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Item 1. Financial Statements

2023-05-10 compared with 2022-11-09 · 556 added, 545 removed, 212 unchanged (84% of the section changed)

FINANCIAL STATEMENTS

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

September 30,

UNAUDITED CONDENSED

CONSOLIDATED BALANCE SHEETS

(in thousands, except

par value and share data)

Current assets:

1 unchanged sentence

Interest and accounts receivable, net

Marketable investments

Other current assets

Total current assets

Finance receivables, net

Finance receivables, net of allowance for credit losses of $ 11,786 and $ 11,846 , as of

March 31, 2023 and December 31, 2022, respectively

Collateral on foreign currency forward contract

Marketable investments

Cost method investment

Deferred tax assets, net

15 unchanged sentences

5,000,000 shares authorized;

no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

no shares issued and outstanding

Common stock, $ 0.001 par value;

250,000,000 shares authorized;

12,835,304 and 12,836,133 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

12,830,399 and 12,843,157 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

4 unchanged sentences

Total liabilities and stockholders’ equity

See accompanying notes to the unaudited condensed

consolidated financial statements.

accompanying notes to the unaudited condensed consolidated financial statements.

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

(in thousands, except per share data)

UNAUDITED CONDENSED

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except

per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Finance receivable interest income, including fees

4 unchanged sentences

Pharmaceutical manufacturing, research and development expense

Change in fair value of acquisition-related contingent consideration

Depreciation and amortization expense

2 unchanged sentences

Other income (expense), net

Unrealized net gain (loss) on derivatives

Unrealized net gain (loss) on equity securities

Unrealized net loss on warrants

Unrealized net loss on equity securities

Gain on foreign currency transactions

Income before income tax expense

Income tax expense

Income tax (benefit) expense

Net income per share

Weighted average shares outstanding

See accompanying notes to the unaudited condensed

consolidated financial statements.

See accompanying notes

to the unaudited condensed consolidated financial statements.

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Nine Months Ended September 30, 2022

Additional Paid-In

Total Stockholders’

Balances at December 31, 2021

$ ( 4,164,496 )

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Forfeiture of unvested restricted stock

Balances at March 31, 2022

( 4,161,018 )

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Balances at June 30, 2022

UNAUDITED CONDENSED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except

Months Ended March 31, 2023

Stockholders’

at December 31, 2022

$ ( 4,151,005 )

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Net settlement for employee taxes on restricted stock and options

Stock options exercised, net

Repurchases of common stock in open market

Balances at September 30, 2022

of adoption of ASC 326

of common stock upon vesting of restricted stock

of common stock in open market

at March 31, 2023

$ ( 4,156,053 )

Nine Months Ended September 30, 2021

Additional Paid-In

Total Stockholders’

Ca pital Deficit Equity

Three Months Ended March 31, 2022

Stockholders’

Paid-In Capital

Balances at December 31, 2021

2 unchanged sentences

Issuance of common stock upon vesting of restricted stock

Forfeiture of unvested restricted stock

Balances at March 31, 2022

$ ( 4,161,018 )

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Balances at June 30, 2021

( 4,173,066 )

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Balances at September 30, 2021

$ ( 4,170,823 )

See accompanying notes to the unaudited condensed

consolidated financial statements.

See accompanying notes

to the unaudited condensed consolidated financial statements.

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

UNAUDITED CONDENSED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

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

Right-of-use asset amortization

Amortization of debt issuance costs

2 unchanged sentences

Change in fair value of equity securities

Change in fair value of acquisition-related contingent consideration

Loan discount amortization and fee accretion

Interest income paid-in-kind

Foreign currency transaction gain

Loan discount and fee accretion

Interest paid-in-kind

Stock-based compensation

Depreciation and amortization expense

Depreciation and amortization

Changes in operating assets and liabilities:

Interest and accounts receivable

Derivative assets and liabilities, net

Accounts payable and other liabilities

5 unchanged sentences

Purchases of property and equipment

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Net settlement for employee taxes on restricted stock and options

Net payments on credit facility

Payment of acquisition-related contingent consideration

Net proceeds from (payments on) credit facility

Repurchases of common stock, including fees and expenses

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

See accompanying notes to the unaudited condensed

consolidated financial statements.

See accompanying notes

to the unaudited condensed consolidated financial statements.

SWK HOLDINGS CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

SWK Holdings Corporation and

Summary of Significant Accounting Policies

NOTES TO THE UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Holdings Corporation and Summary of Significant Accounting Policies

Nature of Operations

SWK 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 business.

The Company’s

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.

is headquartered in Dallas, Texas, and as of September 30, 2022, the Company had 33 full-time employees.

