What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-10 · 571 added, 452 removed, 334 unchanged (75% of the section changed)

3 unchanged sentences

thousands, except par value and share data)

September 30,

Current assets:

3 unchanged sentences

Total current assets

Finance receivables, net of allowance for credit losses of $ 11,104 and $ 11,846 , as of June 30, 2023 and December 31, 2022, respectively

Finance receivables, net of allowance for credit losses of $ 11,327 and $ 11,846 , as of September 30, 2023 and December 31, 2022, respectively

Collateral on foreign currency forward contract

20 unchanged sentences

250,000,000 shares authorized;

12,566,519 and 12,843,157 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

12,510,776 and 12,843,157 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Finance receivable interest income, including fees

2 unchanged sentences

Costs and expenses:

Provision (benefit) for credit losses

Provision for (benefit from) credit losses

Interest expense

1 unchanged sentence

Depreciation and amortization expense

General and administrative

General and administrative expense

Income from operations

Other income (expense), net:

Unrealized net gain (loss) on warrants

Unrealized net loss on equity securities

Gain on foreign currency transactions

Income before income tax expense

Income tax expense

Unrealized net (loss) gain on warrants

Unrealized net gain (loss) on equity securities

(Loss) gain on foreign currency transactions

Income before income tax (benefit) expense

Income tax (benefit) expense

Net income per share:

Weighted average shares outstanding:

See accompanying

notes to the unaudited condensed consolidated financial statements.

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

1 unchanged sentence

thousands, except share data)

Months Ended June 30, 2023

Months Ended September 30, 2023

Stockholders’

1 unchanged sentence

$ ( 4,151,005 )

of adoption of ASC 326

of adoption of ASU 2016-13

of common stock upon vesting of restricted stock

6 unchanged sentences

( 4,152,119 )

Months Ended June 30, 2022

of common stock upon vesting of restricted stock

of common stock in open market

at September 30, 2023

$ ( 4,147,645 )

Nine Months Ended September

Stockholders’

at December 31, 2021

Balances at December 31, 2021

$ ( 4,164,496 )

of common stock upon vesting of restricted stock

of unvested restricted stock

at March 31, 2022

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 )

of common stock upon vesting of restricted stock

at June 30, 2022

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Balances at June 30, 2022

( 4,160,453 )

See accompanying

notes to the unaudited condensed consolidated financial statements.

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

$ ( 4,153,837 )

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Cash flows from operating activities:

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

Provision (benefit) for credit losses

Benefit from credit losses

Right-of-use asset amortization

7 unchanged sentences

Stock-based compensation

Depreciation and amortization

Depreciation and amortization expense

Changes in operating assets and liabilities:

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Purchases of property and equipment

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Payments for financing costs

Net payments on credit facility

Proceeds from (payments on) credit facilities

Net settlement for employee taxes on restricted stock and options

Repurchases of common stock, including fees and expenses

Net cash used in financing activities

Net increase in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase (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.

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

2 unchanged sentences

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 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 June 30, 2023, the Company had 23 full-time 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 September 30, 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 August 5, 2023, the Company and its partners have executed transactions with 50 different parties under its specialty finance

strategy, funding an aggregate of $725.7 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.

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 November 3, 2023, the Company and its partners have executed transactions with 53 different parties under its specialty

finance strategy, funding an aggregate of $756.7 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.

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®

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’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.

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.

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, 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;

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 interest and accounts receivable;

impairment of finance receivables;

for credit losses;

of finance receivables;

allowance for credit losses;

long-lived assets;

1 unchanged sentence

intangible assets;

valuation of warrants and other investments;

of warrants and other investments;

contingent consideration;

1 unchanged sentence

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.

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

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.

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.

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.

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

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

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

non-refundable, upfront license

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.

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 income.

prior year amounts have been reclassified to conform to current year presentation and have no impact on previously reported total

assets and total liabilities, total stockholders’ equity or net income.

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

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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.

The Company has identified existing loans that reference London Interbank Offered Rate (“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”).

ASU 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 chose to apply the full $11.8 million ACL under legacy GAAP 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.

