What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-10 · 259 added, 191 removed, 102 unchanged (82% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and

should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual Report on

Form 10-K for the year ended December 31, 2022 (“Annual Report”), as well as our unaudited condensed consolidated financial

statements and the accompanying notes included in this report.

Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement

to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual

Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”), as well as our unaudited condensed consolidated

financial statements and the accompanying notes included in this report.

have organized our operations into two segments:

2 unchanged sentences

Company evaluates its business performance and manages its operations.

Please refer to Item 1.

Financial Statements, Note 9 of the notes

to the unaudited condensed consolidated financial statements for further information regarding segment information.

Please refer to Part I.

Financial Information, Item 1.

Financial Statements, Note 9 of the notes to the unaudited condensed consolidated financial statements for further information regarding

segment information.

Receivables Portfolio Overview

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

30, 2023 (in thousands, except rate, share and per share data).

Revenue (Loss)

Royalty Purchases

Licensed Technology

Ophthalmic antibiotic

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

ended September 30, 2023 (in thousands, except rate, share and per share data).

Best ABT, Inc.

Oncology diagnosis

Coflex®/Kybella®

Spinal stenosis/submental fullness

NSAID migraine treatment

Japanese women’s health/cystic fibrosis

Depressive disorder treatment

stenosis/submental fullness

migraine treatment

women’s health/cystic fibrosis

Flowonix Medical, Inc.

delivery device

disorder treatment

Ideal Implant, Inc.

Diabetic macular edema

Women’s health

macular edema

Revenue Recognized

Acer Therapeutics, Inc.

Aziyo Biologics, Inc.

BIOLASE, Inc.

Biotricity, Inc.

CDMO Manufacturer

Epica International, Inc.

eTon Pharmaceuticals, Inc.

Flowonix Medical, Inc.

MedMinder Systems, Inc.

6 unchanged sentences

Epica International, Inc.

(Loss) Recognized

Other Income (Loss) Recognized

Warrants to Purchase Stock

10 unchanged sentences

Biotricity, Inc.

CDMO Manufacturer

CeloNova BioSciences, Inc.

5 unchanged sentences

EyePoint Pharmaceuticals, Inc.

Flowonix Medical, Inc.

MedMinder Systems, Inc.

6 unchanged sentences

royalty was paid off during the year ended December 31, 2021.

SWK continues to receive insignificant royalties on international sales.

SWK continues to receive insignificant royalties on international

considered partially impaired.

on nonaccrual.

was paid off during the six months ended June 30, 2023.

July 2023, Ideal Implant assets were sold to an aesthetics company.

was sold to a third party during the six months ended June 30, 2023.

was paid off during the nine months ended September 30, 2023.

Medical assets were sold to Algorithm Sciences, Inc.

during the six months ended June 30, 2023.

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

net sales and royalties.

during the nine months ended September 30, 2023.

for releasing its lien, SWK received cash at close and is expected to receive royalties on sales of two products.

receivable is now classified as a royalty.

In July 2023, Ideal Implant

assets were sold to an aesthetics company, which is expected to pay SWK a mid-single digit, capped royalty on implant sales beginning

was sold to a third party during the nine months ended September 30, 2023.

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

quarterly net sales and royalties.

Environmental,

Social and Governance

overseers of risk and stewards of long-term enterprise value, our management and Board of Directors (“Board”) play a vital

role in assessing, identifying and understanding the potential impact and related risks of environmental, social and governance (“ESG”)

issues on the organization’s operating model.

Our Board and management are committed to identifying those ESG issues most likely

to impact business operations and growth by focusing our investment strategy around supporting innovative, growth-oriented companies

in the life sciences industry that maximize both social and investment value.

overseers of risk and stewards of long-term enterprise value, our management and Board of Directors (“Board”) play a

vital role in assessing, identifying and understanding the potential impact and related risks of environmental, social and governance

(“ESG”) issues on the organization’s operating model.

Our Board and management are committed to identifying

those ESG issues most likely to impact business operations and growth by focusing our investment strategy around supporting innovative,

growth-oriented companies in the life sciences industry that maximize both social and investment value.

the ESG issues we support within the Company, we are committed to recruiting, motivating and developing a diversity of talent.

and foster a company culture where every voice is welcome, heard and respected, regardless of age, gender, race, religion, sexual orientation,

physical conditions, cultural background or country of origin.

Our commitment to ESG initiatives is an endeavor both the Board and management

undertake for the general betterment of those both inside and outside the Company.