The Company has net

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

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

As of November 1, 2022,

the Company and its partners have executed transactions with 48 different parties under its specialty finance strategy, funding an aggregate

of $691.0 million in various financial products across the life science sector.

The Company’s 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.

During 2019, the Company

commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc.

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

the Peptelligence® platform.

Basis of Presentation and Principles of Consolidation

The Company’s 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.

The 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 Company’s 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

Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable

to the Company.

Unaudited Interim Financial Information

The unaudited condensed

consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments 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,

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 Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 25,

Use of Estimates

The preparation of

the Company’s 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

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

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

The Company’s 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, 2023, the Company had 23 full-time 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 3, 2023, the Company and its partners have executed transactions with 50 different parties under its specialty finance strategy,

funding an aggregate of $725.2 million in various financial products across the life science sector.

The Company’s 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.

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

Enteris is a clinical development and manufacturing organization providing development services to pharmaceutical partners as well as

innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform.

Basis of Presentation and Principles

of Consolidation

Company’s 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

Company’s 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 Company’s consolidated financial statements, it would have no effect on its operations and/or

total stockholders’ equity attributable to the Company.

Interim Financial Information

unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments

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, 2023.

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 Company’s Annual Report on Form 10-K for the year ended December 31,

2022, filed with the SEC on March 31, 2023.

preparation of the Company’s 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;

valuation of interest and accounts receivable;

impairment of finance receivables;

for credit losses;

long-lived assets;

and equipment;

property and equipment;

intangible assets;

2 unchanged sentences

income taxes;

and contingencies

and litigation, among others.

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

these estimates.

The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to

be reasonable but that are inherently uncertain and unpredictable.

For any given individual estimate or assumption made by the Company,

there may also be other estimates or assumptions that are reasonable.

The 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 Company’s 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 Company’s 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.

Segment Information

The 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.

and contingencies and litigation, among others.

Some of these judgments can be subjective and

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

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

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

For any given individual

estimate or assumption made by the Company, there may also be other estimates or assumptions that are 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 Company’s 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 Company’s 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 clinical development and manufacturing services

as well as 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.

Revenue Recognition

The Company’s Pharmaceutical

Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license

rights to research, develop, manufacture and commercialize its product candidates to third parties.

The terms of these arrangements typically

include payment to the Company of one or more of the following:

non-refundable, upfront license fees;

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

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

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

non-refundable, upfront license

reimbursement of certain costs;

1 unchanged sentence

development, regulatory and commercial milestone payments;

and royalties on net sales of licensed products.

Deferred 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.

Research and Development

Research and development

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

third parties.

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.

Reclassification

prior year amounts have been reclassified to conform to current year presentation.

The amounts for prior periods have been reclassified

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

or net (loss) income.

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 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.

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.

Recent Accounting Pronouncements

In March 2022, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, “Financial

Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures,” which updates the requirements for

accounting for credit losses under Accounting Standards Codification 326, eliminates the accounting guidance on troubled debt restructurings

for creditors, and enhances creditors’ disclosure requirements related to loan refinancings and restructurings for borrowers experiencing

financial difficulty.

The ASU also amends the guidance on vintage disclosures to require disclosure of gross write-offs by year of origination.

The amendments are effective in periods beginning after December 15, 2022 using either a prospective or modified retrospective transition.

Early adoption of certain or all of the amendments is permitted.

The Company is currently evaluating the provisions of the amendments

and the impact on its future consolidated financial statements.

In June 2016, the

FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU adds an impairment model, known as

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

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.

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.

In March 2020, the

FASB issued ASU 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 are

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 was effective upon issuance, and the provisions generally can be applied prospectively as

of January 1, 2020 through December 31, 2024.

The Company has identified existing loans that reference LIBOR and is in the process of

evaluating alternatives in each situation.

The Company expects that it will elect to apply some of the expedients and exceptions provided

in ASU 2020-04 and does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial

March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 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.

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.

ASU 2020-04 was effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December

The Company has identified existing loans that reference LIBOR and is in the process of evaluating alternatives in each situation.

The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04 and does not believe the

adoption of this standard will have a material impact on the Company’s consolidated financial statements.

Company adopted ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments

(“ASU 2016-13”), as amended, on January 1, 2023 using the modified retrospective approach method.

ASU 2016-13 replaced

the incurred loss impairment methodology with a methodology that reflects a current expected credit loss (“CECL”).

2016-13 impacted all of the Company’s investments held at amortized cost.

At December 31, 2022, the Company's allowance for

credit losses of $11.8 million was the accumulation of allowance for credit losses (“ACL”) applied to specific finance

receivables, representing management's prior estimates of potential future losses on such finance receivables.