Measurement of Credit Losses on Financial Instruments

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

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

ASU 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 chose to apply the full $11.8

million ACL under legacy GAAP 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 Royalty

Purchases 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.

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.

Troubled Debt Restructurings

and Vintage Disclosures,” which removes the accounting guidance for Troubled Debt Restructurings (“TDR”) 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.

Net Income per Share

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

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

period, 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

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

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

the applicable period, 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 amounts):

Schedule of Basic

and Diluted Earning per Share

Three Months Ended

September 30,

Nine Months Ended

September 30,

Weighted-average shares outstanding

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Diluted net income per share

the three months ended June 30, 2023 and 2022, outstanding options to purchase shares of common stock and outstanding shares of restricted

stock in an aggregate of approximately 118,000 and 308,000 , respectively, have been excluded from the calculation of diluted net income

per share, as such securities were anti-dilutive.

For the six months ended June 30, 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 309,000 , respectively, have been

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

the three months ended September 30, 2023 and 2022, outstanding options to purchase shares of common stock and outstanding shares

of restricted stock in an aggregate of approximately 127,000 and 186,000 , 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, 2023 and 2022,

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

121,000 and 268,000 , respectively, have been excluded from the calculation of diluted net income 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 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.

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

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

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.

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.

7 unchanged sentences

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

Term Loans and Royalties.

Term Loans and Royalty Purchases.

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

6 unchanged sentences

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 June 30, 2023, the $0.4 million liability for credit losses on off-balance-sheet credit exposures is included in other liabilities.

As of September 30, 2023, the $0.4 million liability for credit losses on off -balance-sheet credit exposures is included in other

non-current 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):

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

Schedule of Allowance for Credit Losses

Six Months Ended June 30, 2023

Six Months Ended June 30, 2022

September 30, 2023

September 30, 2022

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

Write offs (1)

Effect of Adoption of ASC 326

Provision (benefit) for credit losses

Effect of adoption of ASU 2016-13

Provision (benefit) from credit losses

Allowance at end of period

(1) Reversal of finance receivable-specific ACL recognized in prior periods.

of finance receivable-specific ACL recognized in prior periods.

No impact to consolidated

statement of income for the six months ended June 30, 2023 .

Please refer to Note 1 for further details.

statement of income for the nine months ended September 30, 2023.

Please refer 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.

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):

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, if any.

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

Schedule of analysis of nonaccrual and performing loans by portfolio segment

June 30, 2023

September 30, 2023

December 31, 2022

Royalty purchases

Total before allowance for credit losses

Allowance for credit losses

Total finance receivables, net

of June 30, 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 $ 11.9 million ;

(2) the Best royalty, with a net carrying value of $ 2.8 million ;

and (3) the Ideal Implant,

(“Ideal”) royalty, with a net carrying value of $ 4.3 million .

Although in nonaccrual status, none of the finance receivables

were considered impaired as of June 30, 2023.

The Company collected $0.2 million on its nonaccrual finance receivables during the six

months ended June 30, 2023.

of September 30, 2023, the Company had four finance receivables in nonaccrual status:

(1) the term loan to Trio Healthcare Ltd.

with a carrying value of $ 9.1

(2) the Flowonix Medical, Inc.

royalty, with a carrying value of $ 10.4

million (see Loan Modifications Made to Borrowers

Experiencing Financial Difficulty below for further details);

(3) the Best ABT, Inc.

(“Best”) royalty, with a

carrying value of $ 2.7

and (4) the Ideal Implant, Inc.

royalty, with a net carrying value of $ 4.2

Although in nonaccrual status, none

of the finance receivables were considered impaired as of September 30, 2023.

The Company collected $2.3 million on its nonaccrual finance

receivables during the nine months ended September 30, 2023.

Modifications Made to Borrowers Experiencing Financial Difficulty

January 1, 2023, the Company adopted the provisions of ASU 2022-02, which eliminated the accounting for TDRs while expanding loan

modification and vintage disclosure requirements.

