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Item 8. Financial Statements and Supplementary Data

2024-03-20 compared with 2023-03-31 · 1246 added, 960 removed, 482 unchanged (82% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

HOLDINGS CORPORATION

1 unchanged sentence

of Independent Registered Public Accounting Firm (PCAOB ID # 207 )

Financial Statements

Balance Sheets

3 unchanged sentences

to the Consolidated Financial Statements

Of Independent Registered Public Accounting Firm

the Stockholders and Board of Directors of

Holdings Corporation

on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of SWK

Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements

of income, stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related

notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the

consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity

with accounting principles generally accepted in the United States of America.

These consolidated financial statements are the responsibility of the

Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and

are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Report Of Independent

Registered Public Accounting Firm

To the Stockholders

and Board of Directors of

the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of SWK Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related

consolidated statements of income, stockholders’ equity, and cash flows, for each of the two years in the period ended December

31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the

consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of

December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period

ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

These consolidated

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for

The critical audit matter communicated below is a matter arising from

the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on

the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate

opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Our audits included

performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are

material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we

are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts

or disclosures to which they relate.

of Finance Receivables

As described in Note 3 to the consolidated financial statements, the

Company’s consolidated finance receivables balance was $236.6 million as of December 31, 2022, which is net of the allowance for

credit losses of $11.8 million.

The Company generated $35.5 million of finance receivable interest income, including fees during the year

ended December 31, 2022.

The Company’s finance receivables are stated at amortized cost, net of unamortized origination fees, if

Interest income on the finance receivables is recorded on an accrual basis based on the effective interest rate method to the extent

that the Company expects to collect such amounts.

The Company evaluates the collectability of both interest and principal for each finance

receivable to determine whether it is impaired.

A finance receivable is considered to be impaired when, based on current information and

events, the Company determines it is probable that it will be unable to collect amounts due according to existing contractual terms.

a loan is considered to be impaired, the amount of loss is calculated by comparing the carrying value of the finance receivable to the

value determined by discounting the expected future cash flows.

If actual cash flows were to be substantially lower than estimated, there

could be a significant adverse impact on the carrying value of the finance receivables and results of operations.

The principal considerations for our determination that performing

procedures relating to valuation of the finance receivables is a critical audit matter are its overall impact on the consolidated financial

statements, including the realization of the Company’s deferred tax assets, and the significant amount of judgement by management

in developing the assumptions of the expected future cash flows, which in turn led to significant auditor judgement, subjectivity, and

effort in performing audit procedures and evaluating audit evidence relating to the expected future cash flows.

Additionally, for certain

finance receivables, there may be limited historical data with which to evaluate the expected future cash flows.

Addressing the matter involved performing procedures and evaluating

audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among

others, evaluating management’s process and valuation method for developing the estimate of expected cash flows of its finance receivables

and potential credit losses, testing the completeness and accuracy of the underlying data used in the estimate, and evaluating management’s

assumptions used to estimate future cash flows.

Evaluating management’s assumptions used to estimate future cash flows for reasonableness

involved considering historical cash flows from the Company’s finance receivable portfolio, comparing prior period estimates to

actual results of the same period, publicly available information which supports or is to the contrary of the estimated future cash flows

and determining whether the estimated cash flows used were consistent with evidence obtained in other areas of the audit.

have served as the Company’s auditor since 2006.

Francisco, California

HOLDINGS CORPORATION

described in Note 3 to the consolidated financial statements, the Company’s consolidated finance receivables balance was $274.5

million as of December 31, 2023, which is net of the allowance for credit losses of $13.9 million.

The Company generated $36.3 million

of finance receivable interest income, including fees during the year ended December 31, 2023.

The Company’s finance receivables

are stated at amortized cost, net of unamortized origination fees, if any.

Interest income on the finance receivables is recorded on an

accrual basis based on the effective interest rate method to the extent that the Company expects to collect such amounts.

evaluates the collectibility of both interest and principal for each finance receivable to determine whether it is impaired.

receivable is considered to be impaired when, based on current information and events, the Company determines it is probable that it will

be unable to collect amounts due according to existing contractual terms.

When a loan is considered to be impaired, the amount of loss

is calculated by comparing the carrying value of the finance receivable to the value determined by discounting the expected future cash

If actual cash flows were to be substantially lower than estimated, there could be a significant adverse impact on the carrying

value of the finance receivables and results of operations.

The principal considerations for our determination that performing procedures relating to valuation of the finance receivables is a critical

audit matter are its overall impact on the consolidated financial statements, including the realization of the Company’s deferred

tax assets, and the significant amount of judgement by management in developing the assumptions of the expected future cash flows, which

in turn led to significant auditor judgement, subjectivity, and effort in performing audit procedures and evaluating audit evidence relating

to the expected future cash flows.

Additionally, for certain finance receivables, there may be limited historical data with which to evaluate

the expected future cash flows.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included, among others, (i) evaluating management’s process and valuation method

for developing the estimate of expected cash flows of its finance receivables and potential credit losses;

(ii) testing the completeness

and accuracy of the underlying data used in the estimate;

and (iii) evaluating management’s assumptions used to estimate future

Evaluating management’s assumptions used to estimate future cash flows for reasonableness involved (i) considering historical

cash flows from the Company’s finance receivable portfolio;

(ii) comparing prior period estimates to actual results of the same

(iii) publicly available information which supports or is to the contrary of the estimated future cash flows and;

(iv) determining

whether the estimated cash flows used were consistent with evidence obtained in other areas of the audit.

Quantitative Goodwill Impairment Assessment

- Enteris Reporting Unit

As described in Note 2 to the consolidated financial

statements, the net book value of the Company’s goodwill asset is solely related to the Company’s acquisition of Enteris BioPharma,

(Enteris) in 2019.

During the year ended December 31, 2023, the Company recognized goodwill impairment expense of $8.4 million.

Management tests goodwill for impairment annually

during the fourth fiscal quarter as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

To determine the fair value of the reporting unit, management utilized the results derived from an income valuation approach.

approach is estimated through a probability-adjusted discounted cash flow analysis.

This valuation technique requires management to make

significant estimates and assumptions related to discount rates and forecasts of revenues and earnings.

The principal consideration for our determination

that performing procedures relating to the quantitative goodwill impairment assessment for the Enteris reporting unit is a critical audit

matter is the significant judgment by management when determining the fair value of the reporting unit, which in turn led to significant

auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to

forecasts of revenues, earnings and discount rates, as these assumptions may have a significant effect on the Company’s assessment

of the carrying value of the goodwill of the reporting unit.

Addressing the matter involved performing procedures

and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures

included, among others, (i) testing management’s process for developing the fair value estimate of the reporting unit;

(ii) evaluating

the appropriateness of management’s valuation model;

(iii) testing the completeness and accuracy of underlying data used in the

valuation model;

(iv) evaluating the significant assumptions used by management related to the projected revenues, earnings, and margins,

and the discount rate, and (v) underlying analysis detailing business strategies and plans, including internal communications to management

and the Board of Directors.

Evaluating management’s assumptions related to projected revenues, earnings and margins involved evaluating

whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii)

evaluating management’s process and valuation method for developing the estimate of expected cash flows;

(iii) the consistency with

external market data, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals

with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation approach and the discount

Valuation of Contingent Consideration Payable

As described in Note 7 and Note 9 to the consolidated financial

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

and royalties due to Enteris under a license agreement.

The Company evaluates the fair value of contingent consideration payable at each

reporting date.

During the year ended December 31, 2023, the Company recognized a remeasurement gain of $6.3 million for contingent consideration

To determine the fair value of contingent consideration

payable, management utilized the results derived from an income valuation approach, whereby management estimates probability-adjusted

discounted cash flows.

This valuation technique requires management to make significant estimates and assumptions related discount rates

and forecasts of probability-adjusted cash flows.

The principal consideration for our determination

that performing procedures relating to contingent consideration payable is a critical audit matter is the significant judgment by management

when determining the fair value of contingent consideration payable, which in turn led to significant auditor judgment, subjectivity and

effort in performing procedures and evaluating management’s significant assumptions related to forecasts of probability-adjusted

cash flows from the license agreement and discount rates, as these assumptions may have a significant effect on the Company’s assessment

of the fair value of contingent consideration payable.

Additionally, the valuation of contingent consideration payable is inherently interrelated

to the Company’s goodwill impairment assessment for the Enteris reporting unit.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our

overall opinion on the consolidated financial statements.

These procedures included, among others, (i) testing management’s process

for developing the fair value estimate;

(ii) evaluating the appropriateness of management’s valuation model;

(iii) testing the completeness

and accuracy of underlying data used in the valuation model;

and (iv) evaluating the significant assumptions used by management related

to the projected cash flows and the discount rate.

Evaluating management’s assumptions related to projected cash flows involved

evaluating whether the assumptions used by management were reasonable considering (i) evaluating management’s process and valuation

method for developing the estimate of expected cash flows, (ii) consistency with external market data, and (iii) whether these assumptions

were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist

in the evaluation of the Company’s valuation approach and the discount rate.

We have served

as the Company’s auditor since 2006.

San Francisco,

BALANCE SHEETS

thousands, except share data)

(In thousands,

except share data)

Current assets:

Cash and cash equivalents

Restricted cash

Interest and accounts receivable, net

Marketable investments

Other current assets

3 unchanged sentences

Marketable investments

Cost method investment

Deferred tax assets, net

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Contingent consideration payable

Unsecured senior notes, net

Revolving credit facility

Other non-current liabilities

5 unchanged sentences

no shares issued and outstanding

Common stock, $ 0.001 par value;

250,000,000 shares authorized;

12,843,157 and 12,836,133 shares issued and outstanding at December 31, 2022 and 2021, respectively

Common stock, $ 0.001

250,000,000 shares

12,497,770 and

12,843,157 shares issued and outstanding

at December 31, 2023 and 2022, respectively

Additional paid-in capital

4 unchanged sentences

Total liabilities and stockholders’ equity

accompanying notes to the consolidated financial statements.

HOLDINGS CORPORATION

See accompanying

notes to the consolidated financial statements.

S WK HOLDINGS

STATEMENTS OF INCOME

thousands, except per share data)

(In thousands,

except per share data)

Year Ended December

Finance receivable interest income, including fees

Finance receivable interest income, including

Pharmaceutical development

1 unchanged sentence

Costs and expenses:

Provision for credit losses

Allowance for credit losses

Impairment of goodwill

Interest expense

5 unchanged sentences

Other income (expense), net

Unrealized net gain on warrants

Unrealized net (loss) gain on equity securities

Realized loss on sale of investments

Foreign currency transaction loss

Income before income tax (benefit) expense

Income tax (benefit) expense

Unrealized net (loss) gain on warrants

Unrealized net loss on equity securities

Realized loss from sale of investments

Foreign currency transaction gain (loss)

Income before income tax benefit

Income tax benefit

Net income per share

Weighted average shares outstanding

accompanying notes to the consolidated financial statements.

HOLDINGS CORPORATION

See accompanying

notes to the consolidated financial statements.

STATEMENTS OF STOCKHOLDERS’ EQUITY

4 unchanged sentences

of common stock upon vesting of restricted stock

of unvested restricted stock

settlement for employee taxes on restricted stock and options

options exercised, net

of common stock in the open market

at December 31, 2022

1 unchanged sentence

of common stock upon vesting of restricted stock

of unvested restricted stock

settlement for employee taxes on restricted stock and options

of adoption of ASU 2016-13

options exercised, net

of common stock in open market

of common stock in the open market

at December 31, 2023

$ ( 4,144,801 )

accompanying notes to the consolidated financial statements.

