What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2023-11-08 · 515 added, 465 removed, 440 unchanged (69% of the section changed)

FINANCIAL STATEMENTS

HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

thousands, except par value and share data)

September 30,

(in thousands,

except par value and share data)

Current assets:

Cash and cash equivalents

Interest and accounts receivable, net

Restricted cash

Interest, accounts receivable and other receivables,

Other current assets

Total current assets

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

Finance receivables, net of allowance for credit losses of $ 13,224 and $ 13,901 as of March 31, 2024 and December 31, 2023, respectively

Collateral on foreign currency forward contract

8 unchanged sentences

Accounts payable and accrued liabilities

Revolving credit facility

Total current liabilities

Contingent consideration payable

Unsecured senior notes, net

Revolving credit facility

Other non-current liabilities

7 unchanged sentences

250,000,000 shares authorized;

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

12,481,944 and 12,497,770 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

4 unchanged sentences

Total liabilities and stockholders’ equity

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

See accompanying

notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

thousands, except per share data)

(in thousands,

except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Finance receivable interest income, including fees

2 unchanged sentences

Costs and expenses:

Provision for (benefit from) credit losses

Provision for credit losses

Interest expense

1 unchanged sentence

Depreciation and amortization expense

General and administrative expense

General and administrative

Income from operations

Other income (expense), net

Unrealized net (loss) gain on warrants

Unrealized net gain (loss) on equity securities

(Loss) gain on foreign currency transactions

Income before income tax (benefit) expense

Income tax (benefit) expense

Unrealized net loss on warrants

Loss on exercise of warrants

Realized loss on sale of marketable investments

Gain on foreign currency transactions

Income before income tax expense (benefit)

Income tax expense (benefit)

Net income per share

Weighted average shares outstanding

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

See accompanying

notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

thousands, except share data)

Months Ended September 30, 2023

Stockholders’

at December 31, 2022

$ ( 4,151,005 )

of adoption of ASU 2016-13

of common stock upon vesting of restricted stock

of common stock in open market

at March 31, 2023

( 4,156,053 )

of common stock upon vesting of restricted stock

of common stock in open market

at June 30, 2023

( 4,152,119 )

of common stock upon vesting of restricted stock

of common stock in open market

at September 30, 2023

$ ( 4,147,645 )

Nine Months Ended September

(in thousands,

except share data)

Three Months Ended March 31, 2024

Stockholders’

Paid-In Capital

Balances at December 31, 2023

1 unchanged sentence

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Forfeiture of unvested restricted stock

Issuance of common stock upon vesting of restricted stock

Repurchases of common stock in open market

Balances at March 31, 2024

$ ( 4,143,940 )

Stock-based compensation

Issuance of common stock upon vesting of restricted stock

Balances at June 30, 2022

Three Months Ended March 31, 2023

Stockholders’

Paid-In Capital

Balances at December 31, 2022

$ ( 4,151,005 )

Stock-based compensation

Effect of adoption of ASU 2016-13

Issuance of common stock upon vesting of restricted stock

Net settlement for employee taxes on restricted stock and options

Stock options exercised, net

Repurchases of common stock in open market

Balances at September 30, 2022

Balances at March 31, 2023

$ ( 4,156,053 )

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

See accompanying

notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

(in thousands)

Three Months Ended

Cash flows from operating activities:

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

Benefit from credit losses

Provision for credit losses

Right-of-use asset amortization

2 unchanged sentences

Change in fair value of warrants

Change in fair value of equity securities

Foreign currency transaction gain

Loan discount and fee accretion

Loss on exercise of warrants

Foreign currency transaction (gain) loss

Realized loss on sale of marketable investments

Loan discount and fee accretion on finance receivables

Interest paid-in-kind

Stock-based compensation

Depreciation and amortization expense

Depreciation and amortization

Changes in operating assets and liabilities:

Interest and accounts receivable

Interest, accounts, and other receivables

Derivative assets and liabilities, net

Accounts payable and other liabilities

1 unchanged sentence

Cash flows from investing activities:

Proceeds from sale of investments

Sale of marketable investments

Investment in finance receivables

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Cash flows from financing activities:

Payments for financing costs

Proceeds from (payments on) credit facilities

Net settlement for employee taxes on restricted stock and options

Net (payments on) proceeds from credit facility

Repurchases of common stock, including fees and expenses

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

accompanying notes to the unaudited condensed consolidated financial statements.