The update specifically required additional disclosures on loan modifications

to borrowers experiencing financial difficulties that involved an interest rate reduction, other-than-insignificant payment delay,

a term extension, principal forgiveness or a combination thereof.

the nine months ended September 30, 2023, the Company made one significant modification to a borrower experiencing financial difficulty

involving an other-than-insignificant payment delay and a term extension/modification.

Flowonix’s assets were sold to Algorithm

Sciences, Inc.

(“Algorithm”) during the nine months ended September 30, 2023, and in exchange for releasing its lien, the

Company received $1.5 million of cash at close, bringing the carrying value from $11.9 million as of June 30, 2023 to $10.4 million

as of September 30, 2023.

The Company expects to receive royalties on the net sales of two products beginning in late 2024.

in nonaccrual status, the Flowonix royalty was not considered impaired as of September 30, 2023 and is considered in the $3.3

million Royalty allowance for credit losses as of September 30, 2023.

On an ongoing basis, the Company monitors the performance of modified

loans to their restructured terms.

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 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:

Borrower 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.

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

of the borrower’s 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.

uses the following definitions for its risk ratings for Term Loans:

Borrower 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

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

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Finance receivables rated a 2 might be placed on non-accrual.

While there is a

potential for future principal impairment, we may refrain from placing borrower on non-accrual due to enterprise value coverage, continued receipt of interest payments,

and/or anticipate a near-term capital raise.

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

underwriting.

is a potential for future principal impairment, we may refrain from placing borrower on non-accrual due to enterprise value coverage,

continued receipt of interest payments, and/or anticipate a near-term capital raise.

Borrower 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.

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

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

Borrower has demonstrated access to capital markets.

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

Company uses 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 June 30, 2023:

Company uses 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 September

Schedule of Financing Receivable by origination year

June 30, 2023

September 30, 2023

Subtotal - Term Loans

Subtotal - Royalties

- Royalty Purchases

Total Finance Receivables, gross

Intangible Assets

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

30, 2023 and December 31, 2022 (in thousands):

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

of September 30, 2023 and December 31, 2022 (in thousands):

Schedule of Intangible Assets

June 30, 2023

September 30, 2023

December 31, 2022

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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.

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.

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 $ 0.4 million for both the three months ended June 30, 2023 and 2022, respectively.

expense related to intangible assets was $ 0.9 million for both the six months ended June 30, 2023 and 2022, respectively.

estimated future amortization expense related to intangible assets as of June 30, 2023 is as follows (in thousands):

expense related to intangible assets was $ 0.4 million for both the three months ended September 30, 2023 and 2022, respectively.

Amortization expense related to intangible assets was $ 1.3 million for both the nine months ended September 30, 2023 and 2022,

respectively.

estimated future amortization expense related to intangible assets as of September 30, 2023 is as follows (in thousands):

Schedule of Intangible Asset Amortization Expense

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Revolving Credit Facility

June 28, 2023, the Company entered into a new Credit Agreement (the “Credit Agreement”) by and among SWK Funding LLC, the

Company’s wholly-owned subsidiary (together with the Company, the “Borrower”), the lenders party thereto (“Lenders”),

and First Horizon Bank as a Lender and Agent (the “Agent”).

The Credit Agreement provides for a revolving credit facility

with an initial maximum principal amount of $45.0 million.

The Credit Agreement provides that the Company may request one or more incremental

increases in an aggregate amount not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior

to the termination of the revolving credit period on June 28, 2026 (the “Commitment Termination Date”).

The revolving credit

period will be followed by a one-year amortization period, with the final maturity date of the Credit Agreement occurring on June 28,

outstanding principal balance of the Credit Agreement will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined

in the Credit Agreement) plus (ii) 3.75 percent at all times prior to the Commitment Termination Date.

The outstanding principal balance

of the Revolving Credit Facility will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined in the Credit Agreement)

plus (ii) 4.25 percent at all times on and after the Commitment Termination Date.

Under the terms of the Credit Agreement, all accrued

and unpaid interest shall be due and payable, in arrears, on the first business day of each calendar month.