We promote and foster a company culture where every voice is welcome, heard and respected, regardless of age, gender, race, religion,

sexual orientation, physical conditions, cultural background or country of origin.

Our commitment to ESG initiatives is an endeavor

both the Board and management undertake for the general betterment of those both inside and outside the Company.

nature of our business supports environmental sustainability by being mindful of products we and our partners use in our businesses.

We promote recycling to reduce landfill, and we offer our employees a hybrid work model, which allows employees the flexibility to work

remotely, thereby reducing the carbon output from commuting in cars or buses.

We promote recycling to reduce landfill, and we offer our employees a hybrid work model, which allows employees the flexibility

to work remotely, thereby reducing the carbon output from commuting in cars or buses.

Accounting Policies and Estimates

critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial

Condition and Results of Operations” of our Annual Report.

We believe there have been no new critical accounting policies or material

changes to our existing critical accounting policies and estimates during the six months ended June 30, 2023, compared to those discussed

in our Annual Report.

Accounting Pronouncements

critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis

of Financial Condition and Results of Operations” of our Annual Report.

We believe there have been no new critical accounting

policies or material changes to our existing critical accounting policies and estimates during the nine months ended September

30, 2023, compared to those discussed in our Annual Report.

Recent Accounting Pronouncements

Financial Information, Item 1.

1 unchanged sentence

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

of the three months ended June 30, 2023 and 2022 ( in

Provision (benefit) for credit losses

of the three months ended September 30, 2023 and 2022 ( in millions )

Three Months Ended

September 30,

Provision for credit losses

Interest expense

2 unchanged sentences

General and administrative

Other income (expense), net

Other (expense) income, net

Income tax expense

increased to $9.5 million for the three months ended June 30, 2023 from $6.9 million for the three months ended June 30, 2022.

million increase in revenue for the three months ended June 30, 2023 consisted of a $2.5 million increase in Finance Receivables segment

revenue and a $0.1 million increase in Pharmaceutical Development segment revenue.

The $2.5 million increase in Finance Receivables segment

revenue was primarily due to $2.5 million increase in interest and fees earned due to funding new and existing loans, a $0.8 million

increase in interest income due to an overall increase in reference rates, and a net $0.5 million increase in royalty revenue when compared

to the same period of the previous year.

The increase was partially offset by a $1.3 million decrease in interest, royalties and fees

earned on finance receivables that were paid off in 2022 and 2023.

(benefit) for Credit Losses

allowance for credit losses is established through charges or credits to income in the form of the provision in order to bring our

allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management.

Our allowance for credit

losses decreased by $0.7 million during the three months ended June 30, 2023 due to an overall decrease in finance receivables.

Please refer to Item 1., Financial Statements, Note 3 of the notes to the unaudited condensed consolidated financial statements for

further information regarding the provision for credit losses.

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

of debt issuance costs.

Interest expense increased to $0.4 million for three months ended June 30, 2023 from $0.1 million for the three

months ended June 30, 2022.

The $0.3 million increase in interest expense was due to a higher average outstanding balance under the Prior

Credit Agreement with Cadence Bank during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

June 28, 2023, we terminated the Prior Credit Agreement with Cadence Bank and entered into a new Credit Agreement with First Horizon

Please refer to Item 1., Financial Statements, Note 5 of the notes to the unaudited condensed consolidated financial statements

for further information regarding the Credit Agreement with First Horizon.

decreased to $9.0 million for the three months ended September 30, 2023 from $13.6 million for the three months ended September 30, 2022.

The $4.6 million decrease in revenue for the three months ended September 30, 2023 consisted of a $4.7 million decrease in Pharmaceutical

Development segment revenue and a $0.1 million increase in Finance Receivables segment revenue.

The $4.7 million decrease in Pharmaceutical

Development segment revenue was primarily due to $5.0 million of milestone revenue related to Enteris’ License Agreement

with Cara received during the three months ended September 30, 2022, and no similar milestone revenue was recognized during the three

months ended September 30, 2023.

The $0.1 million increase in Finance Receivables segment revenue was primarily the result of an increase

in reference rates.

for Credit Losses

allowance for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance

for credit losses for loans and unfunded commitments to a level deemed appropriate by management.

Our allowance for credit losses increased

by $0.2 million during the three months ended September 30, 2023.