HOLDINGS CORPORATION

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net cash (used in) provided by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

See accompanying

notes to the unaudited condensed consolidated financial statements.

UNAUDITED CONDENSED 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.

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

Holdings Corporation (the “Company,” “we,” or “us”) was incorporated in July 1996 in California and

reincorporated in Delaware in September 1999.

In July 2012, we commenced a strategy of building a specialty finance and asset management

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

property licensing business.

The Company’s operations comprise two reportable segments:

“Finance Receivables”

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

the sales of life science products by third parties.

The Company is headquartered in Dallas, Texas, and as of September 30, 2023,

the Company had 23 full-time employees.

Our operations comprise two reportable segments:

“Finance Receivables” and “Pharmaceutical

Development.” We evaluate and invest in a broad range of healthcare related companies and products with innovative intellectual

property, including the biotechnology, medical device, medical diagnostics and related tools, animal health and pharmaceutical industries

(collectively, “life sciences”).

We allocate capital to each segment in order to generate income through the sales

of life science products by third parties and related earned income sources.

The Company is headquartered in Dallas, Texas, and as of

March 31, 2024, the Company had 22 full-time employees.

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

and substantial asset.

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

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

to their respective expiration dates.

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

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

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

finance strategy, funding an aggregate of $756.7 million in various financial products across the life science sector.

The Company’s

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

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

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

of May 8, 2024, the Company and its partners have executed transactions w ith 55 different parties under its specialty finance

strategy, funding an aggregate of $779.4 million in various financial products across the life science sector.

The Company’s portfolio

includes senior and subordinated debt backed by royalties an d 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, we commenced our Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc.

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

well as innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence®

We seek to generate income by providing customers pharmaceutical development, formulation and manufacturing services

as well as licensing its internally developed intellectual property.

With an effective date of April 21, 2023 we entered into a collaboration agreement with a strategic partner under which we would be the

exclusive provider of certain contract development and manufacturing organization (CDMO) services to its customers.

Fee revenue generated

as a result of this agreement is presented as pharmaceutical development revenue on the unaudited condensed consolidated statement of

income and is accounted for in accordance with our revenue recognition policy as described under Revenue Recognition below.

an effective date of January 1, 2024, we entered into an Option and Asset Purchase Agreement with the same strategic partner on

March 14, 2024, which granted the partner an exclusive option to acquire certain of Enteris’ assets related to its business of

providing CDMO services through Phase 1 and 2 to third parties, subject to certain exclusions.

The partner must exercise the option by or before January 1, 2026.

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”).

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.

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.

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

The results of

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

or for the year ending December 31, 2023.

Certain information and footnote disclosures normally included in financial statements

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

Commission (“SEC”).

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

read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023.

The results of operations

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

year ending December 31, 2024.

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

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

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

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

2023, filed with the SEC on March 20, 2024.

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

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

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

its specialty finance and asset management business offering

customized financing solutions to a broad range of life-sciences companies, and its business offering clinical development and

manufacturing services as well as oral therapeutic formulation solutions built around Enteris’ pharmaceutical Peptelligence®

platform, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III,

and IV small molecules in an enteric-coated tablet formulation.

Company 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 CDMO services

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

the Peptelligence ® platform.

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

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

Reclassification

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

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

and Development

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

for the Company by third parties.

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

and supplies.

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

the Company by third parties.

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

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

Third-party expenses reimbursed under

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

and development expense in the consolidated statements of income.

Accounting Pronouncements

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 unaudited condensed consolidated statements of income.

Recent Accounting Pronouncements

March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04,

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

The Company has identified existing loans that reference London Interbank Offered Rate (“LIBOR”) and is in the process of evaluating alternatives in each situation.