Credit Agreement contains customary affirmative and negative covenants, in addition to financial covenants specifying that, as of

the end of each calendar month, (i) the consolidated leverage ratio of Borrower will not exceed 1.00 to 1.00, (ii) the consolidated

interest coverage ratio of Borrower will not be less than 4.00 to 1.00, (iii) the cash collection rate in relation to

Borrower’s portfolio of loan assets will not be less than 4.5%, for such calendar month, (iv) the net charge-off percentage in

relation to Borrower’s portfolio of loan assets will not exceed 3 percent for such calendar month, and (v) the weighted

average risk rating in relation to Borrower portfolio of loan assets will not be less than 3.00.

In addition, the Credit Agreement

provides that at no time shall the Company permit its consolidated tangible net worth to be less than $145.0 million, or its

Liquidity (as defined in the Credit Agreement) to be less than $5.0 million.

The Credit Agreement also contains events of default

customary for such financings, the occurrence of which would permit the Agent and Lenders to accelerate the aggregate principal

amount due thereunder.

Credit Agreement refinances the Company’s Loan and Security Agreement dated as of June 29, 2018 (the “Prior Credit Agreement”),

as amended, between the Company and Cadence Bank, N.A.

(“Cadence Bank”), as the lender and administrative agent, which was

due to expire on September 30, 2025.

The Prior Credit Agreement was terminated by the Company, effective as of June 28, 2023.

of June 30, 2023, no amounts were outstanding under either credit facility, and approximately $ 2.4 million was outstanding under the

Prior Credit Agreement as of December 31, 2022.

During the three months ended June 30, 2023 and 2022, the Company recognized $ 0.4 million

and $ 0.1 million , respectively, of interest expense in connection with the Prior Credit Agreement.

During the six months ended June 30,

2023 and 2022, the Company recognized $ 0.5 million and $ 0.2 million , respectively, of interest expense in connection with the Prior Credit

June 28, 2023, the Company entered into a new Credit Agreement (the “Credit Agreement”) by and among SWK Funding LLC,

the Company’s wholly-owned subsidiary (together with the Company, the “Borrower”), the lenders party thereto

(“Lenders”), and First Horizon Bank as a Lender and Agent (the “Agent”).

The Credit Agreement provides

for a revolving credit facility with an initial maximum principal amount of $45.0 million.

The Credit Agreement provides that

the Company may request one or more incremental increases in an aggregate amount not to exceed $80.0 million, subject to the consent

of the Agent and each Lender, at any time prior to the termination of the revolving credit period on June 28, 2026 (the “Commitment

Termination Date”).

The revolving credit period will be followed by a one-year amortization period, with the final maturity

date of the Credit Agreement occurring on June 28, 2027.

outstanding principal balance of the Credit Agreement will bear interest at a rate per annum equal to the sum of (i) Term SOFR

(as defined in the Credit Agreement) plus (ii) 3.75 percent at all times prior to the Commitment Termination Date.

The outstanding

principal balance of the Revolving Credit Facility will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as

defined in the Credit Agreement) plus (ii) 4.25 percent at all times on and after the Commitment Termination Date.

Under the terms

of the Credit Agreement, all accrued and unpaid interest shall be due and payable, in arrears, on the first business day of each

calendar month.

Credit Agreement contains customary affirmative and negative covenants, in addition to financial covenants specifying that, as of the

end of each calendar month, (i) the consolidated leverage ratio of Borrower will not exceed 1.00 to 1.00, (ii) the consolidated interest

coverage ratio of Borrower will not be less than 4.00 to 1.00, (iii) the cash collection rate in relation to Borrower’s portfolio

of loan assets will not be less than 4.5 percent, for such calendar month, (iv) the net charge-off percentage in relation to Borrower’s

portfolio of loan assets will not exceed 3 percent for such calendar month, and (v) the weighted average risk rating in relation to Borrower

portfolio of loan assets will not be less than 3.00.

In addition, the Credit Agreement provides that at no time shall the Company permit

its consolidated tangible net worth to be less than $145.0 million, or its Liquidity (as defined in the Credit Agreement) to be less

than $5.0 million.

The Credit Agreement also contains events of default customary for such financings, the occurrence of which would

permit the Agent and Lenders to accelerate the aggregate principal amount due thereunder.