HOLDINGS CORPORATION

See accompanying

notes to the consolidated financial statements.

STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash flows from operating activities:

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

Provision for credit losses

Adjustments to reconcile net income to net cash provided

by operating activities:

Allowance for credit losses

Amortization of debt issuance costs

Impairment of goodwill

Right-of-use asset amortization

2 unchanged sentences

Change in fair value of equity securities

Foreign currency transaction loss

Realized loss from write down of warrant assets

Foreign currency transaction (gain) loss

Loss on sale of marketable securities

3 unchanged sentences

Stock-based compensation

Depreciation and amortization

Depreciation and amortization expense

Changes in operating assets and liabilities:

5 unchanged sentences

Cash flows from investing activities:

Proceeds from sale of marketable investments

Cash received from settlement of warrants and equity securities

Proceeds from sale of investment and finance receivables

Investment in finance receivables

2 unchanged sentences

Purchases of property and equipment

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Net settlement for employee taxes on restricted stock and options

Net settlement for employee taxes on restricted stock and

Payments for financing costs

Repurchases of common stock, including fees and expenses

Net proceeds from (payments on) credit facility

Proceeds from senior unsecured notes

Net proceeds from revolving credit facilities

Payment of acquisition-related contingent consideration

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Supplemental noncash flow activity:

1 unchanged sentence

Cash paid for interest

Fair value of common stock received in connection with payoff of term loan

Fair value of common stock received upon exercise of warrant

accompanying notes to the consolidated financial statements.

HOLDINGS CORPORATION

TO THE CONSOLIDATED FINANCIAL STATEMENTS

SWK Holdings Corporation and Summary of Significant Accounting Policies

of Operations

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

September 1999.

See accompanying

notes to the consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS

SWK Holdings Corporation

and Summary of Significant Accounting Policies

Nature of Operations

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

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

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

property licensing business.

In August 2019,

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

The Company’s operations comprise two reportable segments:

“Finance Receivables”

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

the sales of life science products by third parties.

“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.

1 unchanged sentence

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 March 14, 2024, the Company and its partners have executed transactions with 55 different parties under its specialty finance

strategy, funding an aggregate $779.4 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.

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 stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral

drug delivery technologies, the Peptelligence® platform.

of Presentation and Principles of Consolidation

Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in

the United States.

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.

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

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

Basis of Presentation and Principles

of Consolidation

Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United

States (“GAAP”).

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

a controlling financial interest as of the financial statement date.

Normally a controlling financial interest reflects ownership of

a majority of the voting interests.

The Company consolidates a variable interest entity (“VIE”) when it possesses both the

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

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

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

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

The Company consolidates its investments

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

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

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

remove the Company.

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.

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 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.

Use of Estimates

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

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

amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions are required in the determination

of revenue recognition;

stock-based compensation;

valuation of accounts receivable;

impairment of finance

impairment of finance receivables;

long-lived assets;

5 unchanged sentences

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

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.

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.

Segment Information

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

its specialty finance and asset management business offering

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

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

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

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

to pharmaceutical partners as well as innovative formulation solutions built around its proprietary oral drug delivery technologies,

the Peptelligence ® platform.

and Intangible Assets

Company’s methodology for allocating the purchase price of an acquisition is based on established valuation techniques that

reflect the consideration of a number of factors, including a valuation performed by a third-party appraiser.

Goodwill is measured

as the excess of the cost of an acquired business over the fair value assigned to identifiable assets acquired and liabilities

Goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is

less than its carrying value.

If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment

is recognized based on that difference, not to exceed the carrying amount of goodwill.

A reporting unit is an operating segment

or a component of an operating segment provided that the component constitutes a business for which discrete financial information

is available and management regularly reviews the operating results of that component.

Goodwill arising from the Enteris acquisition

has been allocated to the Pharmaceutical Development segment.

intangible assets are amortized over their estimated useful life, which is the period over which the assets are expected to contribute

Company’s methodology for allocating the purchase price of an acquisition is based on established valuation techniques that reflect

the consideration of a number of factors, including a valuation performed by a third-party appraiser.

Goodwill is measured as the excess

of the cost of an acquired business over the fair value assigned to identifiable assets acquired and liabilities assumed.

considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value.

If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference,

not to exceed the carrying amount of goodwill.

A reporting unit is an operating segment or a component of an operating segment provided

that the component constitutes a business for which discrete financial information is available and management regularly reviews the

operating results of that component.

Goodwill arising from the Enteris acquisition has been allocated to the Pharmaceutical Development

Finite-lived intangible assets are amortized over their estimated useful life, which is the period over which the assets are expected to contribute

directly or indirectly to the future cash flows of the Company.

Goodwill and indefinite-lived intangible assets are not amortized,

but instead, are subject to annual impairment testing.

We review goodwill and indefinite-lived intangible assets for impairment

annually during the fourth quarter and continually assess whether a triggering event has occurred to determine whether the carrying

value exceeds the implied fair value.

For the years ended December 31, 2022, and 2021, the Company determined there were no indicators

of impairment relating to identifiable finite-lived intangible assets.

Goodwill and indefinite-lived intangible assets are not amortized, but

instead, are subject to annual impairment testing.

We review goodwill and indefinite-lived intangible assets for impairment annually during

the fourth quarter and continually assess whether a triggering event has occurred to determine whether the carrying value exceeds the

implied fair value.

For the year ended December 31, 2023, the Company identified indicators of impairment for identifiable finite-lived

intangible assets due to the lowering of financial expectations for the License Agreement.

The Company performed a Step 2 recoverability

test in accordance with Accounting Standards Codification (“ASC”) 350, Property, Plant and Equipment and determined that the sum of undiscounted

future cash flows exceeded the carrying value.

As such, no further analysis was performed and no impairment

was recognized on identifiable finite-live intangible assets.

For the year ended December 31 2022, the Company determined there were no

indicators of impairment relating to identifiable finite-lived intangible assets.

identification and measurement of goodwill impairment involves the estimation of the fair value of the reporting unit.

the option to assess impairment through a qualitative assessment, which includes factors such as general economic conditions,

negative developments in equity and credit markets, adverse changes in the markets in which a reporting unit operates, increases

in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple

periods, among others.

When a potential impairment is indicated, we perform quantitative testing by comparing the estimated fair

value of the reporting unit to the carrying value of the reported net assets.

Under our quantitative testing, fair value is generally

based on the income approach using a calculation of discounted cash flows, based on the most recent financial projections for

the reporting unit.

The revenue growth rates included in the financial projections are our best estimates based on current and

forecasted market conditions, and the profit margin assumptions are projected by the reporting unit based on current cost structure

and, when applicable, anticipated net cost reductions.

on the Company’s 2022 goodwill impairment testing, no goodwill impairment was indicated as of December 31, 2022.

are stated at the lower of cost or net realizable value, valued at specifically identified cost which approximates the first-in,

first-out method.

The components of inventory include raw materials of $ 0.6 million as of both December 31, 2022 and 2021 and are

reflected in current assets in the consolidated balance sheets.

We have the option

to assess impairment through a qualitative assessment, which includes factors such as general economic conditions, negative developments

in equity and credit markets, adverse changes in the markets in which a reporting unit operates, increases in input costs that have a

negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others.

a potential impairment is indicated, we perform quantitative testing by comparing the estimated fair value of the reporting unit to the

carrying value of the reported net assets.

We also have the unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test.

Under our quantitative testing, fair value is generally based on the income approach

using a calculation of discounted cash flows, based on the most recent financial projections for the reporting unit.

The revenue growth

rates included in the financial projections are our best estimates based on current and forecasted market conditions, and the profit

margin assumptions are projected by the reporting unit based on current cost structure and, when applicable, anticipated net cost reductions.

During the year ended December 31, 2023, as a result

of decreasing the financial expectations for the License Agreement, the Company elected to bypass the qualitative goodwill impairment assessment

and proceed directly with a quantitative assessment.

The goodwill impairment test concluded that the fair value of the Company's Pharmaceutical

Development reporting unit did not exceed the carrying amount and the Company recognized an impairment charge of $8.4 million for the

year ended December 31, 2023, and reduced the goodwill balance to $0 as of December 31, 2023.

Refer to Note 2 for further information.

are stated at the lower of cost or net realizable value, valued at specifically identified cost which approximates the first-in, first-out

The components of inventory include raw materials of $ 0.6 million as of both December 31, 2023 and 2022 and are reflected in

current assets in the consolidated balance sheets.

and Equipment, Net

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are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred.

In addition, we capitalize

interest on borrowings during the active construction period of capital projects.

Capitalized interest is added to the cost of

the assets and depreciated over the estimated useful lives of the assets.

Leased property meeting certain criteria is capitalized

and the present value of the related lease payments is recorded as a liability and included in current liabilities.

In addition, we capitalize interest

on borrowings during the active construction period of capital projects.

Capitalized interest is added to the cost of the assets and

depreciated over the estimated useful lives of the assets.

Leased property meeting certain criteria is capitalized and the present value

of the related lease payments is recorded as a liability and included in current liabilities.

is recorded over the estimated useful lives of the assets involved using the straight-line method.

Leasehold improvements and

capitalized lease assets are amortized to depreciation expense over the estimated useful life of the asset or the respective lease

term used in determining lease classification, whichever is shorter.

Leasehold improvements and capitalized

lease assets are amortized to depreciation expense over the estimated useful life of the asset or the respective lease term used in determining

lease classification, whichever is shorter.

The range of estimated useful lives is as follows:

of Useful Life of Property and Equipment, Net

Estimated Useful Life

Schedule of Useful Life of Property and Equipment, Net

Leasehold improvements

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

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

Deferred revenue was $33,000 and $0.2 million as of December 31, 2022 and 2021, respectively, and is included in accounts

payable and accrued liabilities in the consolidated balance sheets.

The Company classifies

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

Deferred revenue

was $ 9,000 and $ 33,000 as of December 31, 2023 and 2022, respectively, and is included in accounts payable and accrued liabilities in

the consolidated balance sheets.

and Development

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

for the Company by third parties.

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

and supplies.

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

the Company by third parties.

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

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

Third-party expenses reimbursed under

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

and development expense in the consolidated statements of income.

Third-party expenses reimbursed under research and development

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

the consolidated statements of income.

Company extends credit to customers through a variety of financing arrangements, including revenue interest term loans.

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on loans are referred to as finance receivables and are included in finance receivables in the consolidated balance sheets.

is the Company’s expectation that the loans originated will be held for the foreseeable future or until maturity.

Company’s expectation that the loans originated will be held for the foreseeable future or until maturity.

In certain situations,

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Otherwise the write-down is recorded as a reduction in finance receivable interest

income, and any loan loss reserve is reversed.

Once classified as HFS, the amount by which the carrying value exceeds fair value

is recorded as a valuation allowance and is reflected as a reduction to finance receivable interest income.

it is determined that a loan should be transferred from HFS to HFI, the loan is transferred at the lower of cost or fair value

on the transfer date, which coincides with the date of change in management’s intent.

The difference between the carrying

value of the loan and the fair value, if lower, is reflected as a loan discount at the transfer date, which reduces its carrying

Subsequent to the transfer, the discount is accreted into earnings as an increase to finance revenue interest income over

the life of the loan using the effective interest method.

income, and any credit loss reserve is reversed.