As part of the

Company's adoption of ASU 2016-13, management reviewed its prior estimates of finance receivable-specific ACL and wrote off the full

$11.8 million ACL recognized in prior periods to the finance receivables such allowance applied.

Under the new CECL model, the net GAAP

balances of such finance receivables are presented net of previously reported ACL and are included in the Company's estimated ACL

for its Royalties portfolio segment.

adoption of ASC 2016-13 on January 1, 2023, the Company’s transition adjustment included $ 11.8

million of ACL on finance receivables, which is presented as a reduction to finance receivables, and a $ 0.4

million ACL on unfunded loan commitments, which is recorded within other non-current liabilities.

The Company recorded a net

decrease of $ 9.7

million to accumulated deficit as of January 1, 2023 for the cumulative effect of adopting ASU 2016-13, which reflects

the transition adjustments noted above, net of the applicable deferred tax assets of $2.5 million.

Results for reporting

periods beginning after January 1, 2023 are presented under ASU 2016-13, while prior period amounts continue to be reported in

accordance with previously applicable accounting standards.

The Company elected not to measure an allowance for credit losses for

accrued interest receivable and instead elected to reverse interest income on finance receivables when placed on nonaccrual

status, or earlier if the Company believes the collection of interest is doubtful.

The Company has concluded that this

policy results in the timely reversal of uncollectible interest.

Please refer to Note 3 for more information on how the Company

determines its allowance for credit losses on finance receivables.

March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage

Disclosures, which removes the accounting guidance for troubled debt restructurings and requires entities to evaluate whether a modification

provided to a borrower results in a new loan or continuation of an existing loan.

The amendment enhances existing disclosures and requires

new disclosures for receivables when there has been a modification in contractual cash flows due to a borrower experiencing financial

difficulties.

Additionally, the amendments require public business entities to disclose gross charge-off information by year of origination

in the vintage disclosures.

The Company adopted ASU 2022-02 on January 1, 2023 and incorporated the required disclosures into Note 3,

Finance Receivables.

Net Income per Share

Basic net income per share

is computed using the weighted-average number of outstanding shares of common stock.

Diluted net income per share is computed using the

weighted-average number of outstanding shares of common stock, and when dilutive, shares of common stock issuable upon exercise of options

and warrants deemed outstanding using the treasury stock method.

The following table shows

the computation of basic and diluted net income per share for the following periods (in thousands, except per share amounts):

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

Diluted net income per share

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

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

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

Schedule of Basic

1 unchanged sentence

Three Months Ended

September 30,

Nine Months Ended

September 30,

Weighted-average shares outstanding

3 unchanged sentences

Diluted net income per share

For the three months ended

September 30, 2022 and 2021, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate

of approximately 186,000 and 367,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities

were anti-dilutive.

For the nine months ended September 30, 2022 and 2021, outstanding options to purchase shares of common stock and

outstanding shares of restricted stock in an aggregate of approximately 268,000 and 390,000 , respectively, have been excluded from the

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

Finance Receivables, Net

Finance receivables

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

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

interest method.

As of September 30, 2022

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

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

are associated with the Company’s Cambia® and Besivance® royalties, respectively.

The remaining $6.6 million is related to the

ABT Molecular Imaging, Inc., 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.

Approximately $21,000 of cash receipts received from the Company’s Besivance® royalty

during the nine months ended September 30, 2022 were applied toward the allowance for credit losses.

The carrying values of finance

receivables are as follows (in thousands):

the three months ended March 31, 2023 and 2022, outstanding options to purchase shares of common stock and outstanding shares of restricted

stock in an aggregate of approximately 119,000 and 300,000 , respectively, have been excluded from the calculation of diluted net income

per share, as such securities were anti-dilutive.

Receivables, Net

receivables are reported at their determined principal balances net of any unearned income, cumulative write offs charged against the

allowance for credit losses, 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.

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

Schedule of carrying value of finance receivables

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

Total carrying value

The following table presents

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

for Credit Losses

The ACL is management’s estimate of the amount of expected credit losses over the life of the

loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date.

This estimate encompasses

information about historical events, current conditions and reasonable and supportable economic forecasts.

Determining the amount of

the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain.

Given the current level

of economic uncertainty, the complexity of the ACL estimate and level of management judgment required, we believe it is possible that

the ACL estimate could change, potentially materially, in future periods.

Changes in the ACL may result from changes in current economic

conditions, our economic forecast, and circumstances not currently known to us that may impact the financial condition and operations

of our borrowers, among other factors.

credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics.