Credit Agreement refinances the Company’s Loan and Security Agreement dated as of June 29, 2018 (the “Prior Credit

Agreement”), as amended, between the Company and Cadence Bank, N.A.

(“Cadence Bank”), as the lender and administrative

agent, which was due to expire on September 30, 2025.

The Prior Credit Agreement was terminated by the Company, effective as of

June 28, 2023.

October 10, 2023, the Company entered into a First Amendment to Credit Agreement pursuant to which Woodforest National Bank was

added as a lender under the Credit Agreement for an aggregate commitment of $15.0 million, thereby increasing the aggregate commitments

under the Credit Agreement from $45.0 million to $60.0 million.

Please see Note 10 for further information regarding the First

Amendment to Credit Agreement.

of September 30, 2023, $22.0 million was outstanding under the new Credit Agreement, and approximately $ 2.4

million was outstanding under the Prior Credit

Agreement as of December 31, 2022.

During the three months ended September 30, 2023 and 2022, the Company recognized $ 0.2

million and $ 0.1

million , respectively, of interest expense.

the nine months ended September 30, 2023 and 2022, the Company recognized $ 0.7

million and $ 0.2

million , respectively, of interest expense.

Commitments and Contingencies

Consideration

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 June 30, 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 six months ended June 30, 2023 and 2022.

of June 30, 2023, the Company’s unfunded commitments were as follows (in millions):

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, 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

nine months ended September 30, 2023 and 2022.

of September 30, 2023, the Company’s unfunded commitments were as follows (in millions):

Schedule of Unfunded Commitments

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Total unfunded commitments

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 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 CECL model.

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

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 June 30, 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.

As of September

30, 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 June 30, 2023 and December 31, 2022.

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

The term of 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;

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.

Accordingly, the Company had no liabilities recorded for these agreements

as of September 30, 2023 and December 31, 2022.

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 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.

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.

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.

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.

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

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.

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 six months ended June 30, 2023 and 2022.

no transfers between any levels during the nine months ended September 30, 2023 and 2022.

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

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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.

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

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

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.

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:

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.

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.

(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

Changes 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.

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

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 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.

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 foreign currency

forward was recorded in other non-current assets and other non-current liabilities in the consolidated balance sheets as of June 30, 2023 and December 31, 2022.

The Company recognized $1.6 million of changes in fair value related to its foreign currency forward during the six

months ended June 30, 2023.

following table presents financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 (in thousands):

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 foreign currency forward was recorded

in other non-current assets and other non-current liabilities in the consolidated balance sheets as of September 30, 2023 and December

31, 2022, respectively.

The Company recognized $2.1 million of changes in fair value related to its foreign currency forward contract

during the nine months ended September 30, 2023.

following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023

(in thousands):

Schedule of fair value of assets and liabilities measured on recurring basis

Quoted Prices

or Liabilities

Financial Assets

4 unchanged sentences

Contingent consideration payable

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

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

(in thousands):

Quoted Prices

or Liabilities

Financial Assets

4 unchanged sentences

Foreign currency forward contract

changes in fair value of the warrant assets during the six months ended June 30, 2023 and 2022 were as follows (in thousands):

changes in fair value of the warrant assets during the nine months ended September 30, 2023 and 2022 were as follows (in thousands):

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

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Fair value - December 31, 2022

2 unchanged sentences

Change in fair value

Fair value - June 30, 2023

Fair value - June 30, 2022

Fair value - September 30, 2023

Fair value - September 30, 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:

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, 2023

December 31, 2022

Dividend rate range

Risk-free rate range

4.6 % to 5.5 %

4.0 % to 4.3 %

Expected life (years) range

Expected volatility range

of June 30, 2023, the Company had one royalty, Best, that was deemed to be impaired based on reductions in carrying value in prior periods.

As of 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 June

30, 2023 and December 31, 2022 (in thousands):

77.7 % to 154.9 %

54.8 % to 139.4 %

of September 30, 2023, the Company had one royalty, Best, that was deemed to be impaired based on reductions in carrying value

in prior periods.