Once classified as HFS, the amount by which the carrying value exceeds fair

value is recorded as a valuation allowance and is reflected as a reduction to finance receivable interest income.

it is determined that a loan should be transferred from HFS to HFI, the loan is transferred at the lower of cost or fair value on the

transfer date, which coincides with the date of change in management’s intent.

The difference between the carrying value of the

loan and the fair value, if lower, is reflected as a loan discount at the transfer date, which reduces its carrying value.

to the transfer, the discount is accreted into earnings as an increase to finance revenue interest income over the life of the loan using

the effective interest method.

Company accounts for its finance receivables at amortized cost, net of unamortized origination fees, if any.

Related fees and

costs are recorded net of any amounts reimbursed, and interest is accreted or accrued to interest revenue using the effective

interest method.

When and if supplemental payments are received from these long-term receivables, an adjustment to the estimated

effective interest rate is affected prospectively.

Related fees and costs are

recorded net of any amounts reimbursed, and interest is accreted or accrued to interest revenue using the effective interest method.

When and if supplemental payments are received from these long-term receivables, an adjustment to the estimated effective interest rate

is affected prospectively.

Company evaluates the collectibility of both interest and principal for each loan to determine whether it is impaired.

is considered to be impaired when, based on current information and events, the Company determines it is probable that it will

be unable to collect amounts due according to the existing contractual terms.

When a loan is considered to be impaired, the amount

of loss is calculated by comparing the carrying value of the financial asset to the value determined by discounting the expected

future cash flows at the loan’s effective interest rate or to the estimated fair value of the underlying collateral, less

costs to sell, if the loan is collateralized and the Company expects repayment to be provided solely by the collateral.

assessments require significant judgments and are based on significant assumptions related to the borrower’s credit risk,

financial performance, expected sales, and estimated fair value of the collateral.

for Credit Losses on Finance Receivables

A loan is considered

to be impaired when, based on current information and events, the Company determines it is probable that it will be unable to collect

amounts due according to the existing contractual terms.

When a loan is considered to be impaired, the amount of loss is calculated by

comparing the carrying value of the financial asset to the value determined by discounting the expected future cash flows at the loan’s

effective interest rate or to the estimated fair value of the underlying collateral, less costs to sell, if the loan is collateralized

and the Company expects repayment to be provided solely by the collateral.

Impairment assessments require significant judgments and are

based on significant assumptions related to the borrower’s credit risk, financial performance, expected sales, and estimated fair

value of the collateral.

Allowance for Credit Losses

on Finance Receivables

allowance for credit losses is intended to provide for credit losses inherent in the finance receivables portfolio and is periodically

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to the allowance for credit losses are recorded in the provision for loan credit losses in the consolidated statements of income.

Company adopted Accounting Standards Update 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.

Accounting Pronouncements section below and Note 3 for further information.

Marketable Investments

Company’s marketable investment portfolio includes debt securities as of December 31, 2023.

The debt security is

classified as an available-for-sale security, which is reported at fair value with unrealized gains or losses recorded in statements

of other comprehensive income, net of applicable income taxes.

In any case where fair value might fall below amortized cost, the

Company would consider whether that security is other-than temporarily impaired using all available information about the collectibility

of the security.

The Company would not consider that an other-than temporary impairment for a debt security has occurred if (1)

the Company does not intend to sell the debt security, (2) it is not more likely than not that the Company will be required to

sell the debt security before recovery of its amortized cost basis and (3) the present value of estimated cash flows will fully

cover the amortized cost of the security.

The Company would consider that an other-than-temporary impairment has occurred if any

of the above mentioned three conditions are not met.

a debt security for which an other-than-temporary impairment is considered to have occurred, the Company would recognize the entire

difference between the amortized cost and the fair value in earnings if the Company intends to sell the debt security or it is

more likely than not that the Company will be able to sell the debt security before recovery of its amortized cost basis.

Company does not intend to sell the debt security and it is not more likely than not that the Company will be required to sell

the debt security before recovery of its amortized cost basis, the Company would separate the difference between the amortized

cost and the fair value of the debt security into the credit loss component and the non-credit loss component.

The credit loss

component would be recognized in earnings and the non-credit loss component would be recognized in other comprehensive income,

net of applicable income taxes.

Currency Transactions

The debt security is classified as an

available-for-sale security, which is reported at fair value with unrealized gains or losses recorded in statements of other comprehensive

income, net of applicable income taxes.

In any case where fair value might fall below amortized cost, the Company would consider whether

that security is other-than temporarily impaired using all available information about the collectibility of the security.

would not consider that an other-than temporary impairment for a debt security has occurred if (1) the Company does not intend to sell

the debt security, (2) it is not more likely than not that the Company will be required to sell the debt security before recovery of its

amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized cost of the security.

would consider that an other-than-temporary impairment has occurred if any of the above mentioned three conditions are not met.

a debt security for which an other-than-temporary impairment is considered to have occurred, the Company would recognize the entire difference

between the amortized cost and the fair value in earnings if the Company intends to sell the debt security or it is more likely than

not that the Company will be able to sell the debt security before recovery of its amortized cost basis.

If the Company does not intend

to sell the debt security and it is not more likely than not that the Company will be required to sell the debt security before recovery

of its amortized cost basis, the Company would separate the difference between the amortized cost and the fair value of the debt security

into the credit loss component and the non-credit loss component.

The credit loss component would be recognized in earnings and the non-credit

loss component would be recognized in other comprehensive income, net of applicable income taxes.

Foreign Currency Transactions

Company uses the U.S.

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within other income (expense), net in the consolidated statements of income in the period of occurrence.

Other Receivables

of December 31, 2023, the Company had collateral receivable of $2.8 million with the counterparties on its foreign currency exchange

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Changes in fair value for derivatives

that do not meet the criteria for hedge accounting, or for which the Company has not elected hedge accounting are recorded in the consolidated statements of income.

If a derivative

is recorded using hedge accounting, then depending on its nature, changes in its fair value will be either offset against change in the fair value of

hedged assets or liabilities through the consolidated statements of income or recorded in other comprehensive income.

that do not meet the criteria for hedge accounting, or for which the Company has not elected hedge accounting are recorded in the consolidated

statements of income.

If a derivative is recorded using hedge accounting, then depending on its nature, changes in its fair value will

be either offset against change in the fair value of hedged assets or liabilities through the consolidated statements of income or recorded

in other comprehensive income.

Company had no derivatives designated as hedges as of December 31, 2023 and 2022.

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assets in the consolidated balance sheets.

The Company also 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 discussed in Note 9 is not designated as a hedging instrument, and changes in fair value are recognized in earnings.

Receivables Segment

Company’s Finance Receivables segment records interest income on an accrual basis based on the effective interest rate method

to the extent that it expects to collect such amounts.

The Company recognizes investment management fees when clients invest in

our recommended transactions as earned over the period the services are rendered.

In general, the majority of investment management

fees earned are charged either monthly or quarterly.

Incentive fees, if any, are recognized when earned at the end of the relevant

performance period, pursuant to the underlying contract.

The Company also 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

The foreign currency forward contract discussed in Note 9 is not designated as a hedging instrument, and changes in fair value

are recognized in earnings.

Revenue Recognition

Finance Receivables Segment

Company’s Finance Receivables segment records interest income on an accrual basis based on the effective interest rate method to

the extent that it expects to collect such amounts.

The Company recognizes investment management fees when clients invest in our recommended

transactions as earned over the period the services are rendered.

Incentive fees, if any, are recognized when earned at the end of the

relevant performance period, pursuant to the underlying contract.

The Company did not recognize any management or incentive fees in 2023

Other service revenues are recognized when contractual obligations are fulfilled or as services are provided.

Pharmaceutical

Development Segment

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

Pharmaceutical Development Segment

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

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

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

non-refundable,

upfront license fees;

non-refundable, upfront license

reimbursement of certain costs;

customer option exercise fees;

development, regulatory and commercial milestone

and royalties on net sales of licensed products.

determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the

Company performs the following steps:

development, regulatory and commercial milestone payments;

and royalties

on net sales of licensed products.

determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company

performs the following steps:

(i) identification of the promised goods or services in the contract;

(ii) determination

of whether the promised goods or services are performance obligations including whether they are distinct in the context of the

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the

transaction price to the performance obligations;

and (v) recognition of revenue when (or as) the Company satisfies each performance

As part of the accounting for these arrangements, the Company must use its judgment to determine:

(a) the number of

performance obligations based on the determination under step (ii) above;

(ii) determination of whether the

promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement

of the transaction price, including the constraint on variable consideration;

(iv) allocation of the transaction price to the performance

and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

As part of the accounting

for these arrangements, the Company must use its judgment to determine:

(a) the number of performance obligations based on the determination

under step (ii) above;

(b) the transaction price under step (iii) above;

the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price

in step (iv) above;

and (d) the contract term and pattern of satisfaction of the performance obligations under step (v) above.

The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included

in the transaction price as described further below.

The transaction price is allocated to each performance obligation on a relative

stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract

are satisfied.

received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated

balance sheets.

Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as

current deferred revenue.

Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are

classified as deferred revenue, net of current portion.

Deferred revenue as of December 31, 2022 and 2021 was $ 33,000

million , respectively, and is classified as current deferred revenue and is included in accounts payable and accrued

liabilities in the consolidated balance sheets.

Company evaluates collaboration agreements with respect to FASB ASC Topic 808, Collaborative Arrangements , considering

the nature and contractual terms of the arrangement and the nature of its business operations to determine the classification

of the transactions.

When the Company is an active participant in the activity and exposed to significant risks and rewards dependent

on the commercial success of the collaboration, it will record its transactions on a gross basis in the consolidated financial

statements and describe the rights and obligations under the collaborative arrangement in the notes to the consolidated financial

identified in the contract for the allocation of transaction price in step (iv) above;

and (d) the contract term and pattern of satisfaction

of the performance obligations under step (v) above.

The Company uses judgment to determine whether milestones or other variable consideration,

except for royalties, should be included in the transaction price as described further below.

The transaction price is allocated to each

performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance

obligations under the contract are satisfied.

received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance

Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current

deferred revenue.

Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified

as deferred revenue, net of current portion.

Deferred revenue as of December 31, 2023 and 2022 was $ 9,000 and $ 33,000 , respectively,

and is classified as current deferred revenue and is included in accounts payable and accrued liabilities in the consolidated balance

Company evaluates collaboration agreements with respect to the Financial Accounting Standards Board ("FASB") ASC Topic 808, Collaborative

Arrangements, considering the nature and contractual terms of the arrangement and the nature of its business operations to determine the

classification of the transactions.

When the Company is an active participant in the activity and exposed to significant risks and rewards

dependent on the commercial success of the collaboration, it will record its transactions on a gross basis in the consolidated financial

statements and describe the rights and obligations under the collaborative arrangement in the notes to the consolidated financial statements.

the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations

identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when

the license is transferred to the customer and the customer is able to use and benefit from the license.

In assessing whether

a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, manufacturing

and commercialization capabilities of the collaboration partner;

identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license

is transferred to the customer and the customer is able to use and benefit from the license.

In assessing whether a promise or performance

obligation is distinct from the other promises, the Company considers factors such as the research, manufacturing and commercialization

capabilities of the collaboration partner;

the retention of any key rights by the Company;

and the availability

of the associated expertise in the general marketplace.

In addition, the Company considers whether the collaboration partner can

benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise

is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether

it is separately identifiable from the remaining promise.