For finance receivables

that do not share similar risk characteristics with other finance receivables, expected credit losses are estimated on an individual

Expected credit losses are estimated over the contractual terms of the finance receivables, adjusted for expected prepayments

and unfunded commitments, generally excluding extensions and modifications.

The loan portfolio segment is defined as the level at which

an entity develops and documents a systematic method for determining its allowance for credit losses.

As part of the Company’s quarterly

assessment of the allowance, the finance receivables portfolio included two portfolio segments:

Term Loans and Royalties.

implementation of ASU 2016-13 also impacted the Company’s ACL on unfunded loan commitments, as the ACL now represents expected

credit losses over the contractual life of commitments not identified as unconditionally cancellable by the Company.

The reserve for

unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application

of a funding rate to the amount of the unfunded commitment.

The funding rate represents management’s estimate of the amount of

the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical

On January 1, 2023, the Company recorded an adjustment for unfunded commitments of $0.4 million for the

adoption of ASU 2016-13.

As of March 31, 2023, th e $0.4 million liabili ty for credit losses

on off -balance-sheet credit exposures is included in other liabilities.

Please refer to Note 6 for further information on the Company’s

unfunded commitments.

following table details the changes in the allowance for credit losses by portfolio segment for the respective periods (in thousands):

Schedule of Allowance for Credit Losses

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

Allowance at beginning of period, prior to adoption of ASU 2016-13

Write offs (1)

Effect of adoption of ASU 2016-13

Provision expense

Allowance at end of period

(1) Reversal of finance receivable-specific ACL

recognized in prior periods.

No impact to consolidated statement of income for the three-months ended March 31, 2023.

to Note 1 for further details.

Finance Receivables

Company originates finance receivables to companies primarily in the life sciences sector.

This concentration of credit exposes the Company

to a higher degree of risk associated with this sector.

a quarterly basis, the Company evaluates the carrying value of its finance receivables.

Recognition of income is suspended, and the finance

receivable is placed on non-accrual status when management determines that collection of future income is not probable.

This evaluation

is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral,

The Company would generally place term loans on nonaccrual status when the full and timely collection of interest or principal

becomes uncertain and they are 90 days past due for interest or principal, unless the term loan is both well-secured and in the process

of collection.

When placed on nonaccrual, the Company would reverse any accrued unpaid interest receivable against interest income and

amortization of any net deferred fees is suspended.

Generally, the Company would return a term loan to accrual status when all delinquent

interest and principal become current under the terms of the credit agreement and collectibility of remaining principal and interest

is no longer doubtful.

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

Schedule of analysis of nonaccrual and performing loans by portfolio segment

September 30, 2022

March 31, 2023

December 31, 2022

Royalty purchases, net of credit loss allowance

Royalty purchases

Total carrying value

As of September 30, 2022,

the Company had two finance receivables in nonaccrual status:

of March 31, 2023, the Company had three finance receivables in nonaccrual status:

(1) the term loan to Flowonix Medical, Inc.

(“Flowonix”),

with a net carrying value of $ 9.8

million and (2) the Best royalty, with a net carrying value of $ 3.0

As of December 31, 2021, the Company had three finance receivables in nonaccrual status:

(1) the term loan to

Flowonix, with a net carrying value of $10.0 million, (2) the term loan with B&D Dental Corporation

(“B&D”), with a carrying amount of $8.3 million, and (3) the Best royalty, with a carrying amount of $3.4 million.

Although in nonaccrual status, the Flowonix and B&D term loans were not considered impaired as of September 30, 2022 and December

The Company collected $11.4 million on its nonaccrual finance receivables during the nine months ended September 30,

2022, which includes $10.7 million to settle the term loan with B&D.

Marketable Investments

Investments in available-for-sale

corporate debt securities and equity securities as of September 30, 2022 and December 31, 2021 consist of the following (in thousands):

Schedule of marketable investments

September 30, 2022

December 31, 2021

Corporate debt securities

Equity securities

Total marketable investments

The amortized cost

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

as of September 30, 2022 and December 31, 2021, are as follows (in thousands):

Schedule of marketable investments

September 30, 2022

December 31, 2021

The following table

presents unrealized net gain (loss) on equity securities during the three and nine months ended September 30, 2022 and 2021 (in thousands):

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

Three Months Ended

September 30,

Nine Months Ended September 30,

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

with a net carrying value of $ 11.8 million ;

(2) the Best royalty, with a net carrying value of $ 2.9 million ;

and (3) the Ideal Implant,

(“Ideal”) royalty, with a net carrying value of $ 4.2 million .

Although in nonaccrual status, none of the finance receivables

were considered impaired as of March 31, 2023.

The Company collected $0.1 million on its nonaccrual finance receivables during the three

months ended March 31, 2023.