As of 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 September 30, 2023 and December 31, 2022 (in thousands):

of fair value of assets and liabilities measured on nonrecurring basis

June 30, 2023

Quoted Prices

or Liabilities

September 30, 2023

December 31, 2022

were no liabilities measured at fair value on a nonrecurring basis as of June 30, 2023 and December 31, 2022.

were no liabilities measured at fair value on a nonrecurring basis as of September 30, 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.

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

of June 30, 2023 (in thousands):

of September 30, 2023 (in thousands):

Financial Assets

Finance receivables

Finance receivables, net

Marketable investments

5 unchanged sentences

Financial Assets

Finance receivables

Finance receivables, net

Marketable investments

8 unchanged sentences

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 six months ended June 30, 2023 and 2022

(in thousands):

following table provides the contract revenue recognized by revenue source for the three and nine months ended September 30, 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

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 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):

of Contract Liabilities

September 30,

Pharmaceutical Development Segment

1 unchanged sentence

Total contract liabilities

the six months ended June 30, 2023, the Company recognized $ 0.1 million of 2022 deferred revenue from the 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, 2023 or December 31, 2022.

the nine months ended September 30, 2023, the Company recognized $ 3,000 of 2022 deferred revenue from the 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, 2023 or December 31, 2022.

Segment Information

4 unchanged sentences

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.

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

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.

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.

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):

1 unchanged sentence

Geographic Region

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Pharmaceutical

Holding Company

Other revenue

Provision (benefit) for credit losses

Provision for credit losses

Interest expense

2 unchanged sentences

General and administrative

Other income, net

Income tax expense

Other expense, net

Income tax benefit

Net income (loss)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Pharmaceutical

Holding Company

Other revenue

Interest expense

2 unchanged sentences

General and administrative

Other expense, net

Other income, net

Income tax expense

Net income (loss)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Pharmaceutical

Holding Company

Other revenue

Provision (benefit) for credit losses

Benefit from credit losses

Interest expense

5 unchanged sentences

Net income (loss)

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Pharmaceutical

Holding Company

Other revenue

3 unchanged sentences

General and administrative

Other expense, net

Other income, net

Income tax expense

Net income (loss)

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.

Subsequent Events

events have been evaluated through November 8, 2023, the date at which the condensed consolidated financial statements were

available to be issued, and the Company has concluded that no such events or transactions took place that would require disclosure herein,

except as stated directly below.

Therapeutics PLC

October 2, 2023, SWK Funding, a subsidiary of the Company, entered into a credit agreement pursuant to which SWK Funding provided to

Shield Therapeutics PLC (“Shield”)

a term loan in the amount of $ 20.0

The loan matures on September 28, 2028.

In connection with the loan, SWK Funding

also received a warrant to purchase shares of Shield common stock.

Notes Offering

October 3, 2023, the Company completed a registered underwritten public offering of $30.0 million of the Company’s 9.00 percent

Senior Notes due 2027 (the “Notes”).

On October 27, 2023, the underwriters exercised their option to purchase an additional

$2.9 million in aggregate principal amount of the Notes.

The Notes will mature on January 31, 2027, unless earlier redeemed, and will

bear interest at a rate of 9.00 percent per annum, payable quarterly in arrears on March 31, June 30, September 30 and December

31 of each year and at maturity, commencing on December 31, 2023.

The Company received net proceeds after discounts and commissions,

but before expenses and fees, of approximately $31.9 million.

to Credit Agreement

October 10, 2023, the Company entered into a First Amendment to Credit Agreement pursuant to which Woodforest National Bank was

added as a lender under the Credit Agreement for an aggregate commitment of $ 15.0 million , thereby increasing the aggregate commitments

under the Credit Agreement from $ 45.0 million to $ 60.0 million .

Lifesciences, Inc.

October 13, 2023, SWK Funding entered into a credit agreement pursuant to which SWK Funding provided to Nicoya

Lifesciences, Inc.

(“Nicoya”) a term loan in the amount of $ 6.0

The loan matures on November 30, 2026.

In connection with the loan, SWK Funding

also received a warrant to purchase shares of Nicoya common stock.

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