For licenses that are combined with other promises, the Company exercises

judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation

is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance

and related revenue recognition.

The measure of progress, and thereby periods over which revenue should be recognized, are subject

to estimates by management and may change over the course of the research and development and licensing agreement.

Such a change

could have a material impact on the amount of revenue the Company records in future periods.

an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the

goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement,

as they are contingent upon option exercise.

The Company evaluates the customer options for material rights, or options to acquire

additional goods or services for free or at a discount.

If the customer options are determined to represent a material right,

the material right is recognized as a separate performance obligation at the outset of the arrangement.

The Company allocates

the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified

discount and the probability that the customer will exercise the option.

Amounts allocated to a material right are not recognized

as revenue until, at the earliest, the option is exercised.

and the availability of the associated expertise

in the general marketplace.

In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended

purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promise, whether

there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise.

For licenses that are combined with other promises, the Company exercises judgment to assess the nature of the combined performance obligation

to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate

method of measuring progress for purposes of recognizing revenue.

The Company evaluates the measure of progress each reporting period

and, if necessary, adjusts the measure of performance and related revenue recognition.

The measure of progress, and thereby periods over

which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development

and licensing agreement.

Such a change could have a material impact on the amount of revenue the Company records in future periods.

an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and

services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are

contingent upon option exercise.

The Company evaluates the customer options for material rights, or options to acquire additional goods

or services for free or at a discount.

If the customer options are determined to represent a material right, the material right is recognized

as a separate performance obligation at the outset of the arrangement.

The Company allocates the transaction price to material rights

based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer

will exercise the option.

Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.

and Development Services

promises under the Company’s collaboration agreements may include research and development services to be performed by the

Company on behalf of the partner.

Payments or reimbursements resulting from the Company’s research and development efforts

are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts.

Reimbursements from and payments to the partner that are the result of a collaborative relationship with the partner, instead

of a customer relationship, such as co-development activities, are recorded as a reduction to research and development expense.

the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are

considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the

transaction price.

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals,

are not considered probable of being achieved until those approvals are received.

The Company evaluates factors such as the scientific,

clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment.

There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur.

At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject

to constraint and, if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a

cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed

to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related

sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied

(or partially satisfied).

promises under the Company’s collaboration agreements may include research and development services to be performed by the Company

on behalf of the partner.

Payments or reimbursements resulting from the Company’s research and development efforts are recognized

as the services are performed and presented on a gross basis because the Company is the principal for such efforts.

Reimbursements from

and payments to the partner that are the result of a collaborative relationship with the partner, instead of a customer relationship,

such as co-development activities, are recorded as a reduction to research and development expense.

the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered

probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method.

is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable

of being achieved until those approvals are received.

The Company evaluates factors such as the scientific, clinical, regulatory, commercial,

and other risks that must be overcome to achieve the particular milestone in making this assessment.

There is considerable judgment involved

in determining whether it is probable that a significant revenue reversal would not occur.

At the end of each subsequent reporting period,

the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate

of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings

in the period of adjustment.

arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to

be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur,

or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

and Cash Equivalents

Company considers all highly liquid investments with an original maturity date of three months or less at the date of purchase

to be cash equivalents.

There were no such investments at December 31, 2022 or 2021, as all of our cash was held in checking,

savings and brokerage accounts.

As of December 31, 2022, cash was deposited in financial institutions and consisted

of immediately available fund balances.

The Company maintains its cash deposits with well-known

and stable financial institutions but balances may exceed stated federally insured limits.

and Accounts Receivable

Cash Equivalents

Company considers all highly liquid investments with an original maturity date of three months or less at the date of purchase to be

cash equivalents.

There were no such investments at December 31, 2023 or 2022, as all of our cash was held in checking, savings and brokerage

As of December 31, 2023, cash was deposited in financial institutions and consisted of immediately available fund balances.

Company maintains its cash deposits with well-known and stable financial institutions but balances may exceed stated federally insured

Restricted Cash

Restricted cash as of December

31, 2023 is composed of a holdback amount associated with one of the Company's finance receivables.

Interest and Accounts Receivable

Company records interest receivable on an accrual basis and recognizes it as earned in accordance with the contractual terms of the loan

11 unchanged sentences

receivable for management fees are recorded at the aggregate unpaid amount less any allowance for doubtful accounts.

determines an account receivable’s delinquency status based on its contractual terms.

Interest is not charged on outstanding

Accounts are written-off only when all methods of recovery have been exhausted.

As of December 31, 2022 and 2021, the

allowance for doubtful accounts was zero.

Risks and Concentrations

instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash

equivalents, interest and accounts receivable, finance receivables and marketable investments.

The Company invests its excess

cash with major U.S.

The Company determines

an account receivable’s delinquency status based on its contractual terms.

Interest is not charged on outstanding balances.

are written-off only when all methods of recovery have been exhausted.

As of December 31, 2023 and 2022, the allowance for doubtful accounts

Certain Risks and Concentrations

instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents,

interest and accounts receivable, finance receivables and marketable investments.

The Company invests its excess cash with major U.S.

banks and financial institutions.

The Company has not experienced any losses on its cash and cash equivalents.

Receivables Segment

Finance Receivables

Company performs ongoing credit evaluations of its partner companies and generally requires collateral.

For the year ended

December 31, 2022, two of our business partners accounted for 31 percent of our interest and accounts receivable.

ended December 31, 2021, five of our business partners accounted for 63 percent of our interest and accounts receivable.

For the year ended December

31, 2023, three of our business partners accounted for 35 percent of our interest and accounts receivable.

ended December 31, 2022, two of our business partners accounted for 31 percent of our interest and accounts receivable.

Pharmaceutical

3 unchanged sentences

Company does not expect its current or future credit risk exposures to have a significant impact on its operations.

However, there

can be no assurance that its business will not experience any adverse impact from credit risk in the future.

employee and director stock-based compensation is measured at the grant date, based on the estimated fair value of the award,

and is recognized as an expense over the requisite service period.

Stock-based compensation expense is reduced for estimated future

However, there can

be no assurance that its business will not experience any adverse impact from credit risk in the future.

Stock-based Compensation

employee and director stock-based compensation is measured at the grant date, based on the estimated fair value of the award, and is

recognized as an expense over the requisite service period.

Stock-based compensation expense is reduced for estimated future forfeitures.

These estimates are revised in future periods if actual forfeitures differ from the estimates.

Changes in forfeiture

estimates impact compensation expense in the period in which the change in estimate occurs.

restricted stock, the Company recognizes compensation expense in accordance with the fair value of the Company’s stock as

determined on the grant date, amortized over the applicable service period.

When vesting of awards is based wholly or in part

upon the future performance of the stock price, such terms result in adjustments to the grant date fair value of the award and

the derivation of a service period.

If service is provided over the derived service period, the adjusted fair value of the awards

will be recognized as compensation expense, regardless of whether or not the awards vest.

Fair Value of Financial

The recorded values of cash and

restricted cash, accounts and finance receivables, accounts payable, and accrued expenses approximate the fair values due to the

short-term nature of the instruments.

The recorded values of our foreign currency forwards are fair value based on observable

inputs other than quoted prices.

Changes in forfeiture estimates impact

compensation expense in the period in which the change in estimate occurs.

restricted stock, the Company recognizes compensation expense in accordance with the fair value of the Company’s stock as determined

on the grant date, amortized over the applicable service period.

When vesting of awards is based wholly or in part upon the future performance

of the stock price, such terms result in adjustments to the grant date fair value of the award and the derivation of a service period.

If service is provided over the derived service period, the adjusted fair value of the awards will be recognized as compensation expense,

regardless of whether or not the awards vest.

Fair Value of Financial Instruments

recorded values of cash and restricted cash, accounts and finance receivables, accounts payable, and accrued expenses approximate the

fair values due to the short-term nature of the instruments.

The recorded values of our foreign currency forwards are fair value based

on observable inputs other than quoted prices.

tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial

statement carrying amounts of existing assets and liabilities and their respective tax bases.

A valuation allowance is recorded

to reduce deferred tax assets to an amount where realization is more likely than not.

the Company ultimately determines that the payment of such a liability is not necessary, then the Company reverses the liability

and recognizes a tax benefit during the period in which the determination is made that the liability is no longer necessary.

Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax benefit in

the statements of income.

Comprehensive

consolidated statements of comprehensive income have been omitted, as net income equals comprehensive income for the years ended

December 31, 2022 and 2021.

Income per Share

A valuation allowance is recorded to reduce

deferred tax assets to an amount where realization is more likely than not.

the Company ultimately determines that the payment of such a liability is not necessary, then the Company reverses the liability and

recognizes a tax benefit during the period in which the determination is made that the liability is no longer necessary.

recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax benefit in the statements

Comprehensive Income

The consolidated

statements of comprehensive income have been omitted, as net income equals comprehensive income for the years ended December 31, 2023

Net Income per Share

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

Diluted net income per

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

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

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

Diluted net income per share

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

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

following table shows the computation of basic and diluted earnings per share for the following (in thousands, except per share amounts):

Schedule of Basic

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Diluted net income per share

of December 31, 2022 and 2021, outstanding options to purchase shares of common stock and outstanding shares of restricted stock

in an aggregate of approximately 248,000 and 368,000 , respectively, have been excluded from the calculation of diluted net income

per share, as such securities were anti-dilutive.

Accounting Pronouncements

March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance for

a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform

on financial reporting.

ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles

(“GAAP”) to transactions affected by reference rate reform if certain criteria are met.

of December 31, 2023 and 2022, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an

aggregate of approximately 122,000 and 248,000 , respectively, have been excluded from the calculation of diluted net income per share,

as such securities were anti-dilutive.

Recent Accounting Pronouncements

March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance for a

limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on

financial reporting.

ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by

reference rate reform if certain criteria are met.

These transactions include:

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

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

December 31, 2024.

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

in each situation.

The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04

and does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial statements.

March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures,”

which updates the requirements for accounting for credit losses under Accounting Standards Codification 326, eliminates the accounting

guidance on troubled debt restructurings for creditors, and enhances creditors’ disclosure requirements related to loan

refinancings and restructurings for borrowers experiencing financial difficulty.

The ASU also amends the guidance on vintage disclosures

to require disclosure of gross write-offs by year of origination.

The amendments are effective in periods beginning after December

15, 2022 using either a prospective or modified retrospective transition.

Early adoption of certain or all of the amendments is

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU

adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses

rather than incurred losses.

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

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

This ASU describes the impairment allowance as a valuation

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

expected to be collected on the financial asset.

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

in a manner similar to current GAAP;

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

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

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

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

Effective Dates,” which finalized various effective date delays for private

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

Under ASU 2019-10, the effective date for implementation

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

December 15, 2022.

Company will adopt the new CECL model effective January 1, 2023, using the modified retrospective approach for all financial assets measured

at amortized cost, as well as off-balance sheet credit exposures such a unfunded commitments.

The Company has developed a methodology

and model to be used upon adoption.

As of December 31, 2022, the Company’s Finance Receivables totaled $236.6 million with

a corresponding allowance for loan losses of $11.8 million under current GAAP.

Management evaluated the calculation of its allowance

under ASU 2016-13 parallel to its current modeling, and the Company estimates the adoption of the new guidance will result in an increase

to the allowance for credit losses, including the reserve for off-balance sheet credit exposure (please see Note 7 for further details

on the Company’s off-balance sheet credit exposure), between $1.0 million and $2.0 million.

other assets within the scope of Topic 326, such as accounts and other receivables, management expects the adoption of this standard

to have an immaterial impact on the Company’s consolidated financial statements.