Credit Quality of Finance Receivables

Company evaluates all finance receivables on a quarterly basis and assigns a risk rating based upon management’s assessment of

the borrower’s ability likelihood of repayment.

The assessment is subjective and based on multiple factors, including but not limited

to, financial strength of borrowers and operating results of the underlying business.

The credit risk analysis and rating assignment

is performed quarterly in conjunction with the Company’s assessment of its allowance for credit losses.

The Company uses the following

definitions for its risk ratings for Term Loans:

performing well below Company expectations, and the borrower’s ability to raise sufficient capital to operate its business or repay debt

is highly in question.

Finance receivables rated a 1 are on non-accrual and are at an elevated risk for principal impairment.

performing below plan, and the loan-to-value is generally worse than at the time of underwriting.

Borrower has limited access to additional

capital to operate its business.

Finance receivables rated a 2 are generally on non-accrual, and while no loss of impairment is anticipated,

there is potential for future principal impairment.

performing inline-to-modestly below Company expectations, and loan-to-value is similar to slightly worse than at the time of underwriting.

Borrower has demonstrated access to capital markets.

performing inline-to-modestly above Company expectations and loan-to-value similar or modestly better than underwriting case.

has demonstrated access to capital markets.

performing in excess of Company expectations, and loan-to-value is better than at time of origination.

use an internal credit rating system which rates each Royalty on a color scale of Green to Red, with Green typically indicative of a

Royalty that is exceeding base underwritten case and Red reflective of underperformance relative to plan.

following table summarizes the carrying value of Finance Receivables by origination year, grouped by risk rating as of March 31, 2023:

Schedule of Financing

Receivable by origination year

March 31, 2023

Subtotal - Term Loans

Subtotal - Royalties

Total Finance Receivables

Intangible Assets

The following table summarizes

the gross book value, accumulated amortization and net book value balances of intangible assets as of September 30, 2022 and December

31, 2021 (in thousands):

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

31, 2023 and December 31, 2022 (in thousands):

Schedule of Intangible Assets

September 30, 2022

March 31, 2023

December 31, 2022

Gross Book Value

Accumulated Amortization

Net Book Value

Gross Book Value

Accumulated Amortization

Net Book Value

Licensing Agreement (1)

4 unchanged sentences

entered into a non-exclusive commercial license agreement (the “License Agreement”) with Cara Therapeutics, Inc.

for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize Oral KORSUVA TM in

for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize Oral KORSUVA ™ in

any indication worldwide, excluding South Korea and Japan.

1 unchanged sentence

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

Amortization expense related

to intangible assets was $ 0.4 million and $ 0.6 million for the three months ended September 30, 2022 and 2021, respectively.

expense related to intangible assets was $ 1.3 million and $ 2.9 million for the nine months ended September 30, 2022 and 2021, respectively.

The estimated future amortization

expense related to intangible assets as of September 30, 2022 is as follows (in thousands):

expense related to intangible assets was $ 0.4 million and $ 0.5 million for the three months ended March 31, 2023 and 2022, respectively.

estimated future amortization expense related to intangible assets as of March 31, 2023 is as follows (in thousands):

Schedule of Intangible Asset Amortization Expense

Remainder of 2023

Commitments and Contingencies

Credit Facility

November 16, 2022, the Company entered into the Fifth Amendment to Loan and Security Agreement (the “Fifth Amendment”) with

Cadence Bank, N.A.

as a lender and the administrative agent.

Pursuant to the Fifth Amendment, the Loan and Security Agreement dated as

of June 29, 2018 (“Loan Agreement”) was amended to extend the Loan Agreement Termination Date to September 30, 2025 and increase

the Loan Agreement Commitment to $35.0 million.

The Loan Agreement requires the payment of an unused line fee of 0.50 percent and also

provides for quarterly minimum fee income of $60,000 less the aggregate interest and unused line fees paid during the immediately preceding

Unused line fees and minimum fee income are recorded as interest expense.

Loan Agreement accrues interest at the monthly SOFR Rate, with a floor of 1.00 percent, plus a 2.65 percent margin and principal is repayable

in full at maturity.

Interest is generally required to be paid monthly in arrears.

In connection with the Fifth Amendment, the Company

paid approximately $173,000 in amendment and other fees, which were capitalized as deferred financing costs and are being amortized on

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

Loan Agreement has an advance rate against the Company’s 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.

of March 31, 2023 and December 31, 2022, approximately $ 10.5 million and $ 2.4 million , respectively, was outstanding under the credit

As of March 31, 2023, $ 24.5 million was available for borrowing.