The increase in the provision for credit losses resulted from

the reclassification of a term loan to a royalty during the three months ended September 30, 2023, as our royalties have slightly higher

historic loss rates than our term loans.

Please refer to Part I.

Financial Information, Item 1.

Financial Statements, Note 3 of

the notes to the unaudited condensed consolidated financial statements for further information regarding the provision for credit losses

and the reclassification of the Flowonix term loan to a royalty.

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

amortization of debt issuance costs.

Interest expense increased to $0.2 million for three months ended September 30, 2023 from $0.1

million for the three months ended September 30, 2022.

The $0.1 million increase in interest expense was due to an increase in debt

issuance costs and unused line fees related to the First Horizon Credit Agreement signed on June 28, 2023, which increased our line

of credit from $30.0 million to $45.0 million.

On June 28, 2023, we terminated the Prior Credit Agreement with Cadence Bank and

entered into a new Credit Agreement with First Horizon Bank.

Please refer to Part I.

Financial Information, Item 1.

Statements, Note 5 of the notes to the unaudited condensed consolidated financial statements for further information regarding the

Credit Agreement with First Horizon.

Pharmaceutical

Manufacturing, Research and Development Expense

We recognized $1.5

million of pharmaceutical manufacturing, research and development expense for both the three months ended June 30, 2023 and

Pharmaceutical

manufacturing, research and development expense decreased from $1.8 million for the three months ended September 30, 2022 to $0.6

million for the three months ended September 30, 2023.

The $1.2 million decrease was primarily due to a reduction in headcount,

as well as a reduction in research and development and clinical trial expenditures.

and Amortization

recognized $0.6 million of depreciation and amortization expense during both the three months ended June 30, 2023 and 2022.

and amortization primarily consists of amortization expense related to the intangible assets of Enteris.

Amortization expense is aligned

with the expected future cash flows of the intangible assets.

and amortization expense increased from $0.6 million for the three months ended September 30, 2022 to $0.7 million for the three

months ended September 30, 2023.

Depreciation and amortization primarily consists of amortization expense related to the intangible

assets of Enteris.

Amortization expense is aligned with the expected future cash flows of the intangible assets.

and Administrative

3 unchanged sentences

and corporate governance expenses.

We recognized $3.0 million of general and administrative expense for both

the three months ended June 30, 2023 and 2022.

income, net for three months ended June 30, 2023 reflected a net aggregate fair market value gain of $0.4 million on our warrant

derivatives and a $0.3 million net gain from the remeasurement of foreign currency transactions into our functional currency, net of

changes in fair value of the foreign currency forward contract.

expense, net for the three months ended June 30, 2022 reflected a net aggregate fair market value loss of $1.0 million on our warrant

derivatives and Bioventus common stock.

Our Bioventus common stock was sold during the year ended December 31, 2022.

During the three months ended June 30, 2023 and 2022, we recognized income tax expense of $1.5 million and $0.2 million respectively.

The increase in income tax expense is the result of higher taxable income for the three months ended June 30, 2023 when compared to the

same period of the prior year.

of the six months ended June 30, 2023 and 2022 ( in

Provision (benefit) for credit losses

General and administrative expenses decreased to $3.0 million for the three

months ended September 30, 2023 from $4.3 million for the three months ended September 30, 2022.

The $1.3 million decrease was primarily

driven by a one-time severance payment of $1.1 million paid to the former CEO during the three months ended September 30, 2022, as well

as a $0.4 million decrease in one-time professional fees expense related to corporate strategic planning.

The decrease was partially

offset by $0.2 million increase in Board fees and other related expense due to a revised Board compensation plan.

(Expense) Income, Net

expense, net for three months ended September 30, 2023 reflected a net aggregate fair market value loss of $0.2 million on our

warrant derivatives and a $0.1 million net loss from the remeasurement of foreign currency transactions into our functional currency,

net of changes in fair value of the foreign currency forward contract.

income, net for the three months ended September 30, 2022 reflected a net aggregate fair market value gain of $1.8 million on our warrant

derivatives and Bioventus, Inc.

(“Bioventus”) common stock.

Our Bioventus common stock was sold during the year ended

December 31, 2022.

Tax (Benefit) Expense

the three months ended September 30, 2023 and 2022, we recognized income tax benefit of $0.4 million and $1.9 million

of income tax expense, respectively.