As the Company finalizes its implementation of

ASU 2016-13, final decisions by management may result in a different impact than that stated above for financial statement and

disclosure purposes.

Goodwill and Intangible Assets

was no change in the carrying amount of goodwill from December 31, 2021 to December 31, 2022, and net book value remains at $8.4

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

The Company reviews goodwill for

impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be

The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of

the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform an impairment

If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its

carrying value.

If the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is

not impaired.

If the carrying value of the reporting unit’s goodwill exceeds its fair value, then the Company must record an

impairment charge equal to the difference.

As of December 31, 2022, the Company concluded that it is

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

of December 31, 2022 and 2021, the

gross book value, accumulated amortization, net book value and estimated useful life of acquired intangible assets were as follows

(in thousands, except estimated useful life data):

(i) contract modifications, (ii) hedging

relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity.

ASU 2020-04 was effective upon

issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024.

The Company has

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

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, 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 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.

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 (“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.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which requires

public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis.

ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December

Early adoption is permitted.

Public entities are required to adopt the changes retrospectively, recasting each prior-period

disclosure for which a comparative income statement is presented in the period of adoption.

The Company is currently evaluating the impact

of adopting this ASU on the Company's consolidated financial statements and disclosures.

In December 2023,

the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The standard is intended to provide greater

transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well

as the qualitative and quantitative aspects of those components.

The ASU is effective for fiscal years beginning after December 15, 2024,

with early adoption permitted.

The Company is currently evaluating the impact of this accounting standard update on its consolidated

financial statements and related disclosures.

Goodwill and Intangible

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

The Company reviews goodwill for impairment on an annual

basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

During the year ended

December 31, 2023 the Company decreased its financial expectations for the License Agreement and elected to bypass the qualitative goodwill

impairment assessment and proceed directly with a quantitative assessment.

The goodwill impairment test concluded that the fair value

of the Company's Pharmaceutical Development reporting unit did not exceed the carrying amount and the Company recorded an impairment charge

of $8.4 million and reduced the goodwill balance to $0.

An income valuation approach was used to estimate the fair value of the Enteris

reporting unit which was estimated through a probability-adjusted discounted cash flow analysis.

During the prior year ended December

31, 2022 the carrying amount of goodwill did not change.

Intangible Assets

of December 31, 2023 and 2022, the gross book value, accumulated amortization,

net book value and estimated useful life of acquired intangible assets were as follows (in thousands, except estimated useful life data):

Schedule of Intangible Assets

As of December 31, 2023

Net Book Value

Estimated Useful

License Agreement (1)

3 unchanged sentences

As of December 31, 2022

Net Book Value

Estimated Useful

License Agreement (1)

2 unchanged sentences

Total intangible assets

to our acquisition of Enteris, Enteris entered into the License Agreement with Cara, for oral formulation rights to Enteris’ Peptelligence®

technology to develop and commercialize Oral KORSUVA TM in any indication worldwide, excluding South Korea and Japan.

is obligated to pay Enteris certain development, regulatory and tiered commercial milestone payments, as well as low single-digit royalties

based on net sales in the licensed territory.

(1) Prior to our acquisition of Enteris, Enteris entered into the

License Agreement with 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 was $ 1.7 million and

$ 1.8 million for

the years ended December 31, 2022 and 2021 ,

respectively, and was recorded in the consolidated statements of net income.

Based on amounts recorded at December 31, 2022,

the Company will recognize acquired intangible asset amortization as follows (in thousands):

the years ended December 31, 2023 and 2022 , respectively, and

was recognized in the consolidated statements of net income.

Based on amounts recorded at December 31, 2023, the Company

will recognize acquired intangible asset amortization as follows (in thousands):

Schedule of Intangible Asset Amortization Expense

Finance Receivables

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

deferred fees and costs.

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

expected using the effective interest method.

of December 31, 2022, the Company had credit loss allowance of $11.8 million.

Of the total $11.8 million, $ 1.2

million is associated with the Company’s Cambia® royalty, $ 0.6

million is associated with the Company’s Besivance® royalty, and $3.5 million is associated with the

Company’s TRT cost-method investment.

During the year ended December 31, 2022, the Company recognized a full reserve against its cost method investment due to

weaker than anticipated operational results.

The remaining $ 6.6

million is related to the Best ABT, Inc.

(“Best”), second lien term loan that was recognized in order to reflect

the Best royalty at its estimated fair value.

Approximately $23,906 of cash receipts received from the Company’s

Besivance® royalty during the year ended December 31, 2022 were applied toward the allowance for credit losses.

2029 and thereafter

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

fees and costs.

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

effective interest method.

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

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Total carrying value

Quality of Finance Receivables

for Credit Losses

ACL is management’s estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized

cost basis not expected to be collected, at the balance sheet date.

This estimate encompasses information about historical events, current

conditions and reasonable and supportable economic forecasts.

Determining the amount of the ACL is complex and requires extensive judgment

by management about matters that are inherently uncertain.

Given the current level of economic uncertainty, the complexity of the ACL

estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially,

in future periods.

Changes in the ACL may result from changes in current economic conditions, our economic forecast, and circumstances

not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.

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

For finance receivables

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

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

and unfunded commitments, generally excluding extensions and modifications.

The loan portfolio segment is defined as the level at which

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

As part of the Company’s quarterly

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

Term Loans and Royalty Purchases.

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

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

The reserve for

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

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

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

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

On January 1, 2023, the Company recorded an adjustment for unfunded commitments of $0.4 million for the adoption of ASU 2016-13.

As of December 31, 2023, the $0.2 million liability for credit losses on off-balance-sheet credit exposures is included in other

non-current liabilities.

Please refer to Note 7 for further information on the Company’s unfunded commitments.

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

Schedule of Allowance for Credit Losses

Allowance at beginning of period, prior to adoption

of ASU 2016-13

Write offs (1)

Effect of adoption of ASU 2016-13

Allowance for credit losses

Allowance at end of period (2)

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

No impact to consolidated statement of income for the year ended December 31, 2023.

Please refer to Note 1 for further details.

(2) The allowance at end of period as of December 31, 2022 excludes the Company's $3.5 million allowance on its cost

method investment.

Finance Receivables

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

This concentration of credit exposes

the Company to a higher degree of risk associated with this sector.

a quarterly basis, the Company evaluates the carrying value of each finance receivable for impairment.

A term loan is considered

to be impaired when, based on current information and events, it is determined that the Company will not be able to collect the

amounts due according to the loan contract, including scheduled interest payments.

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.

In certain circumstances, the Company may place a finance receivable on nonaccrual status but conclude it

is not impaired.

The Company may retain independent third-party valuations on such nonaccrual positions to support impairment

associated with royalty stream purchases would be considered to be impaired when it is probable that the Company will be unable

to collect the book value of the remaining investment based upon adverse changes in the estimated underlying royalty stream.

the Company identifies a finance receivable as impaired, it measures the impairment based on the present value of expected future

cash flows, discounted at the receivable’s effective interest rate, or the estimated fair value of the collateral, less

estimated costs to sell.

If it is determined that the value of an impaired receivable is less than the recorded investment, the

Company would recognize impairment with a charge to the allowance for credit losses.

When the value of the impaired receivable

is calculated by discounting expected cash flows, interest income would be recognized using the receivable’s effective interest

rate over the remaining life of the receivable.

Company individually develops the allowance for credit losses for any identified impaired loans.

In developing the allowance for

credit losses, the Company considers, among other things, the following credit quality indicators:

characteristics and financial conditions of obligors;

economic conditions and trends;

charge-off experience;

delinquency levels;

of underlying collateral and guarantees;

other relevant factors predicting investment recovery.

following table presents nonaccrual and performing loans by portfolio financing structure:

(in thousands):

Schedule of analysis of nonaccrual and performing loans by portfolio segment

December 31, 2022

December 31, 2021

This concentration of credit exposes the Company

to a higher degree of risk associated with this sector.

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

Recognition of income is suspended, and the finance

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

This evaluation

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

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

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

of collection.

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

amortization of any net deferred fees is suspended.

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

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

is no longer doubtful.

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

Schedule of Allowance for Credit Losses

Royalty purchases

Total before allowance for credit losses

Allowance for credit losses

Total carrying value

of December 31, 2022, the Company had three finance receivables in nonaccrual status:

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

(“Flowonix”), with a

net carrying value of $ 11.3 million ;

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

of December 31, 2023, the Company had four finance receivables in nonaccrual status:

(1) the term loan to Trio Healthcare Ltd.

(“Trio”), with a carrying value of $ 9.1

(2) the Flowonix Medical, Inc.

(“Flowonix”) royalty, with a carrying value of $ 10.4

million (see Loan Modifications Made to Borrowers Experiencing Financial Difficulty below for further details);

the Best ABT, Inc.

(“Best”) royalty, with a carrying value of $ 2.6

and (4) the Ideal Implant, Inc.

(“Ideal”) royalty, with a net carrying value of $ 3.8 million .

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

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

with a net carrying value of $ 10.0 million ;

(2) the term loan with B&D Dental Corporation (“B&D”), with a carrying amount of $ 8.3 million ;

and (3) the Best royalty, with a carrying amount of $ 3.4 million .

Although in nonaccrual status, none of the finance receivables were considered impaired as of December 31, 2022 and 2021.

collected $0.8 million and $1.2 million on its nonaccrual finance receivables during the year ended December 31, 2022 and December 31,

2021, respectively.

Property and Equipment, Net

and equipment, net consisted of the following as of December 31, 2022 and 2021 (in thousands):

(“Ideal”) royalty, with a carrying value of $ 3.8

Although in nonaccrual status, none of the finance receivables were considered impaired as of December 31, 2023.

Company collected $2.4 million and $1.1 million on its nonaccrual finance receivables during the year ended December 31, 2023 and

December 31, 2022, respectively.

Loan 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 year ended December 31, 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,

(“Algorithm”) during the year ended December 31, 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 December

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 December 31, 2023 and is considered in the $4.2 million

Royalty allowance for credit losses as of December 31, 2023.

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

to their restructured terms.

Credit Quality of Finance Receivables

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

the borrower’s likelihood of repayment.

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

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

The credit risk analysis and rating assignment is performed

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

The Company uses the following definitions

for its risk ratings for Term Loans:

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

debt is highly in question.

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

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

Borrower has limited access to additional

capital to operate its business.

Finance receivables rated a 2 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.

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

Borrower has demonstrated access to capital markets.

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

Borrower has demonstrated access to capital markets.

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 December 31,

2023 (in thousands):

Schedule of Financing Receivable by origination year

Subtotal - Term Loans

Subtotal - Royalty Purchases

Total Finance Receivables, gross

Property and Equipment,

equipment, net consisted of the following as of December 31, 2023 and 2022 (in thousands):

Schedule of Property

and Equipment, Net

December 31, 2023

December 31, 2022

Production equipment and other

4 unchanged sentences

Property and equipment, net

and amortization expense on property and equipment was $ 0.8 million and $ 0.6 million for the years ended December 31, 2022 and

2021, respectively.

and amortization expense on property and equipment was $ 0.8

million for both the years ended December 31, 2023 and 2022, respectively.