During the three months ended March 31, 2023 and 2022, the

Company recognized $ 0.2 million and $ 0.1 million , respectively, of interest expense.

and Contingencies

Contingent Consideration

The Company recorded contingent

consideration related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to 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 in earnings.

The estimated fair value of contingent consideration as of September 30, 2022

and December 31, 2021 was $ 8.5 million .

The Company did not recognize a change in the estimated fair value of its contingent consideration

during the nine months ended September 30, 2022.

The Company recognized a $0.1 million gain on the change in fair value of its contingent

consideration during the nine months ended September 30, 2021.

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

to Enteris pursuant to 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 in earnings.

The estimated fair value of contingent consideration as

of March 31, 2023 and December 31, 2022 was $11.2 million.

The Company did not recognize a change in the estimated fair value of

its contingent consideration during the three months ended March 31, 2023 and 2022.

Unfunded Commitments

As of September 30, 2022,

the Company’s unfunded commitments were as follows (in millions):

of March 31, 2023, the Company’s unfunded commitments were as follows (in millions):

Schedule of Unfunded Commitments

Aziyo Biologics, Inc.

MedMinder Systems, Inc.

Trio Healthcare Ltd.

Total unfunded commitments

Per the terms of the

royalty purchase or credit agreements, unfunded commitments are contingent upon reaching an established revenue threshold or other

performance metrics on or before a specified date or period of time, and

in the case of loan transactions, are subject to being advanced as long as an event of default does not exist.

Fair Value Measurements

The 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).

the terms of the royalty purchase or credit agreements, unfunded commitments are contingent upon reaching an established revenue threshold

or other performance metrics on or before a specified date or period of time, and in the case of loan transactions, are subject to being

advanced as long as an event of default does not exist.

January 1, 2023, the Company adopted ASU 2016-13, which replaced the incurred loss methodology with an expected loss model known as the

See Note 3 for information regarding the Company’s allowance for credit losses related to its unfunded commitments.

Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course of

its business.

The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material

impact on the Company’s results of operations, balance sheets and cash flows due to defense costs, and divert management resources.

The Company cannot predict the timing or outcome of these claims and other proceedings.

As of March 31, 2023, the Company is not involved

in any arbitration and/or other legal proceeding that it expects to have a material effect on its business, financial condition, results

of operations and cash flows.

Indemnification

permitted by Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences

while the officer or director is, or was, serving in such capacity, or in other capacities at the Company’s request.

the indemnification period is for the officer’s or director’s lifetime.

The maximum potential amount of future payments the

Company could be required to make under these indemnification agreements is unlimited;

however, the Company has a director and officer

insurance policy that limits its exposure and enables the Company to recover a portion of any such amounts.

As a result of the Company’s

insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is insignificant.

the Company had no liabilities recorded for these agreements as of March 31, 2023 and December 31, 2022.

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).

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

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 instrument’s categorization within the fair value hierarchy is based on the lowest level of significant

input to its valuation.

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 instrument’s 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.

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

Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

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

Unobservable inputs are not corroborated by market data.

This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.

Transfers 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 nine months ended September 30, 2022.

The following information

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

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.

Quoted prices

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

asset or liability.

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

or similar assets or liabilities in inactive markets.

inputs are not corroborated by market data.

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

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

from objective sources.

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

There were no transfers

between any levels during the three months ended March 31, 2023 and 2022.

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

consolidated financial statements and the related market or fair value.

The disclosures include financial instruments and derivative financial

instruments, other than investment in affiliates.

Following 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.

Cash and cash equivalents

The carrying amounts

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

Marketable Investments

Certain common equity

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

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

Finance Receivables

The 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.

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.

Finance receivables are

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

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

Contingent Consideration

The Company recorded contingent

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

License Agreement.

The 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

(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.

Significant increases or decreases in any of those inputs in isolation could

result in a significantly lower or higher fair value measurement.

Marketable Investments and Derivative

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 the contingent consideration obligations and the related intangible assets arising from business combinations

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

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.

in fair value of this obligation are recorded as income or expense within operating income in our consolidated statements of income.

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

Marketable Investments

If active market prices are

available, fair value measurement is based on quoted active market prices and, accordingly, these securities would be classified as Level

If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within

Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly these securities would be classified

If market prices are not available and there are no observable inputs, then fair value would be estimated by using valuation

models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes.

Such securities would be classified

as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable in the market.

If fair value is based

on broker quotes, the Company checks the validity of received prices based on comparison to prices of other similar assets and market

data such as relevant bench mark indices.

Available-for-sale securities are measured at fair value on a recurring basis, while securities

with no readily available fair market value are not, but estimates of fair value are reflected below.