The Company expects that it will

elect to apply some of the expedients and exceptions provided in ASU 2020-04 and does not believe the adoption of this standard will

have a material impact on the Company’s consolidated financial statements.

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

Measurement of Credit Losses on Financial Instruments

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

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.

Net Income per Share

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

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

the applicable period, and when dilutive, shares of common stock issuable upon exercise of options and warrants deemed outstanding

using the treasury stock method.

The Company has identified existing loans that reference London Inter-Bank Offered Rate (“LIBOR”) and is in the

process of evaluating alternatives in each situation.

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

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

financial statements.

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.

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

years beginning after December 15, 2024.

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.

is currently evaluating the impact of this ASU on the Company’s consolidated financial statements and disclosures.

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 ASU on its consolidated financial statements and related disclosures.

Net Income per

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

Diluted net income per

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

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

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

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Weighted-average shares outstanding

3 unchanged sentences

Diluted net income per share

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

the three months ended March 31, 2024 and 2023, outstanding options to purchase shares of common stock and outstanding shares

of restricted stock in an aggregate of approximately 163,000 and 119,000 , respectively, have been excluded from the calculation

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

For the nine months ended September 30, 2023 and 2022,

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

121,000 and 268,000 , respectively, have been excluded from the calculation of diluted net income per share, as all such securities

were anti-dilutive.

Finance Receivables, Net

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

2 unchanged sentences

to interest income based on all cash flows expected using the effective interest method.

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

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

Schedule of carrying value of finance receivables

September 30, 2023

March 31, 2024

December 31, 2023

2 unchanged sentences

Allowance for credit losses

Total finance receivables, net

Total carrying value

for Credit Losses

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

non-current liabilities.

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

Term Loans and Royalties.

Company adopted Accounting Standard Update (“ASU”) 2016-13, as amended, on January 1, 2023 using the modified retrospective

approach method.

The 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.

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 data.

On January 1, 2023, the Company recorded an adjustment for unfunded

commitments of $0.4 million for the adoption of ASU 2016-13.

As of March 31, 2024 and December 31, 2023, the Company has recorded

a $0.2 million l iability for credit losses on off-balance-sheet credit exposures

related to unfunded commitments, with this liability included in accounts payable and accrued liabilities on the condensed consolidated balance

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

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

following table details the changes in the allowance for credit losses by portfolio pool for each of the three-months

ended March 31 (in thousands):

Schedule of Allowance for Credit Losses

September 30, 2023

September 30, 2022

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

Write offs (1)

March 31, 2024

March 31, 2023

Allowance at beginning of period

Effect of adoption of ASU 2016-13

Provision (benefit) from credit losses

Provision (benefit) for credit losses

Write offs (1)

Allowance at end of period

of finance receivable-specific ACL recognized in prior periods.

No impact to consolidated

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

Please refer to

Note 1 for further details.

of finance receivable-specific ACL recognized in prior periods and the effect of

the impairment recorded on the Trio loan during the three months ended March 31,

Finance Receivables

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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, if any.

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

of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the term loan is both

well-secured and in the process of collection.

When placed on nonaccrual, the Company would reverse any accrued unpaid interest

receivable against interest income and amortization of any net deferred fees is suspended.

Generally, the Company would return

a term loan to accrual status when all delinquent interest and principal become current under the terms of the credit agreement

and collectibility of remaining principal and interest is no longer doubtful.

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

Schedule of analysis of nonaccrual and performing loans by portfolio segment

September 30, 2023

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

suspended 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 pool, net of allowance for credit loss (in thousands) as of:

Schedule of Allowance for Credit Losses

March 31, 2024

December 31, 2023

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Allowance for credit losses

Total finance receivables, net

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

Total carrying value

of March 31, 2024, the Company had five finance receivables in nonaccrual status:

(1) the term loan to Trio Healthcare Ltd.

with a carrying value of $ 9.1

(“Trio”), with a carrying value of $ 3.6

(2) the term loan to Exeevo, Inc (“Exeevo”), with a carrying value of $ 6.8

(3) the Flowonix Medical, Inc.

royalty, with a carrying value of $ 10.4

million (see Loan Modifications Made to Borrowers

Experiencing Financial Difficulty below for further details);

(“Flowonix”) royalty, with a

carrying value of $ 10.4 million (see Loan Modifications Made to Borrowers Experiencing Financial

Difficulty below for further details);

(4) the Best ABT, Inc.