Marketable Investments

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

in corporate debt securities securities as of December 31, 2023 and 2022 consist of the following (in thousands):

Schedule of marketable investments

Corporate debt securities

Equity securities

Total marketable investments

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

debt securities as of December 31, 2022 and 2021, are as follows (in thousands):

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

securities as of December 31, 2023 and 2022, are as follows (in thousands):

Schedule of available-for-sale securities reconciliation

4 unchanged sentences

December 31, 2022

following table presents realized and unrealized gains and losses on equity securities as prescribed by ASC 321, Investments

- Equity Securities during the year ended December 31, 2022 and 2021.

following table presents realized and unrealized gains and losses on equity securities as prescribed by ASC 321, Investments - Equity

Securities during the year ended December 31, 2023 and 2022 (in thousands):

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

Unrealized net (loss) gain on equity securities reflected in the Consolidated Statements of Income

Fair value of common stock received upon exercise of warrant to purchase stock

Proceeds received on sale/tender of common stock

Realized net loss on sale/tender of equity securities reflected in the Consolidated Statements of Income

the year ended December 31, 2022, the Company exercised its right to purchase Harrow Health, Inc.

(“Harrow”) common

Upon exercise, the Company received 306,347 shares of Harrow common stock with a fair value of $3.7 million, or $11.97

During the year ended December 31, 2022, the Company sold its shares of Harrow and Bioventus common stock and received

proceeds of $3.7 million and $0.5 million, respectively.

Revolving Credit Facility

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

with Cadence Bank, N.A.

as a lender and the administrative agent.

Pursuant to the Fifth Amendment, the Loan and Security Agreement

dated as of June 29, 2018 (“Loan Agreement”) was amended to extend the Loan Agreement Termination Date to September

30, 2025 and increase the Loan Agreement Commitment to $35.0 million.

The Loan Agreement requires the payment of an unused line

fee of 0.50 percent and also provides for quarterly minimum fee income of $60,000 less the aggregate interest and unused line

fees paid during the immediately preceding quarter.

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

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

is repayable in full at maturity.

Interest is generally required to be paid monthly in arrears.

In connection with the Fifth Amendment,

the Company paid approximately $173,000 in amendment and other fees, which were capitalized as deferred financing costs and are

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

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

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

requirements as defined in the Loan Agreement.

The Loan Agreement contains certain affirmative and negative covenants including

minimum asset coverage and minimum interest coverage ratios.

of December 31, 2022, approximately $ 2.4 million was outstanding under the credit facility, and $ 32.6 million was available for

During the year ended December 31, 2022 and 2021, the Company recognized $ 0.3 million and $ 0.4 million , respectively,

of interest expense.

Unrealized net loss on equity securities

reflected in the Consolidated Statements of Income

Fair value of common stock received upon exercise of warrant

to purchase stock

Realized net loss on write-off of warrant assets and

sale/tender of equity securities reflected in the Consolidated Statements of Income

Equity Securities

was no equity securities activity during the year ended December 31, 2023.

During the year ended December 31, 2022, the Company exercised

its right to purchase Harrow Health, Inc.

(“Harrow”) common stock.

Upon exercise, the Company received 306,347 shares of

Harrow common stock with a fair value of $3.7 million, or $11.97 per share.

During the year ended December 31, 2022, the Company sold

its shares of Harrow and Bioventus common stock and received proceeds of $3.7 million and $0.5 million, respectively.

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 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.

As of December 31, 2023 the Company was

in compliance with all covenants.

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.

of December 31, 2023, $ 12.4 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 year December 31, 2023 and 2022, the Company recognized $1.0 million and

$0.3 million, respectively, of interest expense relating to the old and new Credit Agreements.

October 3, 2023, the Company issued a $30.0 million aggregate principal amount of 9 percent Senior Notes due 2027 (“2027 Senior

Notes” or “Notes”) in a registered underwritten public offering.

On October 27, 2023, the underwriter exercised in

full, its over-allotment option by purchasing an additional approximately $3.0 million aggregate principal amount of the 2027

Senior Notes.

The interest rates are fixed at 9% per annum and are payable quarterly in arrears on March 31, June 30, September 30, and

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

The Notes will mature on January 31, 2027.

total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $30.6

The Company intends to use the net proceeds from the Offering for general corporate purposes, including funding future acquisitions

and investments, repaying indebtedness, making capital expenditures, and funding working capital.

of Long Term Debt

The following table summarizes the outstanding

balance of the Notes, net of debt issuance costs, as of December 31 (in thousands):

2027 Senior Notes

Debt issuance costs

Total Long-term debt, net

The Company’s future principal obligations

for the notes were as follows as of December 31 (in thousands):

Schedule of Maturities of Long Term Notes

Total Long-term debt, net

Company may redeem the Notes for cash in whole or in part at any time (i) on or after September 30, 2025 (the “First Call Date”)

and prior to September 30, 2026, at a price equal to the sum of 102% of their principal amount, and (ii) on or after September 30, 2026

at a price equal to the sum of 100% of their principal amount, plus (in each case noted above) accrued and unpaid interest to, but excluding,

the date of redemption.

At any time prior to the First Call Date, the Company may, at its option, redeem the Notes for cash, in whole

at any time or in part from time to time at a redemption price equal to (i) 100% of the principal amount of Notes redeemed, plus (ii)

a Make-Whole Amount (as defined in the Indenture), plus (iii) accrued and unpaid interest, if any, to, but excluding, the date of redemption.

On and after any redemption date, interest will cease to accrue on the redeemed Notes.

Additionally, upon the occurrence of a Triggering

Event (as defined in the Indenture), holders of the Notes will have the right to require the Company to make an offer to repurchase all

or any portion of their Notes for cash at a purchase price equal to 100% of the aggregate principal amount thereof, plus accrued and

unpaid interest, if any, to, but excluding, the date of purchase.

Notes are senior unsecured obligations of the Company and rank equal in right of payment with the Company’s existing and future

senior unsecured indebtedness.

Company evaluated the 2027 Senior Notes for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified an embedded derivative

that required bifurcation as the feature is not clearly and closely related to the host instrument.

The embedded derivative was a default

provision, which could require additional interest payments.

The Company determined that the fair value of the embedded derivative was

immaterial as of December 31, 2023.

Commitments and Contingencies

842 establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on

the balance sheet for all leases with a term longer than twelve months.

Leases are classified as finance or operating, with classification

affecting the pattern and classification of expense recognition in the income statement.

The Company’s leases consist of operating

leases for office space.

The Company determines if an arrangement is a lease at inception.

ROU assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments

arising from the lease.

Operating lease right-of-use assets are recognized at commencement date based on the present value of

lease payments over the lease term.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental

borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Company’s corporate headquarters is in Dallas, Texas, where it leases approximately 2,400 square feet.

Total rent expense

recognized under the lease was $ 68,800 for both the years ended December 31, 2022 and 2021.

The office lease expires in May

Lease Obligations

842, Leases, establishes a right-of-use (“ROU”) model that requires

a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months.

are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income

The Company’s leases consist of operating leases for office space.

The Company determines if an arrangement is a lease

at inception.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent

the Company’s obligation to make lease payments arising from the lease.

Operating lease right-of-use assets are recognized at commencement

date based on the present value of lease payments over the lease term.

As the Company’s leases do not provide an implicit rate,

the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value

of lease payments.

Company’s material leases are operating leases.

ROU assets related to operating leases are included on the balance sheet in

the other non-current assets caption and operating lease cost is recognized over the lease term on a straight-line basis and is

classified within general and administrative cost on the income statement.

In March of 2023, the Company entered into a new lease

for additional office space in Dallas, Texas.

The Company’s corporate office spaces in Dallas, Texas total approximately 6,850

square feet consisting of the two office locations.

Total rent expense recognized was $0.2 million for the year ended December 31,

2023 and $0.1 million for the year ended December 31, 2022.

The respective office leases expire in August 2028 and August 2025.

Enteris headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space.

rent expense recognized under the lease was $ 0.3 million for both the years ended December 31, 2022 and 2021.

lease expires in December 2024 with an option to renew for an additional five years.

future minimum rent is as follows (in thousands):

Total rent expense

recognized under the lease was $ 0.3 million for both the years ended December 31, 2023 and 2022.

The office lease expires in December

2024 with an option to renew for an additional five years.

Cash paid for amounts

included in the measurement of operating lease liabilities was $0.4 million and $0.3 million for the years ended December 31, 2023 and

2022 and right-of-use assets obtained in exchange for new operating lease obligations was $0.6 million and $0.

The components of

lease cost is as follows (in thousands):

Operating lease cost

Variable lease cost

Total lease cost

Supplemental balance sheet information

related to operating leases is as follows (in thousands):

Operating lease right-of-use assets

Operating lease liabilities, current

Operating lease liabilities, non-current

Total operating lease liabilities

Weighted-average remaining lease term (years)

Weighted-average discount rate

Future minimum rent on the Company's operating leases is as follows (in thousands):

Schedule of Future Minimum Rent

Total future lease payments

Consideration

Contingent Consideration

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

5 unchanged sentences

The company recognized $6.3 million of remeasurement

expense on the change in the estimated fair value of its contingent consideration during year ended December 31, 2022.

of December 31, 2022, the Company’s unfunded commitments were as follows (in millions):

gain on the change in the estimated fair value of its contingent consideration during year ended December 31, 2023.

See Note 9 for further information regarding the Company's contingent consideration.

Unfunded Commitments

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

Schedule of Unfunded Commitments

MedMinder Systems, Inc.

Sincerus Pharmaceuticals, Inc.

Journey Medical Corporation

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.

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.

December 31, 2022, 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.

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.

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

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

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

of operations and cash flows.

Indemnification

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

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

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 December 31, 2022 and 2021.

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 December 31, 2023 and 2022.

Stockholders’ Equity

total number of shares of common stock, $ 0.001 par value, that the Company is authorized to issue is 250,000,000 .

Purchases of Equity Securities

May 31, 2022, the Board authorized a share repurchase program under which the Company was authorized to repurchase up to $ 10.0 million of the Company’s outstanding shares of common stock, from

time to time until May 15, 2023, through a Rule 10b5-1 trading plan in compliance with all applicable laws and regulations,

including Rule 10b-18 of the Securities Exchange Act.

The actual timing, number and value of shares repurchased under the program

will depend on several factors, including the constraints specified in the Rule 10b5-1 trading plan, price, and general market

There is no guarantee as to the exact number of shares that will be repurchased under the trading plan.

may also suspend or discontinue the repurchase program at any time, in its sole discretion.

The purchase period is July 1, 2022

through May 15, 2023.

Issuer Purchases of Equity Securities

May 31, 2022, the Board authorized a share repurchase program under which the Company was previously authorized to repurchase up to $ 10.0

million of the Company’s outstanding shares of common stock from time to time until May 15, 2023, through a Rule 10b5-1 trading

plan in compliance with all applicable laws and regulations, including Rule 10b-18 of the Exchange Act (the “Prior Repurchase Program”).

The purchase period for the Prior Repurchase Program was July 1, 2022 through May 15, 2023.

May 16, 2023, the Company announced that the Board had authorized the Company to repurchase up to $10.0 million of the Company’s

outstanding shares of common stock from time-to-time until May 16, 2024, through a trading plan established in compliance with Rule 10b5-1

and Rule 10b-18 of the Exchange Act (the “New Repurchase Program”).

The actual timing, number and value of shares repurchased

under the New Repurchase Program will depend on several factors, including the constraints specified in the Rule 10b5-1 trading plan,

price, and general market conditions.