Derivative Securities

For exchange-traded derivatives,

fair value is based on quoted market prices, and accordingly, would be classified as Level 1.

For non-exchange traded derivatives, fair

value is based on option pricing models and are classified as Level 3.

The following table

presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 (in thousands):

Schedule of fair value assets measured on recurring basis

active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities

would be classified as Level 1.

If active market prices are not available, fair value measurement is based on observable inputs other

than quoted prices included within Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly

these securities would be classified as Level 2.

If market prices are not available and there are no observable inputs, then fair value

would be estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker

Such securities would be classified as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable

in the market.

If fair value is based on broker quotes, the Company checks the validity of received prices based on comparison to prices

of other similar assets and market data such as relevant bench mark indices.

Available-for-sale securities are measured at fair value

on a recurring basis, while securities with no readily available fair market value are not, but estimates of fair value are reflected

Derivative Instruments

exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1.

For non-exchange

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

Company uses a foreign currency forward contract to manage the impact of fluctuations in foreign currency denominated cash flows expected

to be received from one of its royalty finance receivables denominated in a foreign currency.

The foreign currency forward contract is

not designated as a hedging instrument, and changes in fair value are recognized in earnings.

The liability related to the derivative

instrument was recorded in other non-current liabilities in the consolidated balance sheets.

following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 (in thousands):

of fair value of assets and liabilities measured on recurring basis

Quoted Prices

5 unchanged sentences

Contingent consideration payable

The following table presents

financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 (in thousands):

Derivative liability - foreign currency forward

following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 (in thousands):

Quoted Prices

5 unchanged sentences

Contingent consideration payable

The changes in fair value

of the warrant assets during the nine months ended September 30, 2022 and 2021 were as follows (in thousands):

Derivative liability - foreign currency forward

changes in fair value of the warrant assets during the three months ended March 31, 2023 and 2021 were as follows (in thousands):

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

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

Fair value - December 31, 2022

2 unchanged sentences

Change in fair value

Fair value - September 30, 2022

Fair value - September 30, 2021

The Company holds warrants

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

These warrants meet the definition of a derivative and are included

in the unaudited condensed consolidated balance sheets.

The fair values for warrants outstanding, which do not have a readily determinable

value, are measured using the Black-Scholes option pricing model.

The following ranges of assumptions were used in the models to determine

Fair value - March 31, 2023

Fair value - March 31, 2022

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

These warrants meet the definition of

a derivative and are included in the unaudited condensed consolidated balance sheets.

The fair values for warrants outstanding, which

do not have a readily determinable value, are measured using the Black-Scholes option pricing model.

The following ranges of assumptions

were used in the models to determine fair value:

Schedule of weighted average assumptions

September 30, 2022

March 31, 2023

December 31, 2022

7 unchanged sentences

54.8 % to 139.4 %

As of September 30,

2022 and December 31, 2021, the Company had two royalties, 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 September

30, 2022 and December 31, 2021 (in thousands):

Schedule of fair value

assets and liabilities measured on nonrecurring basis

of March 31, 2023 and December 31, 2022, the Company had two royalties, 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, 2023 and December 31, 2022 (in thousands):

of fair value of assets and liabilities measured on nonrecurring basis

Quoted Prices

or Liabilities

September 30, 2022

March 31, 2023

December 31, 2022

There were no liabilities

measured at fair value on a nonrecurring basis as of September 30, 2022 and December 31, 2021.

The 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 measured at fair value on a recurring and non-recurring basis.

were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022.

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

Schedule of fair value by balance sheet grouping

As of September 30, 2022

(in thousands):

Carrying Value

of March 31, 2023 (in thousands):

Financial Assets

Cash and cash equivalents

Finance receivables

3 unchanged sentences

Contingent consideration payable

As of December 31, 2021 (in

Carrying Value

Derivative liability - foreign currency forward

of December 31, 2022 (in thousands):

Financial Assets

Cash and cash equivalents

Finance receivables

3 unchanged sentences

Contingent consideration payable

Derivative liability - foreign currency forward

Revenue Recognition

The Company’s Pharmaceutical

Development segment recognizes revenues received from contracts with its customers by revenue source, as the Company believes it best

depicts the nature, amount, timing and uncertainty of our revenue and cash flow.

The Company’s Finance Receivables segment does

not have any revenues received from contracts with customers.

The following table provides

the contract revenue recognized by revenue source for the three and nine months ended September 30, 2022 and 2021 (in thousands):

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

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

The Company’s

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

following table provides the contract revenue recognized by revenue source for the three and three months ended March 31, 2023 and 2022

(in thousands):

Schedule of Revenue Recognized by Revenue Source

Three Months Ended

September 30,

Nine Months Ended

September 30,

Pharmaceutical Development Segment

2 unchanged sentences

Total contract revenue

$ 5.0 million of milestone revenue

related to Enteris’s License Agreement with Cara was received during the nine months ended September 30, 2022.

