

We expect the Pharmaceutical

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

customer relationships;

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

upon the success of our technology licensees pharmaceutical development candidates.

Also, the COVID-19 pandemic has resulted

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

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

In the aggregate, we expect

these assets to generate positive cash flows in 2021.

However, the COVID-19 pandemic has created substantial uncertainty in the

global markets and economy;

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

receivables portfolio.

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

interest rates with a LIBOR-based interest rate floor.

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

income for debt instruments with floating rates.

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

in the future.

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

license agreements and customer relationships;

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

uncertain and dependent upon the success of our technology licensees pharmaceutical development candidates.

Also, the COVID-19

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

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

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

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

As of March 31, 2021, $11.2 million was outstanding under the

As of June 30, 2021, no amount was outstanding under the

revolving credit facility, and $20.0 million was available for borrowing.

The credit facility was paid off subsequent to quarter

ended March 31, 2021, and $20.0 was available for borrowing as of May 10, 2021.

The Loan Agreement matures on June 30, 2021;

however, the Company has the option to extend the maturity date by 90 days.

We continue to explore other options with respect to a

new credit facility.

The credit facility was amended on June 29, 2021 to

extend the maturity date to September 27, 2021.

We continue to explore other options with respect to a new credit facility.

Sheet Arrangements

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

What changed 10-Q

Item 1. Financial Statements