There is no guarantee as to the exact number of shares that will be repurchased under the New Repurchase

Our Board may also suspend or discontinue the New Repurchase Program at any time, in its sole discretion.

The purchase period

for the New Repurchase Program is May 16, 2023 through May 16, 2024.

of December 31, 2023, the Company has repurchased 326,088

shares under the share repurchase program

at a total cost of $1.1 million, or $17.78 per share.

As of December 31, 2022, the maximum number of shares

that may yet be purchased under the plan was approximately $8.9 million, or 650,385 shares of common stock.

Company’s Board may, without further action by the stockholders, issue one or more series of preferred stock and fix the

rights and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting

rights, terms of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series

and the designation of such series.

shares under the new share repurchase program at a total cost of $5.4 million, or $16.65 per share.

As of December 31, 2023, the

maximum number of shares that may yet be purchased under the plan was approximately $4.6 million, or 289,297 shares of common

Preferred Stock

Company’s Board may, without further action by the stockholders, issue one or more series of preferred stock and fix the rights

and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms

of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series and the designation

of such series.

As of December 31, 2023, no shares of preferred stock have been issued.

Compensation Plans

Company’s 2010 Stock Incentive Plan (the “2010 Stock Incentive Plan”) provides for options, restricted stock,

and other customary forms of equity to be granted to the Company’s directors, officers, employees, and independent contractors.

All forms of equity incentive compensation are granted at the discretion of the Board and have a term not greater than 10 years

from the date of grant.

Stock Compensation Plans

Company’s 2010 Stock Incentive Plan (the “2010 Stock Incentive Plan”) provides for options, restricted stock, and other

customary forms of equity to be granted to the Company’s directors, officers, employees, and independent contractors.

of equity incentive compensation are granted at the discretion of the Board and have a term not greater than 10 years from the date of

calculation of the fair values of our stock-based compensation plans requires estimates that require management’s judgments.

Under ASC 718, the fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model.

The valuation models require assumptions and estimates to determine expected volatility, expected life and expected risk-free

interest rates.

The expected volatility was determined using historical volatility of our stock based on the contractual life

of the award.

ASC 718, Compensation - Stock Compensation , the fair value of each stock option is estimated on the grant date using the

Black-Scholes option-pricing model.

The valuation models require assumptions and estimates to determine expected volatility, expected

life and expected risk-free interest rates.

The expected volatility was determined using historical volatility of our stock based on

the contractual life of the award.

The risk-free interest rate assumption was based on the yield on zero-coupon U.S.

Treasury strips at the award grant

Treasury strips

at the award grant date.

There were no options granted in the fiscal years ended December 31, 2023 and 2022.

following table summarizes activities under the 2010 Stock Incentive Plan for the indicated periods:

The following

table summarizes activities under the 2010 Stock Incentive Plan for the indicated periods:

of Stock Option Activity

11 unchanged sentences

Options canceled and retired

Options exercised

Options exercised, net

Options granted

Balances, December 31, 2023

Options vested and exercisable and expected to be vested and exercisable at December 31, 2022

Options vested and exercisable and expected to be vested

and exercisable at December 31, 2023

Options vested and exercisable at December 31, 2023

December 31, 2022, there were approximately 770,334 shares reserved for issuance under the 2010 Stock Incentive Plan, and the Company

had $47,000 of total unrecognized stock option expense for time-based awards, net of estimated forfeitures, which will be recognized

December 31, 2023, there were approximately 741,274 shares reserved for issuance under the 2010 Stock Incentive Plan, and the

Company had $2,325 of total unrecognized stock option expense for time-based awards, net of estimated forfeitures, which will be recognized

over the weighted-average remaining period of 0.03 years.

8 unchanged sentences

Price per Share

stock-based compensation expense recognized for time-vesting options for the years ended December 31, 2022 and 2021, uses the

Black-Scholes option pricing model for estimating the fair value of options granted under the Company’s equity incentive

Risk-free interest rates for the options were taken from the Daily Federal Yield Curve Rates on the grant dates for the

expected life of the options as published by the Federal Reserve.

The expected volatility was based upon historical data and other

relevant factors such as the Company’s changes in historical volatility and its capital structure, in addition to mean reversion.

Employee stock-based compensation expense recognized for market performance-vesting options uses a binomial lattice model for

estimating the fair value of options granted under the Company’s equity incentive plan.

calculating the expected life of stock options, the Company determines the amount of time from grant date to exercise date for

exercised options and adjusts this number for the expected time to exercise for unexercised options.

The expected time to exercise

for unexercised options is calculated from grant as the midpoint between the expiration date of the option and the later of the

measurement date or the vesting date.

In developing the expected life assumption, all amounts of time are weighted by the number

of underlying options.

the year ended December 31, 2022, the Company’s Board approved the modification of the previous CEO’s stock options with respect

to 100,000 Shares with an exercise price of $13.70 per share pursuant to an award agreement dated August 18, 2014.

and the previous CEO agreed that (i) 50 percent of the 2014 award has already vested due to the satisfaction of time-based vesting

conditions set forth in the 2014 award agreement, and a cashless exercise of the 2012 award was facilitated by net settlement

of exercise price and taxes.

stock-based compensation expense recognized for time-vesting options for the years ended December 31, 2023 and 2022, uses the Black-Scholes

option pricing model for estimating the fair value of options granted under the Company’s equity incentive plans.

Risk-free interest

rates for the options were taken from the Daily Federal Yield Curve Rates on the grant dates for the expected life of the options as

published by the Federal Reserve.

The expected volatility was based upon historical data and other relevant factors such as the Company’s

changes in historical volatility and its capital structure, in addition to mean reversion.

Employee stock-based compensation expense

recognized for market performance-vesting options uses a binomial lattice model for estimating the fair value of options granted under

the Company’s equity incentive plan.

calculating the expected life of stock options, the Company determines the amount of time from grant date to exercise date for exercised

options and adjusts this number for the expected time to exercise for unexercised options.

The expected time to exercise for unexercised

options is calculated from grant as the midpoint between the expiration date of the option and the later of the measurement date or the

vesting date.

In developing the expected life assumption, all amounts of time are weighted by the number of underlying options.

the year ended December 31, 2022, the Company’s Board approved the modification of the previous Chief Executive Officer’s (“CEO’s”)

stock options with respect to 100,000 Shares with an exercise price of $13.70 per share pursuant to an award agreement dated August

The Company and the previous CEO agreed that (i) 50 percent of the 2014 award has already vested due to the satisfaction of

time-based vesting conditions set forth in the 2014 award agreement, and a cashless exercise of the 2012 award was facilitated by net

settlement of exercise price and taxes.

The remaining 50 percent of the 2014 award that had not vested as of December 31, 2021 was forfeited

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the year ended December 31, 2023, 25,944 restricted shares were granted and 15,989 restricted shares vested.

During the year ended

December 31, 2021, 8,761 restricted shares were granted and 24,727 restricted shares vested.

As of December 31, 2022 and 2021,

there were 71,339 and 74,221 shares of restricted stock outstanding, respectively.

During the year ended December

31, 2022, 41,427 restricted shares were granted and 4,696 restricted shares vested.

As of December 31, 2023 and 2022, there were 97,283

and 71,339 shares of restricted stock outstanding, respectively.

September 2022, the Board approved a change in the compensation plan for non-employee directors such that each non-employee director

shall receive a cash retainer of $55,000, payable quarterly in arrears.

The Board will also receive an annual equity retainer

of $55,000 in restricted shares of the Company’s common stock, subject to a one-year cliff vesting period.

In addition, each member

of (i) the Audit Committee shall receive an additional quarterly fee of $10,000, with the Audit Committee Chair receiving $15,000;

(ii) the Compensation Committee shall receive an additional quarterly fee of $6,000, with the Compensation Committee Chair receiving

and (iii) the Governance Committee shall receive an additional quarterly fee of $6,000, with the Governance Committee

Chair receiving $8,000.

Each non-employee director has the option to elect to receive up to 100 percent of the annual cash retainer

in shares of the Company’s common stock.

the years ended December 31, 2022 and 2021, the Board approved compensation for Board services by granting 13,168 and 18,978 shares,

respectively, of common stock as compensation for the non-employee directors.

The Board also received 9,151 restricted shares

as compensation for the non-employee directors during the year ended December 31, 2022.

The Company recorded $ 0.3 million in Board

stock-based compensation expense during both the years ended December 31, 2022 and 2021.

The Company recorded aggregate stock-based

compensation expense, including the quarterly and annual Board grants, of $0.5 million and $1.2 million during the years ended

December 31, 2022 and 2021, respectively.

The Board will also receive an annual equity retainer of $55,000

in restricted shares of the Company’s common stock, subject to a one-year cliff vesting period.

In addition, each member of (i)

the Audit Committee shall receive an additional quarterly fee of $10,000, with the Audit Committee Chair receiving $15,000;

Compensation Committee shall receive an additional quarterly fee of $6,000, with the Compensation Committee Chair receiving $8,000;

(iii) the Governance Committee shall receive an additional quarterly fee of $6,000, with the Governance Committee Chair receiving $8,000.

Each non-employee director has the option to elect to receive up to 100 percent of the annual cash retainer in shares of the Company’s

common stock.

the years ended December 31, 2023 and 2022, the Board approved compensation for Board services by granting 9,897 and 13,168 shares, respectively,

of common stock as compensation for the non-employee directors.

The Board also received 9,151 restricted shares as compensation for the

non-employee directors during the year ended December 31, 2022.

The Company recorded $ 0.3 million in Board stock-based compensation expense

during both the years ended December 31, 2023 and 2022.

The Company recorded aggregate stock-based compensation expense, including the

quarterly and annual Board grants, of $0.5 million and $0.5 million during the years ended December 31, 2023 and 2022, respectively.

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.

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.

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.

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

no transfers between any levels during the years ended December 31, 2022 and 2021.

There were no transfers

between any levels during the years ended December 31, 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.

and cash equivalents

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

available for sale

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

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

Cash and cash equivalents

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

Securities available for sale

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

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

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

Projected future cash flows are calculated

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

These receivables are classified

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.

Finance Receivables

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.

Contingent 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.

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.

These inputs include:

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

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.

(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.

of December 31, 2023 and 2022, the acquisition-related contingent consideration was $4.9 million and $11.2 million, respectively.

the year ended December 31, 2022 and 2021, the Company recorded $5.2 million of expense and $0.3 million of income, respectively,

During the year ended December 31, 2023 and 2022, the Company recorded a $6.3 million gain and a $5.2 million loss, respectively,

for the change in the estimated fair value of contingent consideration.

The Company made payments of $2.5 million and $8.1 million

against the contingent consideration liability during the years ended December 31, 2022 and 2021, respectively.

The Company made no payments during the year ended December

31, 2023 and made a $2.5 million payment against the contingent consideration liability during the years ended December 31,

Marketable Investments

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 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.

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

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

these securities would be classified as Level 2.

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

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

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

in the market.

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

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

Available-for-sale securities are measured at fair value

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

Derivative Instruments

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

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

the year ended December 31, 2022, the Company entered into a foreign currency forward contract to manage the impact of fluctuations

in foreign currency denominated cash flows expected to be received from one of its royalty finance receivables denominated in a

foreign currency.

The foreign currency forward contract is not designated as a hedging instrument, and changes in fair value are

recognized in earnings.

The liability related to the derivative instrument was recorded in other non-current liabilities in the

consolidated balance sheets.

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

(in thousands):

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 December 31, 2023 and December

31, 2022, respectively.