(“Best”) royalty, with a

carrying value of $ 2.7

(“Best”) royalty, with a carrying value of $ 2.5

and (5) the Ideal Implant, Inc.

royalty, with a net carrying value of $ 4.2

Although in nonaccrual status, none

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

The Company collected $2.3 million on its nonaccrual finance

receivables during the nine months ended September 30, 2023.

Modifications Made to Borrowers Experiencing Financial Difficulty

(“Ideal”) royalty, with a carrying value of $ 3.6

As of March 31, 2024 Trio was considered impaired by $6.0 million, with the $6.0 million impairment recognized in provision for credit losses on the unaudited condensed consolidated statements of income for

the three months ended March 31, 2024.

The Company collected $0.7 million and $0.1 million on its nonaccrual finance receivables during the three months ended March 31, 2024 and 2023 , 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

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a term extension, principal forgiveness or a combination thereof.

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

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

Flowonix’s assets were sold to Algorithm

Sciences, Inc.

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

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

as of September 30, 2023.

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

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

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

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

loans to their restructured terms.

Quality of Finance Receivables

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

of the borrower’s likelihood of repayment.

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

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

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 collectability 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 decisions.

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

Credit Quality of Finance Receivables

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

the borrower’s ability and 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

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access to additional capital to operate its business.

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

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

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

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

time of underwriting.

Finance receivables rated a 2 are generally on non-accrual, and while no

loss of impairment is anticipated, there is potential for future principal impairment.

performing 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.

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

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.

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

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

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

following table summarizes the carrying value of Finance Receivables by origination year, grouped by risk rating as of September

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 March 31, 2024

and December 31, 2023 (in thousands):

Schedule of Financing Receivable by origination year

September 30, 2023

March 31, 2024

Subtotal - Term Loans

- Royalty Purchases

Subtotal - Royalties

Total Finance Receivables, gross

Subtotal - Term Loans

Subtotal - Royalties

Total Finance Receivables, gross

Intangible Assets

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

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

of March 31, 2024 and December 31, 2023, 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

September 30, 2023

March 31, 2024

Licensing Agreement (1)

Trade names and trademarks

Customer relationships

Total intangible assets

December 31, 2023

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Total intangible assets

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

Therapeutics, Inc.

(“Cara”), for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize

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

Cara is obligated to pay Enteris certain development,

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

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

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

respectively.

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

to our acquisition of Enteris, Enteris entered into the License Agreement with Cara Therapeutics, Inc.

for oral formulation rights to Enteris’ Peptelligence® technology to develop and

commercialize Oral KORSUVA TM in any indication worldwide, excluding South Korea

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

expense was $ 0.3

million and $ 0.4

million for the three months ended March

31, 2024 and 2023 , respectively, and was recognized within depreciation and amortization expense on the

unaudited condensed consolidated statements of income.

Based on amounts recorded at March 31, 2024 ,

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

Schedule of Intangible Asset Amortization Expense

Remainder of 2024

Revolving Credit Facility

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, 2027.

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

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

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 Secured Overnight Financing Rate, or 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.

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

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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.

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 March 31, 2024 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

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

Please see Note 10 for further information regarding the First

Amendment to Credit Agreement.

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

million was outstanding under the Prior Credit

Agreement as of December 31, 2022.

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

of March 31, 2024 there were no amounts outstanding under the new Credit Agreement.

During the three months ended March 31, 2024 and

2023, the Company recognized $ 0.3

million and $ 0.2

million , respectively, of interest expense.

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

million , respectively, of interest expense relating to the Credit Agreement and Prior Credit Agreement, respectively.

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.

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

$30.6 million.

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.