The decrease in income tax expense is primarily due to a decrease in taxable income for the three

months ended September 30, 2023 when compared to the same period of the previous year, as well as the additional release of the valuation

allowance on our deferred tax assets resulting from an increase in management's forecasted future taxable income in 2023 when compared

of the nine months ended September 30, 2023 and 2022 ( in millions )

Nine Months Ended

September 30,

Benefit from credit losses

Interest expense

2 unchanged sentences

General and administrative

Other expense, net

Other (expense) income, net

Income tax expense

increased to $18.9 million for the six months ended June 30, 2023 from $18.1 million for the six months ended June 30, 2022.

million increase in revenue for the six months ended June 30, 2023 consisted of a $1.3 million increase in Finance Receivables segment

revenue and a $0.5 million decrease in Pharmaceutical Development segment revenue.

The $1.3 million increase in Finance Receivables segment

revenue was due to $4.9 million increase in interest and fees earned due to funding new and existing loans, a $2.4 million increase in

interest income due to an overall increase in reference rates, and a net $0.4 million increase in royalty revenue when compared to the

same period of the previous year.

The increase was partially offset by a $6.4 million decrease in interest, royalties and fees earned

on finance receivables that were paid off in 2022 and 2023.

(benefit) for Credit Losses

allowance for credit losses is established through charges or credits to income in the form of the provision in order to bring our

allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management.

Our allowance for credit

losses decreased by $0.7 million during the six months ended June 30, 2023 due to an overall decrease in finance receivables.

refer to Item 1., Financial Statements, Note 3 of the notes to the unaudited condensed consolidated financial statements for further

information regarding the provision for credit losses.

decreased to $27.9 million for the nine months ended September 30, 2023 from $31.7 million for the nine months ended September 30, 2022.

The $3.8 million decrease in revenue for the nine months ended September 30, 2023 consisted of a $5.3 million decrease in Pharmaceutical

Development segment revenue and a $1.5 million increase in Finance Receivables segment revenue.

The $5.3 million decrease in Pharmaceutical

Development segment revenue was primarily due to $5.0 million of milestone revenue related to Enteris’ License Agreement

with Cara received during the nine months ended September 30, 2022, and no similar milestone revenue was recognized during the nine months

ended September 30, 2023.

The $1.5 million increase in Finance Receivables segment revenue was primarily due to $6.5 million increase

in interest and fees earned due to funding new and existing loans and a $4.1 million increase in interest earned on our finance receivables

due to an overall increase in reference rates.

The increase was partially offset and a net $0.7 million decrease in royalty revenue when

compared to the same period of the previous year and an $8.5 million decrease in interest, royalties and fees earned on finance receivables

that were paid off in 2022 and 2023.

from Credit Losses

allowance for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance

for credit losses for loans and unfunded commitments to a level deemed appropriate by management.

We recognized a $0.5 million

benefit for credit losses during the nine months ended September 30, 2023.

The decrease in the provision for credit losses resulted from

an overall decrease in our finance receivables.

The decrease was partially offset by the addition of a term loan, as well as the reclassification

of a term loan to a royalty during the nine months ended September 30, 2023, as our royalties have slightly higher historic loss rates

than our term loans.

Please refer to Part I.

Financial Information, Item 1.

Financial Statements, Note 3 of the notes to the unaudited

condensed consolidated financial statements for further information regarding the provision for credit losses and the reclassification

of the Flowonix term loan to a royalty.

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

of debt issuance costs.

Interest expense increased to $0.5 million for six months ended June 30, 2023 from $0.2 million for the six months

ended June 30, 2022.

This $0.3 million increase in interest expense was due to a higher average outstanding balance under the Prior Credit

Agreement with Cadence Bank during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

2023, we terminated the Prior Credit Agreement with Cadence Bank and entered into a new Credit Agreement with First Horizon Bank.

refer to Item 1., Financial Statements, Note 5 of the notes to the unaudited condensed consolidated financial statements for further

information regarding the Credit Agreement with First Horizon.

Interest expense increased to $0.7 million for the nine months ended September 30, 2023 from $0.2 million

for the nine months ended September 30, 2022.

This $0.5 million increase in interest expense was due to the acceleration of debt

issuance costs related to the Prior Credit Agreement with Cadence Bank, as well as interest expense incurred on both the Prior

Credit Agreement and the new Credit Agreement with First Horizon Bank.

On June 28, 2023, we terminated the Prior Credit Agreement

with Cadence Bank and entered into a new Credit Agreement with First Horizon Bank.

Please refer to Part I.

Financial Information, Item 1.