The Company recognized a $1.7 million gain due to changes in fair value related to its foreign currency

forward contract during the year ended December 31, 2023.

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

Schedule of fair value assets measured on recurring basis

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Balance Sheets

Quoted Prices in

Active Markets for

Identical Assets or

Significant Other

Observable Inputs

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Marketable investments

Foreign Currency Forward Contract

Financial liabilities:

Contingent consideration payable

Derivative liability - foreign currency

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

(in thousands):

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

Total Carrying

Balance Sheets

Quoted Prices in

Quoted Prices

Active Markets for

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Significant Other

Observable Inputs

Financial assets:

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Contingent consideration payable

Derivative liability - foreign currency forward

The contingent consideration payable is valued using a discounted cash flow approach and includes a significant unobservable input which

is the discount rate.

As of the year ended December 31, 2023 and 2022 the discount rate was 14.5% and 14.0%, respectively.

year ended December 31, 2023 there was a change in the range of outcomes as a result of royalty and milestone cash flow projections being

decreased for the License Agreement.

changes on the value of the warrant assets during the years ended December 31, 2023 and 2022 were as follows (in thousands):

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a derivative and are included in the consolidated balance sheets.

The fair values for warrants outstanding, for companies that

have a readily determinable value, are measured using the Black-Scholes option pricing model.

The following range of assumptions were

used in the models to determine fair value:

The fair values for warrants outstanding, for companies that have a

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

The following range of assumptions were used in

the models to determine fair value:

Schedule of weighted average assumptions

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Risk-free rate

4.0 % to 4.3 %

0.97 % to 1.44 %

Expected life (years)

Expected volatility

54.8 % to 139.4 %

60.2 % to 142.0 %

Company had two royalties, Best and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior

The following table presents these royalties measured at fair value on a nonrecurring basis as of December 31, 2022 and

2021 (in thousands):

warrant assets are valued using a market approach and include significant unobservable inputs such as risk-free rate, expected life, and

expected volatility.

For the year ended December 31, 2023 the risk-free rate range was 3.8 % - 4.8 % , weighted average of 4.3 % , and median

For the year ended December 31, 2022 the risk-free rate range was 4.0 % - 4.3 % , weighted average of 4.0 % , and median of 4.0 % .

the year ended December 31, 2023 the expected life range was 1.2 - 5.8 years , weighted average of 3.4 years , and median of 4.4 years .

the year ended December 31, 2022 the expected life range was 2.0 - 6.9 years , weighted average of 6.2 years , and median of 5.4 years .

the year ended December 31, 2023 the expected volatility range was 75.4 % - 154.3 % , weighted average of 124.6 % , and median of 134.4 % .

the year ended December 31, 2022 the expected volatility range was 54.8 % - 139.4 % , weighted average of 93.8 % , and median of 94.1 % .

of December 31, 2023, the Company had one royalty, Best, that was deemed to be impaired based on reductions in carrying value in prior

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 amortized cost using the effective interest

method, which approximates fair value, on a nonrecurring basis as of December 31, 2023 and 2022 (in thousands):

Schedule of weighted average assumptions

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Balance Sheets

Quoted Prices in

Active Markets for

Identical Assets or

Significant Other

Observable Inputs

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financial instruments.

The following table presents the fair value of financial assets and liabilities as of year ended December 31, 2023 (in thousands):

Schedule of fair value by balance sheet grouping

the year ended December 31, 2022 (in thousands):

Financial assets:

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Warrant assets

Foreign Currency Forward Contract

Financial liabilities

Contingent consideration payable

Derivative liability - foreign currency

the year ended December 31, 2021 (in thousands):

following table presents the fair value of financial assets and liabilities as of the year ended December 31, 2022 (in

Financial assets:

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Contingent consideration payable

Derivative liability - foreign currency forward

Revenue Recognition

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

following table provides the contract revenue recognized by revenue source for the years ended December 31, 2022 and 2021 (in

following table provides the contract revenue recognized by revenue source for the years ended December 31, 2023 and 2022 (in thousands):

Schedule of Revenue Recognized by Revenue Source

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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

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Total contract liabilities

the year ended December 31, 2022, the Company recognized $ 0.1 million of 2021 deferred revenue from satisfaction of performance

Please refer to Notes 1 and 2 for further details on the Company’s deferred revenue and License Agreement, respectively.

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

31, 2022 or 2021.

the year ended December 31, 2023, the Company recognized $ 24 .0

thousand of 2022 deferred revenue from satisfaction of performance obligations.

Please refer to Notes 1 and 2 for further details on

the Company’s deferred revenue and License Agreement, respectively.

The Company did not have any contract assets nor did it

have any contract liabilities related to the License Agreement as of December 31, 2023 or 2022.

Segment Information

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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.

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.

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):

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Other revenue

Provision for credit losses and impairment expense

Allowance for credit losses

Interest expense

Manufacturing, research and development

Change in fair value of contingent consideration

Impairment of goodwill

Manufacturing, research and development

Depreciation and amortization expense

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Income tax benefit

Consolidated net income (loss)

Net income (loss)

Year Ended December 31, 2022

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Other revenue

Allowance for credit losses and impairment expense

Interest expense

Manufacturing, research and development

Change in fair value of contingent consideration

Depreciation and amortization expense

Change in fair value of acquisition-related contingent consideration

General and administrative

Other income, net

Income tax expense

Consolidated net income (loss)

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

which have been included for purposes of reconciling to the consolidated amounts.

components of income before income tax (benefit) expense are as follows (in thousands):

Other expense, net

Income tax benefit

Net income (loss)

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

have been included for purposes of reconciling to the consolidated amounts.

The components

of income before income tax benefit are as follows (in thousands):

Schedule of Income before Income Tax Provision

the years ended December 31, 2022 or 2021, the Company’s provision for (benefit from) income taxes was as follows (in thousands):

the years ended December 31, 2023 or 2022, the Company’s benefit from income taxes was as follows (in thousands):

of Components of Income Tax Expense (Benefit)

Current (benefit) expense

Deferred (benefit) expense

Deferred (benefit)

Total income tax (benefit) expense

components of the income tax provision (benefit) are as follows (in thousands):

components of the income tax benefit are as follows(in thousands):

Federal tax provision at statutory rate

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State taxes, net of federal income tax benefit

Impairment of goodwill

Mark-to-market adjustments

Contingent consideration revaluation

Write off of deferred tax assets

Total income tax (benefit) expense

Write off of expired deferred tax

Total income tax benefit

Company records deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting

standards that address income taxes.

Significant management judgment is required in determining whether a valuation allowance

against the Company’s deferred tax assets is required.

The Company has considered all available evidence, both positive

and negative, such as historical levels of income and predictability of future forecasts of taxable income from existing investments,

in determining whether a valuation allowance is required.

The Company is also required to forecast future taxable income in accordance

with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires

the exercise of significant management judgment.

The Company focuses on forecasting future taxable income for the investment portfolio

that exists as of the balance sheet date.

Specifically, the Company evaluated the following criteria when considering a valuation

Significant management judgment is required in determining whether a valuation allowance against

the Company’s deferred tax assets is required.

The Company has considered all available evidence, both positive and negative, such

as historical levels of income and predictability of future forecasts of taxable income from existing investments, in determining whether

a valuation allowance is required.

The Company is also required to forecast future taxable income in accordance with accounting standards

that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant

management judgment.

The Company focuses on forecasting future taxable income for the investment portfolio that exists as of the balance

Specifically, the Company evaluated the following criteria when considering a valuation allowance:

history of tax net operating losses in recent years;

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of December 31, 2023, the Company had cumulative net income before tax for the three years then ended.

Based on its historical operating

performance, the Company has concluded that it was more likely than not that the Company would not be able to realize the full benefit

Based on its historical

operating performance, the Company had previously concluded that it was more likely than not that the Company would not be able to realize

the full benefit of the U.S.

federal and state deferred tax assets in the future.

However, at December 31, 2022 the Company has concluded that

it is more likely than not that the Company will be able to realize approximately $24.5 million benefit of the U.S.

state deferred tax assets in the future.

However, at December 31, 2023 the Company has

concluded that it is more likely than not that the Company will be able to realize approximately $28.3 million benefit of the U.S.

federal and state deferred tax assets in the future.

Company will continue to assess the need for a valuation allowance on the deferred tax assets by evaluating both positive and negative

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The valuation allowance against deferred tax assets

was $6.7 million and $16.3 million as of December 31, 2022 and 2021, respectively.

tax assets consist of the following (in thousands):

was $0 and $6.7 million as of December 31, 2023 and 2022, respectively.

assets consist of the following (in thousands):

Schedule of Deferred Tax Assets and Liabilities

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Credit carryforward

Effect of adoption of ASU 2016-13

Stock based compensation

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Net deferred tax assets

Tax Reform Act of 1986 limits the use of NOLs and tax credit carryforwards in certain situations where stock ownership changes

In the event the Company has had a change in ownership, the future utilization of the Company’s net operating loss

and tax credit carryforwards could be limited.

Tax Reform Act of 1986 limits the use of NOLs and tax credit carryforwards in certain situations where stock ownership changes occur.

In the event the Company has had a change in ownership, the future utilization of the Company’s net operating loss and tax credit

carryforwards could be limited.

of December 31, 2023, the Company had NOL carryforwards for federal income tax purposes of approximately $ 87.7 million .

NOL carryforwards, if not offset against future income, will expire by 2037.

Approximately $4.0 million can be carried forward

indefinitely.

Approximately $6.9 million can be carried forward indefinitely.

Company also had federal research carryforwards of $3.0 million.

The federal research credits begin to expire in

2023 and will fully expire by 2042.

The federal research credits began to expire in 2023 and will

fully expire by 2042.

Company records liabilities, where appropriate, for all uncertain income tax positions and recognizes potential accrued interest and

1 unchanged sentence

As of December 31, 2023 and 2022, the Company had approximately

$ 0.6 million

and $ 0.3 million ,

respectively, of unrecognized tax benefit, none of which would impact the effective tax rate if recognized.

The Company does not expect

the unrecognized tax benefits to change materially over the next twelve months.

There are no tax positions for which it is reasonably

possible that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of December

$ 0.6 million and $0.7 million, respectively, of

unrecognized tax benefit, none of which would impact the effective tax rate if recognized.

The Company does not expect the unrecognized

tax benefits to change materially over the next twelve months.

There are no tax positions for which it is reasonably possible that the

total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of December 31, 2023.

Company is subject to taxation in the U.S.

1 unchanged sentence

The Company is currently open to audit under the statute

of limitations by the Internal Revenue Service for the years ending December 31, 1999 through December 31, 2022 due to carryforward

of unutilized net operating losses and research and development credits.

The Company does not anticipate significant changes to

its uncertain tax positions through December 31, 2022.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

of limitations by the Internal Revenue Service for the years ending December 31, 1999 through December 31, 2023 due to carryforward of

unutilized net operating losses and research and development credits.

The Company does not anticipate significant changes to its

uncertain tax positions through December 31, 2023.

With an effective date of January 1, 2024, Enteris, a wholly owned subsidiary

of SWK Holdings Corporation, entered into an exclusive option and asset purchase agreement with Aptar on March 14, 2024 which granted

Aptar an exclusive option to acquire certain of Enteris’ tangible assets related to its business of providing good manufacturing

practice (GMP) manufacturing and clinical supply services through Phase 1 and 2 to third parties.

Aptar must exercise the option by or

before January 1, 2026.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data