The following

table summarizes the outstanding balance of the Notes, net of debt issuance costs (in thousands):

of Long Term Debt

2027 Senior Notes

Debt issuance costs

Total unsecured senior notes, net

Company’s future principal obligations for the Notes were as follows (in thousands):

Schedule of Maturities of Long Term Notes

Remainder of 2024

Total unsecured senior notes, 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

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 Accounting Standard Codification (“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

The Company reassesses the feature quarterly to determine if it requires separate accounting.

There have been no changes to

the Company’s assessment through March 31, 2024 that the fair value of the embedded derivative is immaterial.

and Contingencies

Lease Obligations

the Company’s material leases are operating leases.

Right-of-use (“ROU”) assets related to operating leases are included on

the unaudited condensed consolidated balance sheets in other non-current assets.

Operating lease cost is recognized over the lease

term on a straight-line basis and is recorded within general and administrative expenses on the unaudited condensed consolidated statements of income.

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

million and $ 0.03

million , respectively, of interest expense.

Commitments and Contingencies

million for three months ended March 31, 2024 and 2023, respectively.

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.

Total rent expense

recognized under the lease was $ 0.06

million for both the three months ended March 31, 2024 and 2023, respectively.

The office lease

expires in December 2024 with an option to renew for an additional five years.

components of lease cost was as follows (in thousands):

Three Months Ended

Operating lease cost

Variable lease cost

Total lease cost

minimum rent on the Company’s operating leases was as follows as of March 31, 2024 (in thousands):

Schedule of Future Minimum Rent

Remainder of 2024

Total future lease payments

Consideration

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due to Enteris pursuant to the License Agreement.

Contingent consideration is remeasured to fair value at each reporting date until

the contingency is resolved, with changes in the estimated fair value recognized in earnings.

The estimated fair value of contingent

consideration as of September 30, 2023 and December 31, 2022 was $ 11.2 million .

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

nine months ended September 30, 2023 and 2022.

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

Contingent consideration is remeasured to fair value at each reporting date

until the contingency is resolved, with changes in the estimated fair value recognized in earnings.

The estimated fair value of

contingent consideration as of March 31, 2024 and December 31, 2023 was $ 4.9 million .

The Company did not recognize a change

in the estimated fair value of its contingent consideration during the three months ended March 31, 2024 and 2023.

of March 31, 2024, the Company’s unfunded commitments were as follows (in thousands):

Schedule of Unfunded Commitments

MedMinder Systems, Inc.

Journey Medical Corporation

Total unfunded commitments

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

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

as the CECL model.

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

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

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

As of September

30, 2023, the Company is not involved in any arbitration and/or other legal proceeding that it expects to have a material effect

on its business, financial condition, results of operations and cash flows.

As of March 31,

2024, 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

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Accordingly, the Company had no liabilities recorded for these agreements

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

Fair Value Measurements

as of March 31, 2024 and December 31, 2023.

Value Measurements

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

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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.

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

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

volume to provide pricing information on an ongoing basis.

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 nine months ended September 30, 2023 and 2022.

no transfers between any levels during the three months ended March 31, 2024 and 2023.

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

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

and cash equivalents

Cash and cash equivalents

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

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

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

Projected future cash flows are calculated

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

These receivables are classified

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

receivables are measured at amortized cost, which approximates fair value.

The fair value of finance receivables is estimated

using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent

in the finance receivables.

Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments

and prepayments of principal.

These receivables are classified as Level 3.

Finance receivables are not measured at fair value on a recurring

basis, but estimates of fair value are reflected below.

Contingent Consideration

fair value measurements of the contingent consideration obligations and the related intangible assets arising from business combinations

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or higher fair value measurement.

As of both March 31, 2024 and

December 31, 2023, the acquisition-related contingent consideration liability was $4.9 million.

For both the three months ended March

31, 2024 and 2023, the Company did not record a change in the estimated fair value of contingent consideration.

The Company made

no payments during the three months ended March 31, 2024 and 2023 against the contingent consideration liability.

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 three months ended March 31, 2024 and year ended 2023 the discount rate was 14.5% for both periods, respectively.

During the 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.

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 benchmark 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.

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

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

The foreign currency forward contract is

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

The foreign currency forward was recorded

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

31, 2022, respectively.