The Company’s contract liabilities

represent advance consideration received from customers and are recognized as revenue when the related performance obligation is satisfied.

The Company’s contract

liabilities are presented as deferred revenues and are included in accounts payable and accrued liabilities in the consolidated balance

sheets (in thousands):

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

performance obligation is satisfied.

Company’s contract liabilities are presented as deferred revenues and are included in accounts payable and accrued liabilities

in the consolidated balance sheets (in thousands):

Schedule of Company's Contract Liabilities

September 30,

December 31, 2021

Pharmaceutical Development Segment

1 unchanged sentence

Total contract liabilities

During the nine months ended

September 30, 2022, the Company recognized $ 0.2 million of 2021 deferred revenue from satisfaction of performance obligations.

the three months ended March 31, 2023, the Company recognized $ 0.1 million of 2022 deferred revenue from satisfaction of performance obligations.

The Company did not have any contract assets

nor did it have any contract liabilities related to the License Agreement as of September 30, 2022 or December 31, 2021.

nor did it have any contract liabilities related to the License Agreement as of March 31, 2023 or December 31, 2022.

Segment Information

Selected financial

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

concept as the basis for identifying reportable segments.

The management approach is based on the way that management organizes the segments

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

Consequently, the segments are evident

from the structure of the Company’s internal organization, focusing on financial information that the Company’s chief executive

officer uses to make decisions about the Company’s operating matters.

As described in Note

1, the Company has determined it has two reportable segments:

Finance Receivables and Pharmaceutical Development, and each are individually

managed and provide separate services.

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

approach” concept as the basis for identifying reportable segments.

The management approach is based on the way that management

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

Consequently,

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

Company’s CEO uses to make decisions about the Company’s operating matters.

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

two reportable segments:

Finance Receivables and Pharmaceutical Development, and each are individually managed and provide separate services.

Revenues by segment represent revenues earned on the services offered within each segment.

Company does not report assets by reportable segment, nor does the Company report results by geographic region, as these metrics are not

used by the Company’s chief executive officer in assessing performance or allocating resources to the segments.

Segment performance

is evaluated based on several factors, including income (loss) from continuing operations before income taxes.

Management uses this measure

of net income (loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and

the overall earnings potential of each segment.

The following tables

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

Schedule of Reportable Segments

Three Months Ended September 30, 2022

Finance Receivables

Pharmaceutical Development and Other

Holding Company and Other

Other revenue

Interest expense

Manufacturing, research and development

Depreciation and amortization expense

General and administrative

Other income, net

Income tax expense

Net income (loss)

Three Months Ended September 30, 2021

Finance Receivables

Pharmaceutical Development and Other

Holding Company and Other

Interest expense

Manufacturing, research and development

Depreciation and amortization expense

General and administrative

Other income, net

Income tax expense

Net income (loss)

Nine Months Ended September 30, 2022

Finance Receivables

Pharmaceutical Development and Other

Holding Company and Other

The Company does not report assets by reportable

segment, nor does the Company report results by geographic region, as these metrics are not used by the Company’s chief executive

officer in assessing performance or allocating resources to the segments.

performance is evaluated based on several factors, including income (loss) from continuing operations before income taxes.

uses this measure of profit (loss) to evaluate segment performance because the Company believes this measure is indicative of performance

trends and the overall earnings potential of each segment.

The Company does not report assets by reportable segment, as this metric is

not used by the Company’s CEO in assessing performance or allocating resources to the segments.

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

Schedule of Reportable Revenue by

Geographic Region

Three Months Ended March 31, 2023

Pharmaceutical

Development and

Holding Company

Other revenue

3 unchanged sentences

General and administrative

Other income, net

Income tax expense

Other expense, net

Income tax benefit

Net income (loss)

Nine Months Ended September 30, 2021

Finance Receivables

Pharmaceutical Development and Other

Holding Company and Other

Three Months Ended March 31, 2022

Pharmaceutical

Development and

Holding Company

Other revenue

2 unchanged sentences

Depreciation and amortization expense

Change in fair value of acquisition-related contingent consideration

General and administrative

Other income, net

Other expense, net

Income tax expense

Net income (loss)

Included in Holding Company

and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, including public company costs

and non-Enteris corporate employees, which have been included for purposes of reconciling to the consolidated amounts.

in Holding Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, including

public company costs and non-Enteris corporate employees, which have been included for purposes of reconciling to the consolidated amounts.

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