Stock And Warrant Off-Balance Sheet R&D - SWORD

A financing option developed to help biotechnology companies access capital that could be used to finance new or ongoing research and development projects by establishing a separate entity. Thefinancing received through outside investors gives thebiotechnology company the needed capital in exchange for giving the investors partialrights to the outcomes of the R&D projects they are funding.

|||The SWORD isa separate entity that isconnected to the outside investors and the biotech company through several legal obligations. Investors are usually institutional investors or wealthy inpiduals looking to capitalize on the latest technology. The investors are hoping to benefitfrom thewarrants on the common stock of the biotech company and partial rights to the technology developed from the project.

Biotech companies benefit from a SWORD by being able to develop projects they would otherwise be unable to afford. Also, being able to use outside investors reduces the risk put on current shareholders. Using SWORDs allows companies to minimize the effects of R&D spending on the firm's bottom line.