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

during the nine months ended September 30, 2023.

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

(in thousands):

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

The 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 in the consolidated balance sheets as of

March 31, 2024 and December 31, 2023 and totaled to $1.8 million and $1.0 million, respectively.

The Company recognized a $0.9 million

and $0.2 million gain due to changes in fair value related to its foreign currency forward contract during the three months ended March

31, 2024 and March 31, 2023, respectively.

following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 (in

Schedule of fair value assets measured on recurring basis

Quoted Prices

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Warrant assets

Marketable investments

Foreign currency forward contract

Marketable investments

Financial Liabilities

Contingent consideration payable

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 three months

ended March 31, 2024 and year ended 2023 the discount rate was 14.5% for both periods, respectively.

During the 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

following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023

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Marketable investments

Foreign currency forward contract

Financial Liabilities:

Contingent consideration payable

Foreign currency forward contract

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

changes in fair value of the warrant assets during the three months ended March 31, 2024 and 2023 were as follows (in thousands):

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

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Fair value - December 31, 2023

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Change in fair value

Fair value - September 30, 2023

Fair value - September 30, 2022

Loss on foreign currency transactions

Fair value - March 31, 2024

Fair value - March 31, 2023

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

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Schedule of weighted average assumptions

September 30, 2023

March 31, 2024

December 31, 2023

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75.3 % to 154.3 %

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

in prior periods.

As of December 31, 2022, the Company had two royalties, Best and Cambia®, that were deemed to be impaired

based on reductions in carrying values in prior periods.

The following table presents these royalties measured at fair value on

a nonrecurring basis as of September 30, 2023 and December 31, 2022 (in thousands):

of fair value of assets and liabilities measured on nonrecurring basis

The 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 three months ended March 31, 2024 the risk-free rate range weighted average was 4.4 % ,

and had a median of 4.2 % .

For the year ended December 31, 2023 the risk-free rate range weighted average was 4.3 % ,

and had a median of 3.8 % .

For the three months ended March 31, 2024 the expected life range weighted average was 3.4

years , and had a median of 4.4

For the year ended December 31, 2023 the expected life range weighted average was 3.4

years , and had a median of 4.4

For the three months ended March 31, 2024 the expected volatility range weighted average was 124.6 % ,

and had a median of 134.4 % .

For the year ended December 31, 2023 the expected volatility range weighted average 124.6 % ,

and median of 134.4 % .

of March 31, 2024 and December 31, 2023, the Company had one royalty, Best, that was deemed to be impaired based on reductions

in carrying value in prior periods.

As of March 31, 2024, the Company had one loan, Trio Healthcare, that was deemed to be impaired based

on reductions in carrying value during the three months ended March 31, 2024.

The following table presents this royalty and loan

measured at amortized cost using the effective interest method, which approximates fair value, on a nonrecurring basis as of March 31,

2024 and December 31, 2023 (in thousands):

Schedule of weighted average assumptions

Quoted Prices

or Liabilities

September 30, 2023

March 31, 2024

December 31, 2023

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

were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023.

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

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

following table presents the fair value of financial assets and liabilities as of March 31, 2024 (in thousands):

Schedule of fair value by balance sheet grouping

of September 30, 2023 (in thousands):

Financial Assets

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Contingent consideration payable

of December 31, 2022 (in thousands):

following table presents the fair value of financial assets and liabilities as of year ended December 31, 2023 (in thousands):

Financial Assets

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Warrant assets

Foreign Currency Forward Contract

Financial liabilities

Contingent consideration payable

Foreign currency forward contract

Revenue Recognition

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

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

The Company’s

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

following table provides the contract revenue recognized by revenue source for the three and nine months ended September 30, 2023

and 2022 (in thousands):

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

The Company’s Finance Receivables

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

following table provides the contract revenue recognized by revenue source for the three

months ended March 31, 2024 and 2023 (in thousands):

Schedule of Revenue Recognized by Revenue Source

Three Months Ended

September 30,

Nine Months Ended

September 30,

Pharmaceutical Development Segment

License Agreement

Pharmaceutical Development and other

Pharmaceutical Development

Total contract revenue

1 unchanged sentence

related performance obligation is satisfied.