Financial Statements,

Note 5 of the notes to the unaudited condensed consolidated financial statements for further information regarding the Credit

Agreement with First Horizon.

Pharmaceutical

1 unchanged sentence

Pharmaceutical

manufacturing, research and development expense decreased from $3.4 million for the six months ended June 30, 2022 to $2.2 million for

the six months ended June 30, 2023.

The $1.2 million decrease was primarily due to a was primarily due to a reduction in headcount as

well as a reduction in R&D and clinical trial expenditures.

manufacturing, research and development expense decreased from $5.2 million for the nine months ended September 30, 2022 to $2.8

million for the nine months ended September 30, 2023.

The $2.4 million decrease was primarily due to a reduction in headcount,

as well as a reduction in research and development and clinical trial expenditures.

and Amortization

recognized $1.3 million of depreciation and amortization expense during both the six months ended June 30, 2023 and 2022.

and amortization primarily consists of amortization expense related to the intangible assets of Enteris.

Amortization expense is aligned

with the expected future cash flows of the intangible assets.

recognized $1.9 million and $2.0 million of depreciation and amortization expense during both the nine months ended September

30, 2023 and 2022, respectively.

Depreciation and amortization primarily consists of amortization expense related to the intangible

assets of Enteris.

Amortization expense is aligned with the expected future cash flows of the intangible assets.

and Administrative

3 unchanged sentences

and corporate governance expenses.

General and administrative expenses decreased to $5.5 million for the six

months ended June 30, 2023 from $6.2 million for the six months ended June 30, 2022.

The $0.7 million decrease included a net $0.6 million

decrease in salaries, benefits, general office and maintenance expense mainly due to a reduction in employee headcount in our Pharmaceutical

Development segment;

and a $0.3 million decrease in corporate strategic planning and related professional fees expense.

was partially offset by $0.2 million increase in Board fees due to a revised Board compensation plan.

expense, net for the six months ended June 30, 2023 reflected a net aggregate fair market value loss of $0.6 million on our warrant derivatives

and a $0.5 million gain from the remeasurement of foreign currency transactions into our functional currency, net of changes in fair

value of the foreign currency forward contract.

expense, net for the six months ended June 30, 2022 reflected a net aggregate fair market value loss of $1.7 million on our warrant derivatives

and Bioventus common stock.

Our Bioventus common stock was sold during the year ended December 31, 2022.

We recognized income tax expense of $1.3 million for both the six months ended

June 30, 2023 and 2022.

The nominal increase in income tax expense was the result of an increase in taxable income for the six

months ended June 30, 2023 when compared to the same period of the prior year.

General and administrative expenses decreased to $8.5 million for the nine

months ended September 30, 2023 from $10.5 million for the nine months ended September 30, 2022.

The $2.0 million decrease was primarily

driven by a one-time severance payment of $1.1 million paid to the former CEO during the three months ended September 30, 2022;

million decrease in one-time professional fees and other expense related to corporate strategic planning;

and a net $0.4 million

decrease in Enteris operational expenses due to a reduction in headcount and business development expense.

The decrease was partially

offset by $0.2 million increase in Board fees and other related expense due to a revised Board compensation plan.

(Expense) Income, Net

expense, net for the nine months ended September 30, 2023 reflected a net aggregate fair market value loss of $0.8 million on

our warrant derivatives and a $0.4 million gain from the remeasurement of foreign currency transactions into our functional currency,

net of changes in fair value of the foreign currency forward contract.

income, net for the nine months ended September 30, 2022 reflected a net aggregate fair market value gain of $0.1 million on our warrant

derivatives and Bioventus, Inc.

(“Bioventus”) common stock.

Our Bioventus common stock was sold during the year ended

December 31, 2022.

the nine months ended September 30, 2023 and 2022, we recognized income tax expense of $1.0 million and $3.2 million, respectively.

The decrease in income tax expense is primarily due to the additional release of the valuation allowance on our deferred tax assets

resulting from an increase in management's forecasted future taxable income in 2023 when compared to 2022.

and Capital Resources

of June 30, 2023, we had $6.8 million in cash and cash equivalents, compared to $6.2 million in cash and cash equivalents as of

of September 30, 2023, we had $31.0 million in cash and cash equivalents, compared to $6.2 million in cash and cash equivalents as of

December 31, 2022.

The primary driver of the $0.6 million increase in our cash balance was $31.6 million of interest, fees,

principal and royalty payments received on our finance receivables.