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

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

in the consolidated balance sheets (in thousands):

of Contract Liabilities

September 30,

Schedule of Company's Contract Liabilities

Pharmaceutical Development Segment

Deferred revenue

Deferred income

Total contract liabilities

the nine months ended September 30, 2023, the Company recognized $ 3,000 of 2022 deferred revenue from the satisfaction

of performance obligations.

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

License Agreement as of September 30, 2023 or December 31, 2022.

the three months ended March 31, 2024, the Company did not recognize any of the 2023 deferred income from satisfaction of performance

The Company did not have any contract assets as

of March 31, 2024 or December 31, 2023.

Enteris Exclusive Option

and Asset Purchase Agreement

effective date of January 1, 2024, we entered into an exclusive option and asset purchase agreement with a strategic partner on March

14, 2024 which granted the partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing

clinical manufacturing and development services.

The partner must exercise the option by or before January 1, 2026.

In exchange for the

exclusive purchase option the partner is to provide consideration in the form of an “option fee” and “guaranteed revenue

fee is broken into two components:

A low-single digit million fee due within 30 business days of executing the agreement;

and should the

option not be exercised by the first anniversary of the effective date, an additional low-single digit million fee will be due at that

The first option fee was paid in April 2024.

Option fee payments will be included in deferred income until the earlier of term

expiration or exercise of the purchase option.

Should the partner exercise the purchase option, any option fee payments made will be applied

towards the purchase price.

The guaranteed

revenue payments include two components:

A mid-single digit million guaranteed revenue payment in 2024 and a mid-single digit million

guaranteed revenue payment in 2025.

The revenue is to be derived by the partner under an existing collaboration agreement, and partner

is to pay the difference should the minimum amount not be met each year.

Each years' guaranteed revenue amount is to be paid in two installments

semi-annually each year.

Should revenue exceed the 2024 or 2025 guaranteed revenue amounts after receiving a difference payment in the

first half of the year, we must repay the partner the amount of such overpayment.

We are evaluating the revenue recognition policy of

the guaranteed revenue payments.

No guaranteed revenue was recognized during the three months ended March 31, 2024.

Segment Information

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Geographic Region

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Pharmaceutical

2 unchanged sentences

Interest expense

Pharmaceutical manufacturing, research and development

Manufacturing, research and development

Depreciation and amortization expense

1 unchanged sentence

Other expense, net

Income tax benefit

Net income (loss)

Three Months Ended September 30, 2022

Pharmaceutical

Other revenue

Interest expense

Pharmaceutical manufacturing, research and development

Depreciation and amortization expense

General and administrative

Other income, net

Income tax expense

Net income (loss)

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2023

Pharmaceutical

Other revenue

Benefit from credit losses

Interest expense

Pharmaceutical manufacturing, research and development

Manufacturing, research and development

Depreciation and amortization expense

1 unchanged sentence

Other expense, net

Income tax expense

Net income (loss)

Nine Months Ended September 30, 2022

Pharmaceutical

Other revenue

Interest expense

Pharmaceutical manufacturing, research and development

Depreciation and amortization expense

General and administrative

Other income, net

Income tax expense

Income tax benefit

Net income (loss)

2 unchanged sentences

consolidated amounts.

Subsequent Events

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

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

except as stated directly below.

Therapeutics PLC

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

Shield Therapeutics PLC (“Shield”)

a term loan in the amount of $ 20.0

The loan matures on September 28, 2028.

In connection with the loan, SWK Funding

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

Notes Offering

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

Senior Notes due 2027 (the “Notes”).

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

$2.9 million in aggregate principal amount of the Notes.

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

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

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

The Company received net proceeds after discounts and commissions,

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

to Credit Agreement

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

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

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

Lifesciences, Inc.

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

Lifesciences, Inc.

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

The loan matures on November 30, 2026.

In connection with the loan, SWK Funding

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

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

What changed 10-Q

Item 1. Financial Statements