The increase in cash and cash equivalents was partially offset

by $13.7 million of investment funding, net of deferred fees and origination expenses;

payroll, accounts payable and new credit

facility closing costs totaled $9.6 million;

$5.1 million to repurchase shares of the Company’s common stock in the open

and net payments of $2.4 million of credit facility draws, principal, interest and fees paid on our credit facility with

Cadence Bank.

The primary driver of the $24.9 million increase in our cash balance was $43.9 million of interest, fees, principal

and royalty payments received on our finance receivables and a $19.6 million net increase on our credit facility.

in cash and cash equivalents was partially offset by $18.8 million of investment funding, net of deferred fees and origination expenses;

payroll, accounts payable and credit facility closing costs of $14.1 million;

and $6.1 million to repurchase shares of the Company’s

common stock in the open market.

entered into a new $45.0 million revolving credit facility in June 2023 with First Horizon Bank.

The Credit Agreement provides for one

or more incremental increases not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior to

the Commitment Termination Date.

As of June 30, 2023, no funds have been borrowed, and $45.0 million was available for borrowing under

the new credit facility.

Our Prior Credit Agreement with Cadence Bank was terminated in connection with the establishment of the new

credit facility.

Please refer to Item 1., Financial Statements, Note 5 of the notes to the unaudited condensed consolidated financial

statements for further information regarding the Credit Agreement with First Horizon Bank.

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

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

Development segment.

The Credit Agreement provides

for one or more incremental increases not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any

time prior to the Commitment Termination Date.

As of September 30, 2023, $22.0 million was outstanding under the new Credit Agreement,

and $23.0 million was available for borrowing.

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.

Our Prior Credit Agreement with Cadence Bank was terminated in

connection with the establishment of the new Credit Agreement (please refer to Part I.

Financial Information, Item 1.

Financial Statements, Notes 5 and 10 of

the notes to the unaudited condensed consolidated financial statements for further information regarding the Credit Agreement

with First Horizon Bank).

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.

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

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

success of our Pharmaceutical Development segment.

We generate income primarily from four sources:

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

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

intellectual property;

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

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

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

of June 30, 2023, our finance receivables portfolio contains $223.0 million of net finance receivables and $0.1 million of

To a lesser extent, realizing capital appreciation from

equity-related investments in the life science sector.

of September 30, 2023, our finance receivables portfolio contains $223.6 million of net finance receivables and $0.1 million of

marketable investments.

2 unchanged sentences

and long-term financial position of our finance receivables portfolio.

In addition, the majority of our finance receivables

portfolio are debt instruments that carry floating interest rates with a SOFR, Prime, or LIBOR-based interest rate floor.

interest rates may affect the interest income for debt instruments with floating rates.

We believe we are well positioned to benefit

should market interest rates rise in the future.

In addition, the majority of our finance receivables portfolio

are debt instruments that carry floating interest rates with a SOFR, Prime, or LIBOR-based interest rate floor.

Changes in interest

rates may affect the interest income for debt instruments with floating rates.

We believe we are well positioned to benefit should

market interest rates rise in the future.

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

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

above what our existing assets are expected to produce in 2023.

We do not assume any near-term repayments from borrowers, and as a result,

no assurances can be given that actual results would not differ materially from the statement above.

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

cash flow above what our existing assets are expected to produce in 2023.

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

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

Sheet Arrangements

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

our consolidated financial statements.

These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity

Such transactions are used primarily to manage partner companies’ requests for funding and take the form of loan commitments

and lines of credit.

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

upon, the partner company defaults, and the value of any existing collateral becomes worthless.

We use the same credit policies in making

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

of June 30, 2023, we had $7.4 million of unfunded commitments.

Please refer to Item 1., Financial Statements, Note 6 of the notes to

the unaudited condensed consolidated financial statements for further information regarding the Company’s commitments and contingencies.

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

in our consolidated financial statements.

These transactions involve, to varying degrees, elements of credit, interest rate, and

liquidity risk.

Such transactions are used primarily to manage partner companies’ requests for funding and take the form

of loan commitments and lines of credit.

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

fully drawn upon, the partner company defaults, and the value of any existing collateral becomes worthless.

We use the same credit

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

of September 30, 2023, we had $7.4 million of unfunded commitments.

Please refer to Part I.

Financial Information, Item 1.

Financial Statements, Note 6 of the

notes to the unaudited condensed consolidated financial statements for further information regarding the Company’s commitments

and contingencies.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis