10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2018

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-27163

 

SWK Holdings Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware	77-0435679
(State or Other Jurisdiction of Incorporation   or Organization)	(I.R.S. Employer Identification No.)
14755 Preston Road, Suite 105   Dallas, TX	75254 (Zip Code)
(Address of Principal Executive Offices)

(Registrant’s Telephone Number, Including Area Code): (972) 687-7250

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      x   YES     o   NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x   YES     o   NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer   o   Accelerated Filer   o   Non-Accelerated Filer   o   Smaller Reporting Company    x    Emerging Growth Company   o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   o   YES     x   NO

As of May 10, 2018, there were 13,059,137 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

SWK Holdings Corporation

Form 10-Q

Quarter Ended March 31, 2018

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets—March 31, 2018 and December 31, 2017	1
	Unaudited Condensed Consolidated Statements of Income—Three Months Ended March 31, 2018 and 2017	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income—Three Months Ended March 31, 2018 and 2017	3
	Unaudited Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2018 and 2017	4
	Notes to the Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
	Signatures	33
	Certifications

FORWARD-LOOKING STATEMENTS

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions, and include, but are not limited to, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Words such as “anticipate,” “believe,” “estimate,” “expects,” “intend,” “plan,” “will” and variations of these words and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially (both favorably and unfavorably) from those expressed or forecasted in the forward-looking statements.

These risks and uncertainties include, but are not limited to, those described in Part II, Item 1A “Risk Factors” and elsewhere in this report. Forward-looking statements that were believed to be true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	March 31,			December 31,
	2018			2017
ASSETS
Cash and cash equivalents	$	21,451		$	30,557
Accounts receivable		1,579			1,637
Finance receivables, net		165,843			151,995
Marketable investments		1,713			1,856
Deferred tax asset		21,771			22,725
Warrant assets		1,519			987
Other assets		314			126
Total assets	$	214,190		$	209,883
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities	$	2,450		$	1,840
Warrant liability		65			91
Total liabilities		2,515			1,931
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively		—			—
Common stock, $0.001 par value; 250,000,000 shares authorized;13,059,190 and 13,053,422 issued and outstanding as of  March 31, 2018 and December 31, 2017, respectively		13			13
Additional paid-in capital		4,433,668			4,433,589
Accumulated deficit		(4,222,006	)		(4,225,863	)
Accumulated other comprehensive income		—			213
Total SWK Holdings Corporation stockholders’ equity		211,675			207,952
Non-controlling interests in consolidated entity		—			—
Total stockholders’ equity		211,675			207,952
Total liabilities and stockholders’ equity	$	214,190		$	209,883

See accompanying notes to the unaudited condensed consolidated financial statements.

1

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2018			2017
Revenues:
Finance receivable interest income, including fees	$	6,817		$	4,656
Income related to investments in unconsolidated entity		—			10,204
Other		5			4
Total revenues		6,822			14,864
Costs and expenses:
Provision for credit losses		1,179			—
General and administrative		1,221			661
Total costs and expenses		2,400			661
Other income (expense), net
Unrealized net gain (loss) on derivatives		300			(472	)
Unrealized net loss on equity securities		(124	)		—
Gain on sale of marketable securities		—			243
Income before provision for income taxes		4,598			13,974
Provision for income taxes		954			3,706
Consolidated net income		3,644			10,268
Net income attributable to non-controlling interests		—			5,032
Net income attributable to SWK Holdings Corporation stockholders	$	3,644		$	5,236
Net income per share attributable to SWK Holdings Corporation stockholders:
Basic	$	0.28		$	0.40
Diluted	$	0.28		$	0.40
Weighted Average Shares
Basic		13,053			13,144
Diluted		13,057			13,147

See accompanying notes to the unaudited condensed consolidated financial statements.

2

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended
	March 31,
	2018		2017
Consolidated net income	$	3,644	$	10,268
Other comprehensive income, net of tax
Unrealized gain on investment in securities
Change in fair value of securities		—		1,820
Total other comprehensive income		—		1,820
Comprehensive income		3,644		12,088
Comprehensive income attributable to non-controlling interests		—		5,032
Comprehensive income attributable to SWK Holdings Corporation stockholders	$	3,644	$	7,056

See accompanying notes to the unaudited condensed consolidated financial statements.

3

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended
	March 31,
	2018			2017
Cash flows from operating activities:
Consolidated net income	$	3,644		$	10,268
Adjustments to reconcile net income to net cash provided by operating activities:
Income from investment in unconsolidated entity		—			(10,204	)
Provision for loan credit losses		1,179			—
Deferred income taxes		954			3,706
Change in fair value of warrants		(300	)		472
Change in fair value of equity securities		124			—
Gain on sale of equity securities		—			(243	)
Loan discount amortization and fee accretion		(837	)		(568	)
Interest paid-in-kind		(47	)		(383	)
Stock-based compensation		79			78
Interest income in excess of cash received		(70	)		—
Other		4			4
Changes in operating assets and liabilities:
Accounts receivable		58			(88	)
Other assets		(189	)		(112	)
Accounts payable and other liabilities		610			48
Net cash provided by operating activities		5,209			2,978
Cash flows from investing activities:
Cash distributions from investment in unconsolidated entity		—			17,189
Proceeds from sale of available-for-sale marketable securities		—			345
Investment in finance receivables		(29,250	)		(3,638	)
Repayment of finance receivables		14,918			225
Marketable investment principal payment		19			24
Other		(2	)		(3	)
Net cash (used in) provided by investing activities		(14,315	)		14,142
Cash flows from financing activities:
Distribution to non-controlling interests		—			(8,788	)
Net cash used in financing activities		—			(8,788	)
Net (decrease) increase in cash and cash equivalents		(9,106	)		8,332
Cash and cash equivalents at beginning of period		30,557			32,182
Cash and cash equivalents at end of period	$	21,451		$	40,514

See accompanying notes to the unaudited condensed consolidated financial statements.

4

SWK HOLDINGS CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. SWK Holdings Corporation and Summary of Significant Accounting Policies

Nature of Operations

SWK 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. The Company’s strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions to a broad range of life science companies, institutions and inventors. The Company is primarily focused on monetizing cash flow streams derived from commercial-stage products and related intellectual property through royalty purchases and financings, as well as through the creation of synthetic revenue interests in commercialized products. The Company has been deploying its assets to earn interest, fees, and other income pursuant to this strategy, and the Company continues to identify and review financing and similar opportunities on an ongoing basis. In addition, through the Company’s wholly-owned subsidiary, SWK Advisors LLC, the Company provides non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board. The Company intends to fund transactions through its own working capital, as well as by building its asset management business by raising additional third-party capital to be invested alongside the Company’s capital.

The Company fills a niche that it believes is underserved in the sub-$50 million transaction size. Since many of its competitors that provide longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than the Company, they tend to not focus on transaction sizes below $50 million as it is generally inefficient for them to do so. In addition, the Company does not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market. As such, the Company believes it faces less competition from such investors in transactions that are less than $50 million.

The 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, we do not anticipate that our life science business strategy will generate sufficient income to permit us to utilize all of our NOLs prior to their respective expiration dates. As such, it is possible that we might pursue additional strategies that we believe might result in our ability to utilize more of our NOLs.

As of May 10, 2018, the Company and its partners have executed transactions with 28 different parties under its specialty finance strategy, funding an aggregate $405 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 is headquartered in Dallas, Texas.

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Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“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.

The 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.

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments 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, 2018. 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, 2017, filed with the SEC on March 29, 2018.

Use of Estimates

The 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, impairment of financing receivables and long-lived assets, valuation of warrants, income taxes and contingencies and litigation, among others.  Some of these judgments can be subjective and complex, and consequently, actual results may differ from these estimates. The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable. For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable.

The 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, 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.

6

Recent Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 was further amended in February 2018 by ASU 2018-03, “Technical Corrections and Improvements to Financial instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” and in March 2018 by ASU 2018-04, “Investments - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117” and SEC Release No. 33-9273 (SEC Update) to clarify certain guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. This guidance changes how entities measure equity investments that do not result in consolidation and are not accounted for under the equity method. Entities will be required to measure these investments at fair value at the end of each reporting period and recognize changes in fair value in net income. A practicability exception will be available for equity investments that do not have readily determinable fair values; however, the exception requires the entity to consider relevant transactions that can be reasonably known to identify any observable price changes that would impact the fair value. Under prior GAAP, changes in fair value of available-for-sale equity securities were recorded in other comprehensive income. The Company adopted ASU 2016-01 as of January 1, 2018. As of that date, the Company reclassified the accumulated net unrealized appreciation related to our investments in equity securities as of December 31, 2017 (approximately $0.2 million) from accumulated other comprehensive income to retained earnings and does not expect the adoption of ASU 2016-01 to have a material impact on the Company’s future reported net earnings.

Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”) and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within, beginning after December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. A reporting entity may apply the amendments in the Revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach.

The Revenue ASUs became effective for the Company on January 1, 2018. The Company has been evaluating the new guidance and believes the Revenue ASUs will not have a material impact on its consolidated financial statements upon adoption since the primary source of revenue for the Company is generated through financing arrangements, which are excluded from the Revenue ASUs.

7

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The new standard adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new 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. The 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 income. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)” (“ASU 2016-15”), which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued this guidance with the intent of reducing diversity in practice with respect to classification of eight types of cash receipts and payments: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero coupon bonds, (3) contingent consideration payments after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718)” (“ASU 2017-09”), to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting required by Topic 718. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 on January 1, 2018. The adoption of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements.

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); and Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, and (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” This guidance addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the new guidance to determine the impact on its consolidated financial statements upon adoption in fiscal 2019.

8

Note 2. Net Income per Share

Basic 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.

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

	Three Months Ended
	March 31,
	2018		2017
Numerator:
Net income attributable to SWK Holdings Corporation stockholders	$	3,644	$	5,236
Denominator:
Weighted-average shares outstanding		13,053		13,144
Effect of dilutive securities		4		3
Weighted-average diluted shares		13,057		13,147
Basic income per share attributable to SWK Holdings Corporation stockholders	$	0.28	$	0.40
Diluted income per share attributable to SWK Holdings Corporation stockholders	$	0.28	$	0.40

For the three months ended March 31, 2018 and 2017, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 286,000 and 399,000, respectively, have been excluded from the calculation of diluted income per share as all such securities were anti-dilutive. 

9

Note 3. Finance Receivables, Net

Finance 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.

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

	March 31,			December 31,
Portfolio	2018			2017
Term loans	$	147,715		$	118,533
Royalty purchases		20,966			35,121
Total before allowance for credit losses		168,681			153,654
Allowance for credit losses		(2,838	)		(1,659	)
Total carrying value	$	165,843		$	151,995

Credit Quality of Finance Receivables

The 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.

On 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 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.

Receivables 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.

When 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.

10

The 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:

§ business characteristics and financial conditions of obligors;

§ current economic conditions and trends;

§ actual charge-off experience;

§ current delinquency levels;

§ value of underlying collateral and guarantees;

§ regulatory environment; and

§ any other relevant factors predicting investment recovery.

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

	March 31, 2018						December 31, 2017
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	18,919	$	128,796	$	147,715	$	11,402	$	107,131	$	118,533
Royalty purchases, net of credit loss allowance		—		18,128		18,128		—		33,462		33,462
Total carrying value	$	18,919		146,924	$	165,843	$	11,402	$	140,593	$	151,995

As of March 31, 2018, the Company had three term loans associated with three portfolio companies in nonaccrual status with a carrying value, net of credit loss allowance, of $18.9 million. As of December 31, 2017, the Company had two term loans associated with two portfolio companies in nonaccrual status with a carrying value, net of credit loss allowance, of $11.4 million. The Company collected $0.6 million on one nonaccrual loan during the three months ended March 31, 2018. No cash on nonaccrual loans was collected during the year ended December 31, 2017. Of the three nonaccrual term loans as of March 31, 2018, only one loan is deemed to be impaired. (Please see ABT Molecular Imaging, Inc., B&D Dental Corporation, and Hooper Holmes, Inc. below for further details regarding nonaccrual term loans.)

Term Loans

ABT Molecular Imaging, Inc. (“ABT”)

On October 10, 2014, the Company entered into a credit agreement pursuant to which the Company provided ABT a second lien term loan in the principal amount of $10.0 million. The loan matures on October 8, 2021. The synthetic royalty payment due to the Company on December 15, 2015 was blocked by ABT’s first lien lender pursuant to the terms of the intercreditor agreement by and between the Company and the first lien lender as a result of a forbearance agreement entered into between ABT and the first lien lender. Under the terms of the forbearance agreement, the first lien lender deferred principal payments until maturity of the first lien in March 2016 and ABT raised additional equity capital.

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In February 2016, ABT violated the terms of the forbearance agreement with the first lien lender. In order to control the workout of the default under the first lien loan and prevent the equity sponsors from taking control of the first lien term loan, the Company purchased from an unrelated party the first lien term loan at par for a purchase price of $0.7 million. Since then the equity sponsors funded cash shortfalls into the second quarter of 2016. The Company continues to work with ABT’s equity sponsors to resolve the existing defaults. ABT is currently evaluating strategic options.

Since 2016, the Company has entered into additional amendments to the first lien term loan to provide for an additional $8.3 million of liquidity under the first lien credit agreement.

The Company recorded an impairment loss of $7.6 million as of December 31, 2017. The collateral for the loan has been individually reviewed, and the Company believes that its current collateral position is greater than the recorded investment in the loan as of March 31, 2018. The Company considered several factors in this determination, including an independent third-party valuation and developments in ABT’s business and industry.

B&D Dental Corporation (“B&D”)

On December 10, 2013, the Company entered into a five-year credit agreement to provide B&D a senior secured term loan with a principal amount of $6.0 million funded upon close, net of an arrangement fee of $60,000. Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D. As of March 31, 2018, the total amount funded was $8.1 million. B&D is currently evaluating strategic options.

B&D is currently in default under the terms of the credit agreement, and as a result, the Company classified the loan to nonaccrual status as of September 30, 2015. During the first and fourth quarters of 2016, the Company executed two additional amendments to the loan to advance an additional $0.5 million in order to directly pay critical vendors and protect the value of the collateral. The Company believes its collateral position is greater than the unpaid balance; thus, accrued interest has not been reversed nor has an allowance been recorded as of March 31, 2018. The Company considered several factors in this determination, including an independent third-party valuation and developments in B&D’s business and industry.

Hooper Holmes, Inc. (“Hooper”)

On May 12, 2017, the Company provided a $6.5 million term loan to Hooper to support its merger with Provant Health Solutions, LLC.  On August 8, 2017, the Company provided an additional $2.0 million term loan with terms similar to the original term loan. The $2.0 million August term loan was scheduled to mature on February 1, 2018.  In late January, Hooper informed the Company of tight liquidity and that it would be strained if it repaid the full $2.0 million; thus, the Company agreed to extend the maturity for twelve weeks to April 30, 2018 in exchange for a partial repayment of $0.3 million on February 1, 2018 and an additional $0.3 million on March 15, 2018. However, in mid- March, Hooper informed the Company that it would be unable to repay the $0.3 million that was due on March 15, 2018. The Company is currently working with Hooper on strategic options, including requiring Hooper to retain financial advisors to evaluate strategic options. The Company has placed Hooper on nonaccrual but believes its collateral position is greater than the unpaid balance; thus, an allowance has not been recorded as of March 31, 2018.

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Royalty Purchases

Cambia®

On July 31, 2014, the Company purchased a 25 percent royalty on sales of Cambia® from royalty holder, APR Applied Pharma Research S.A. (“APR”), for $4.0 million. On December 2, 2015, the Company purchased a second 25 percent royalty on sales of Cambia® for $4.5 million. In the U.S., Cambia® is marketed by DepoMed, Inc. (“DepoMed”) while the product is marketed by Aralez Pharmaceuticals, Inc. As disclosed by DepoMed, Cambia® prescription trends decelerated in 2017, and while they have begun to stabilize, they are not growing in line with the Company’s original forecast. During the three months ended March 31, 2018, the Company reduced its expectations for future royalty receipts and recognized an allowance for credit loss on the royalty purchase of $1.2 million.

Note 4. Marketable Investments

Investments in marketable investments at March 31, 2018 and December 31, 2017 consist of the following (in thousands):

	March 31, 2018		December 31, 2017
Corporate debt securities	$	581	$	600
Equity securities		1,132		1,256
Total	$	1,713	$	1,856

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities as of March 31, 2018 and December 31, 2017, are as follows (in thousands):

March 31, 2018	Amortized Cost		Gross Unrealized    Gains		Gross Unrealized    Loss		Fair Value
Corporate debt securities	$	581	$	—	$	—	$	581
Total	$	581	$	—	$	—	$	581

December 31, 2017	Amortized Cost		Gross Unrealized    Gains		Gross Unrealized    Loss		Fair Value
Corporate debt securities	$	600	$	—	$	—	$	600
Total	$	600	$	—	$	—	$	600

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The following table presents the proceeds from sale of equity securities, realized gain on sale of equity securities, and unrealized net loss on equity securities as prescribed by ASC 321, “Investment - Equity Securities.” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” was adopted on January 1, 2018, at which time a cumulative effect adjustment of $213,000 was recorded to reclassify the amount of accumulated unrealized gains related to equity securities from accumulated other comprehensive income to retained earnings.

(in thousands)	Three Months Ended March 31,
	2018			2017
Proceeds from sale of equity securities	$	—		$	—
Realized gain on sale of equity securities		—			243
Unrealized net loss on equity securities reflected in the Consolidated Statement of Operations		(124	)		—

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of March 31, 2018 and December 31, 2017 were as follows (in thousands):

March 31, 2018	Less than Twelve Months				Twelve Months or Greater					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity securities		—		—		41		(72	)		41		(72	)
Total	$	—	$	—	$	41	$	(72	)	$	41	$	(72	)

December 31, 2017	Less than Twelve Months				Twelve Months or Greater					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity securities		—		—		33		(117	)		33		(117	)
Total	$	—	$	—	$	33	$	(117	)	$	33	$	(117	)

Equity Securities

The Company’s equity securities include 661,076 shares of Cancer Genetics common stock and 77,922 shares of Hooper common stock. During the three months ended March 31, 2017, the Company sold 75,000 shares of Cancer Genetics common stock, which resulted in a realized gain of $0.2 million. As of March 31, 2018, the Cancer Genetics and Hooper equity securities are reflected at fair value of $1.1 million and $41,000 respectively.

Debt Securities

On July 9, 2013, the Company entered into a note purchase agreement to purchase, at par, $3.0 million of a total of $100.0 million aggregate principal amount of senior secured notes due in November 2026.  The agreement allows the first interest payment date to include paid-in-kind notes for any cash shortfall, of which the Company received $0.1 million on November 15, 2013. The notes are secured only by certain royalty and milestone payments associated with the sales of pharmaceutical products.

The senior secured notes have been placed on non-accrual status as of June 30, 2016. Total cash collected during the three months ended March 31, 2018 was $19,500, which was credited to the notes’ carrying value. As of March 31, 2018, the notes are reflected at their estimated fair value of $0.6 million.

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Note 5. Variable Interest Entities

The Company consolidates the activities of VIEs of which it is the primary beneficiary. The primary beneficiary of a VIE is the variable interest holder possessing a controlling financial interest through (i) its power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) its obligation to absorb losses or its right to receive benefits from the VIE that could potentially be significant to the VIE. In order to determine whether the Company owns a variable interest in a VIE, the Company performs qualitative analysis of the entity’s design, organizational structure, primary decision makers and relevant agreements.

Consolidated VIE

SWK HP Holdings LP (“SWK HP”) was formed in December 2012 to acquire a limited partnership interest in Holmdel Pharmaceuticals LP (“Holmdel”).   Holmdel acquired the U.S. marketing authorization rights to a beta blocker pharmaceutical product indicated for the treatment of hypertension for a total purchase price of $13.0 million. The Company, through its wholly owned subsidiary SWK Holdings GP LLC (“SWK Holdings GP”), acquired a direct general partnership interest in SWK HP, which in turn acquired a limited partnership interest in Holmdel. The total investment in SWK HP of $13.0 million included $6.0 million provided by SWK Holdings GP and $7.0 million provided by non-controlling interests.  Subject to customary limited partner protections afforded the investors by the terms of the limited partnership agreement, the Company maintained voting and managerial control of SWK HP and therefore included it in its consolidated financial statements.

SWK HP had significant influence over the decisions made by Holmdel. SWK HP received quarterly distributions of cash flow generated by InnoPran XL according to a tiered scale that was subject to certain cash on cash returns received by SWK HP. SWK HP achieved the 2x cash on cash return threshold with the November 2016 distribution as such its economic ownership in Holmdel approximated 49 percent.

On February 23, 2017, Holmdel sold the U.S. marketing authorization rights to InnoPran XL to ANI Pharmaceuticals, Inc. SWK Holdings GP received net proceeds from the transaction of approximately $8.0 million. The approximate $8.0 million of proceeds includes a 5 percent incentive fee earned from SWK HP, and SWK Holdings GP’s share of the sale proceeds. As part of the transaction, SWK HP and all involved parties executed mutual releases and terminations of all license and supply agreements. SWK Holdings GP received an additional distribution regarding InnoPran XL sales covering the period from January 1, 2017 through the date of sale and has not received any further material distributions.

Unconsolidated VIE

For the three months ended March 31, 2018, the Company did not recognize any income related to this entity accounted for under the equity method, nor did the Company receive any cash distributions.

For the three months ended March 31, 2017, the Company recognized $10.2 million of equity method gains, of which $5.0 million was attributable to the non-controlling interest in SWK HP. In addition, SWK HP received cash distributions totaling $17.2 million during the three months ended March 31, 2017, of which $8.8 million was subsequently paid to holders of the non-controlling interests in SWK HP. There has been no change in the carrying amount of the Company’s investment in Holmdel since December 31, 2017.

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Note 6. Related Party Transactions

On September 6, 2013, in connection with entering into a credit facility, the Company issued warrants to an affiliate of a stockholder, Carlson Capital, L.P. (the “Stockholder”), for 100,000 shares of the Company’s common stock at a strike price of $13.88 per share. The warrants have a price anti-dilution mechanism that was triggered by the price that shares were sold by the Company in a rights offering in 2014, and as a result, the strike price of the warrants was reduced to $13.48 per share.

Due to certain provisions within the warrant agreement, the warrants meet the definition of a derivative and do not qualify for a scope exception, as it is not considered indexed to the Company’s stock. As such, the warrants are reflected as a warrant liability in the consolidated balance sheets. The Company recorded a nominal gain for the three months ended March 31, 2018. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: 

	March 31,  2018			December 31,  2017
Dividend rate		—			—
Risk-free rate		2.3	%		2.0	%
Expected life (years)		2.4			2.7
Expected volatility		19.4	%		21.9	%

The changes on the value of the warrant liability during the three months ended March 31, 2018 were as follows (in thousands):

Fair value – December 31, 2017	$	91
Issuances		—
Changes in fair value		(26	)
Fair value – March 31, 2018	$	65

Note 7. Stockholders’ Equity

Stock Compensation Plans

During the three months ended March 31, 2018 and 2017, the Board approved compensation for Board services by granting 5,768 and 5,928 shares, respectively, of common stock as compensation for the non-employee directors. During both the three months ended March 31, 2018 and 2017, the Company recorded approximately $62,000 in Board compensation expense. The aggregate stock-based compensation expense, including the quarterly Board grants, recognized by the Company for both of the three months ended March 31, 2018 and 2017 was $0.1 million.

Non-controlling Interests

As discussed in Note 5, SWK HP had a limited partnership interest in Holmdel. There has been no change to the carrying amount of the non-controlling interest since December 31, 2017.

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Note 8. Fair Value Measurements

The 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). 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.

Level 1   Unadjusted 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.

Level 2   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.

Level 3   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.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the three months ended March 31, 2018. 

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in affiliates.

Following 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

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

Equity Securities

Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).

Finance Receivables

The 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. Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below.

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Marketable Investments and Warrants

Marketable Investments

If 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.

Derivative securities

For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	1,519	$	—	$	—	$	1,519
Marketable investments		1,713		1,132		—		581
Financial Liabilities:
Warrant liability	$	65	$	—	$	—	$	65

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The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	987	$	—	$	—	$	987
Marketable investments		1,856		1,256		—		600
Financial Liabilities:
Warrant liability	$	91	$	—	$	—	$	91

The changes on the value of the warrant assets during the three months ended March 31, 2018 were as follows (in thousands):

Fair value – December 31, 2017	$	987
Issued		258
Canceled		—
Change in fair value		274
Fair value – March 31, 2018	$	1,519

The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the unaudited condensed consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value:

	March 31,		December 31,
	2018		2017
Dividend rate range		—		—
Risk-free rate range		2.3% to 2.7%		2.0% to 2.3%
Expected life (years) range		2.4 to 7.0		2.6 to 6.6
Expected volatility range		55.6% to 94.9%		72.5% to 95.7%

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The following table presents the financial assets measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
March 31, 2018
Impaired loans	$	12,574	$	—	$	—	$	12,574
December 31, 2017
Impaired loans	$	6,087	$	—	$	—	$	6,087

There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017.

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in unconsolidated entity.

As of March 31, 2018 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	21,451	$	21,451	$	21,451	$	—	$	—
Finance receivables		165,843		165,843		—		—		165,843
Marketable investments		1,713		1,713		1,132		—		581
Warrant assets		1,519		1,519		—		—		1,519
Financial Liabilities
Warrant liability	$	65	$	65	$	—	$	—	$	65

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As of December 31, 2017 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	30,557	$	30,557	$	30,557	$	—	$	—
Finance receivables		151,995		151,995		—		—		151,995
Marketable investments		1,856		1,856		1,256		—		600
Warrant assets		987		987		—		—		987
Financial Liabilities
Warrant liability	$	91	$	91	$	—	$	—	$	91

Note 9. Subsequent Events

OraMetrix, Inc.

On May 1, 2018, OraMetrix, Inc. retired its credit facility with SWK Funding LLC, a wholly-owned subsidiary of the Company (“SWK Funding”), in conjunction with its sale to Dentsply Sirona Inc. SWK Funding received an aggregate of approximately $9.2 million at pay-off, including payment of accrued interest and exit fees.

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ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2017 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.

Overview

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 (together “life science”) and tailor our financial solutions to the needs of our business partners. Our business partners are primarily engaged in selling products that directly or indirectly cure diseases and/or improve people’s or animals’ wellness, or they receive royalties paid on the sales of such products. For example, our biotechnology and pharmaceutical business partners manufacture medication that directly treats disease states, whereas our life science tools partners sell a wide variety of research instrumentation to help other companies conduct research into disease states.

Our investment objective is to maximize our portfolio total return and thus increase our net income and book value by generating income from three sources:

1. primarily owning or financing through debt investments, royalties or revenue interests generated by the sales of life science products and related intellectual property;

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

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

In our portfolio we seek to achieve attractive risk-adjusted current yields and opportunities with the potential for equity-like returns with protection that credit provides.

The majority of our transactions are structured similarly to factoring transactions whereby we provide capital in exchange for an interest in an existing revenue stream. We do not anticipate providing capital in situations prior to the commercialization of a product. The existing revenue stream can take several forms, but is most commonly either a royalty derived from the sales of a life science product (1) from the marketing efforts of a third party, such as a royalty paid to an inventor on the sales of a medicine, or (2) from the marketing efforts of a partner company, such as a medical device company that directly sells its own products. Our structured debt investments may include warrants or other features, giving us the potential to realize enhanced returns on a portion of our portfolio. Capital that we provide directly to our partners is generally used for growth and general working capital purposes, as well as for acquisitions or recapitalizations in select cases. We generally fund the full amount of transactions up to $20 million through our working capital.

In addition, we provide non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life-science finance. We may seek to raise discretionary capital from similar investors in the future.

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In circumstances where a transaction is greater than $20 million, we seek to syndicate amounts in excess of $20 million to our investment advisory clients. In addition, we may participate with investors other than our investment advisory clients. In those instances, we do not expect to earn investment advisory income from the participations of such investors.

We source our investment opportunities through a combination of our senior management’s proprietary relationships within the industry, outbound business development efforts and inbound inquiry from companies, institutions and inventors interested in learning about our capital financing alternatives. Our investment advisory clients generally do not originate investment opportunities for us.

As of May 10, 2018, we have executed 28 transactions, deploying approximately $405 million, across a variety of opportunities. In counting our transactions, we generally consider a series of transactions with one partner company as a single transaction. In eleven of the transactions, we participated alongside other investors; our investment advisory clients co-invested in three of these transactions. The other seventeen transactions were completed solely by SWK.

The table below provides an overview of our outstanding transactions as of March 31, 2018.

(in thousands, except rate and share data)

			Funded		GAAP				Revenue Recognized
Royalty Purchases and Financings	License Technology	Footnote	Amount		Balance		Rate		Q1
Besivance®	Ophthalmic antibiotic		$	6,000	$	2,640		N/A	$	125
Cambia®	NSAID migraine treatment	(1)		8,500		6,649		N/A		394
Forfivo XL®	Depressive disorder treatment			6,000		4,841		N/A		288
Narcan®	Opioid overdose treatment			17,500		707		N/A		1,376
Secured Royalty Financing (Marketable Investment)	Women’s health	(2)		3,000		581		11.5%		—
Tissue Regeneration Therapeutics	Umbilical cord banking			3,250		3,291		N/A		132

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													Revenue
							Maturity		GAAP				Recognized
Term Loans	Type	Footnote			Principal		Date		Balance		Rate		Q1
ABT Molecular Imaging	First Lien		(2), (3)		$	8,283		06/30/16	$	8,283		7.0%	$	139
ABT Molecular Imaging	Second Lien Royalty		(2), (3)			3,285		10/08/21		3,285		N/A		—
B&D Dental Corporation	First Lien		(2), (4)			8,148		12/10/18		8,117		14.0%		—
B&D Dental Corporation	First Lien Equipment Loan					63		03/28/20		63		16.0%		3
CeloNova BioSciences, Inc.	First Lien					7,629		07/31/21		7,531		13.0%		252
DxTerity Diagnostics, Inc.	First Lien					9,266		04/06/21		9,309		14.0%		368
EyePoint Pharmaceuticals, Inc.	First Lien					15,000		03/27/23		14,443		12.0%		23
Hooper Holmes, Inc.	First Lien		(5	)		8,250		05/11/21		7,517		14.0%		153
Hooper Holmes, Inc.	Revolving		(5	)		—		05/11/21		—		14.0%		12
Imprimis Pharmaceuticals, Inc.	First Lien					9,720		07/19/21		9,237		12.0%		348
Keystone Dental, Inc.	First Lien					20,000		05/23/21		19,940		13.0%		757
OraMetrix, Inc.	First Lien		(6	)		8,500		12/15/21		8,487		12.0%		293
Parnell Pharmaceuticals	First Lien					13,500		11/22/20		15,568		13.0%		910
Solsys Medical LLC (formerly Soluble Systems)	First Lien					15,096		10/26/22		15,145		13.0%		481
Tenex Health, Inc.	First Lien					6,472		07/01/21		6,502		12.0%		211
Thermedx, LLC	First Lien					3,500		05/05/21		4,132		N/A		396
Veru, Inc.	Synthetic Royalty					10,000		03/05/25		10,156		N/A		156

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		Funded		GAAP		Change in Fair Value
Equity Securities	Footnote	Amount		Balance		Q1
Cancer Genetics (Common Stock)			—		1,091	$	(133)
Hooper Holmes, Inc. (Common Stock)			—		41		9

			Number of		Exercise Price per		GAAP		Change in Fair Value
Warrants to Purchase Stock	Footnote		Shares		Share		Balance		Q1
ABT Molecular Imaging		(2), (3)		5,000,000		0.20	$	—	$	—
B&D Dental Corporation		(2), (4)		225		0.01		—		—
CeloNova BioSciences, Inc.				TBD		0.01		—		—
DxTerity Diagnostics				420,673		2.08		—		—
EyePoint Pharmaceuticals, Inc.				409,091		1.10		302		43
Hooper Holmes, Inc.		(5)		1,317,289		0.84		505		173
Hooper Holmes, Inc.		(5)		450,000		0.80		176		59
Imprimis Pharmaceuticals, Inc.				373,847		2.08		434		12
Keystone Dental, Inc.				793,651		1.26		—		—
OraMetrix, Inc.		(6)		690,496		0.62		—		—
Solsys Medical LLC (formerly Soluble Systems)				1,209,068		0.99		—		—
Solsys Medical LLC (formerly Soluble Systems)				2,284,793		0.89		—		—
Tenex Health, Inc.				2,693,878		0.37		—		—
Tribute Pharmaceuticals Canada, Inc.				1,843,016		Various		102		(13	)

			Revenue
	Assets		Q1
Total Finance Receivables	$	165,843	$	6,817
Total Marketable Securities		1,713		—
Total Net Investment in Unconsolidated Entity		—		—
Fair Value of Warrant Assets		1,519		—
Total Assets/Revenues	$	169,075	$	6,817

(1) Provision for credit losses of $1,179 was recognized during Q1 2018.

(2) Investment on nonaccrual.

(3) December 2015 synthetic royalty payment to us was blocked by first lien lender; we purchased senior first lien credit facility at par in February 2016. An impairment charge of $7,638 was recognized on the second lien during 2017. Interest is being paid current on the first lien credit facility; first lien credit facility maturity date has not been extended. ABT is evaluating strategic alternatives for the business. Both credit facilities are in default.

(4) In the aggregate, executed eight amendments to the loan to advance additional $2,148 during 2015 and 2016. B&D is evaluating strategic alternatives for the business. The loan is currently in default.

(5) Seasonal working capital facility was terminated on January 31, 2018 via the terms of the credit agreement. Term loan is on nonaccrual after Hooper missing the scheduled principal payment of $250 in March 2018. Hooper has engaged financial advisors to evaluate strategic alternatives pursuant to a forebearance agreement signed between SWK and Hooper. The loan is currently in default.

(6) OraMetrix repaid the term loan on May 1, 2018, in conjunction with its sale to Dentsply Sirona, Inc.

25

Unless otherwise specified, our senior secured debt assets generally are repaid by a revenue interest that is charged on a company’s quarterly net sales and royalties.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 29, 2018. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the three months ended March 31, 2018, compared to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2017.

Recent Accounting Pronouncements

Refer to Part I. Financial Information, Item 1. Financial Statements, Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements for a listing of recent accounting pronouncements and their potential impact to our consolidated financial statements.

Comparison of the Three Months Ended March 31, 2018 and 2017 (in millions)

	Three Months Ended March 31,
	2018		2017		Change
Revenues	$	6.8		14.9	$	(8.1)
Provision for credit losses		1.2		—		1.2
General and administrative		1.2		0.7		0.5
Other income (expense), net		0.2		(0.2)		0.4
Provision for income taxes		1.0		3.7		(2.7)
Consolidated net income		3.6		10.3		(6.7)

26

Revenues

We generated revenues of $6.8 million for the three months ended March 31, 2018, driven primarily by $6.8 million in interest and fees earned on our finance receivables. We generated revenues of $14.9 million for the three months ended March 31, 2017, driven primarily by $4.7 million in interest and fees earned on our finance receivables and $10.2 million in income related to our investment in an unconsolidated partnership. The decrease in revenue is primarily due to a $10.2 million decrease in income from our investment in an unconsolidated entity, which on February 23, 2017 sold its U.S. marketing rights to its underlying intellectual property (please refer to Item 1. Financial Statements, Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information on the Holmdel transaction). This was offset by a $2.2 million increase in interest and fees earned on new and existing finance receivables, including a $0.7 million increase in royalty revenue on our Narcan® investment. Royalty revenue from our Narcan® investment will be substantially less going forward, as we reached the 1.5x cash on cash royalty cap during the three months ended March 31, 2018.

Provision for Credit Losses

We recognized an allowance for credit loss on a royalty purchase of $1.2 million during the three months ended March 31, 2018. We did not recognize an allowance for credit losses during the three months ended March 31, 2017.

Please refer to Item 1. Financial Statements, Note 3 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information regarding the provision for credit loss recognized during the three months ended March 31, 2018.

General and Administrative

General and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff, Board of Directors, legal and audit expenses, and corporate governance. General and administrative expenses increased to $1.2 million for the three months ended March 31, 2018 from $0.7 million for the three months ended March 31, 2017, which was primarily due to an increase in the performance-based bonus accrual.

Other Income (Expense), Net

Other income (expense), net for the three months ended March 31, 2018 reflected a net fair market value gain of $0.3 million on our warrant derivatives and a net fair market value loss of $(0.1) million on our equity securities.

Other income (expense), net for the three months ended March 31, 2017 reflected a net fair market value loss of $(0.5) million on our warrant derivatives and a $0.2 million realized gain on the sale of equity securities.

Income Tax Provision

We recognized $1.0 million of deferred income tax expense for the three months ended March 31, 2018. We recognized $3.7 million deferred income tax expense for the three months ended March 31, 2017. The decrease in deferred income tax expense was primarily due to a reduction in net income, coupled with a change in the federal statutory tax rate signed into law on December 22, 2017. The new legislation decreased the U.S. corporate federal income tax rate from 35 percent to 21 percent, effective January 1, 2018.

27

Liquidity and Capital Resources

As of March 31, 2018, we had $21.5 million in cash and cash equivalents, compared to $30.6 million in cash and cash equivalents as of December 31, 2017. The primary driver of the net decrease in our cash balance was new and add-on investment funding of $29.3 million, offset by interest and fee payments of $15.0 million earned on our finance receivables, including $13.7 million of royalty-related receipts from our Narcan® investment.

Our ability to generate cash in the future depends primarily upon our success in implementing our business model of generating income by providing capital to a broad range of life science companies, institutions and inventors. We generate income primarily from three sources:

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

2. receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector; and,

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

As of March 31, 2018, our portfolio contains $165.8 million of finance receivables and $1.7 million of marketable investments. We expect these assets to generate positive cash flows in 2018. We continue to evaluate multiple attractive opportunities that, if consummated, we believe would similarly generate additional income. Since the timing of any investment is difficult to predict, we may not be able to generate positive cash flow above what our existing assets will produce in 2018.

We intend to borrow funds to make investments to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities. We currently do not have access to a credit facility or other forms of borrowing, though we executed a non-binding term sheet with a potential lender on November 7, 2017, which we are continuing to negotiate. The timing of obtaining such a credit facility is uncertain and is largely dependent upon finalizing terms and conditions acceptable to us.

Off Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in our consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage partner companies’ requests for funding and take the form of loan commitments and lines of credit.

The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the partner company defaults, and the value of any existing collateral becomes worthless. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

28

As of March 31, 2018, our unfunded commitments were as follows (in millions):

CeloNova BioSciences, Inc.	$	5.0
EyePoint Pharmaceuticals, Inc.		5.0
Tenex Health, Inc.		2.0
Veru, Inc.		2.0
Total unfunded commitments	$	14.0

All unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified date or period of time per the terms of the royalty purchase or credit agreements, and in the case of loan transactions, are only subject to being advanced as long as an event of default does not exist.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

During the three months ended March 31, 2018, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at March 31, 2018 approximated its carrying value.

Investment and Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. As we seek to provide capital to a broad range of life science companies, institutions and investors, our net investment income is dependent, in part, upon the difference between the rate at which we earn on our cash and cash equivalents and the rate at which we lend those funds to third parties. As a result, we would be subject to risks relating to changes in market interest rates. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations by providing capital at variable interest rates.  We constantly monitor our portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any of our investments.

If we borrow funds to make additional investments, our income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we would be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our income, especially to the extent we continue to hold fixed rate investments. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. Adverse developments resulting from changes in interest rates or hedging transactions could have a materially adverse effect on our business, financial condition and results of operations.

Inflation

We do not believe that inflation has had a significant impact on our revenues or operations.

29

ITEM 4.      CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no changes during the three months ended March 31, 2018 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

30

PART II. OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

We are involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material negative impact on our results of operations, balance sheets and cash flows due to defense costs, and divert management resources. Currently, we are not involved in any arbitration and/or other legal proceeding that we expect to have a material effect on our business, financial condition, results of operations and cash flows.

ITEM 1A.    RISK FACTORS.

Information regarding the Company’s risk factors appears in “Part I. – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 29, 2018. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.      MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5.      OTHER INFORMATION. 

None.

31

ITEM 6.       EXHIBITS

				Filing	Filed
Number	Exhibit Description	Form	Exhibit	Date	Herewith
31.01	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.02	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.01	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*				X
32.02	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*				X
101.INS+	XBRL Instance				X
101.SCH+	XBRL Taxonomy Extension Schema				X
101.CAL+	XBRL Taxonomy Extension Calculation				X
101.DEF+	XBRL Taxonomy Extension Definition				X
101.LAB+	XBRL Taxonomy Extension Labels				X
101.PRE+	XBRL Taxonomy Extension Presentation				X

* These certifications accompany this Quarterly Report on Form 10-Q. They are not deemed “filed” with the Securities and Exchange Commission and are not to be incorporated by reference in any filing of SWK Holdings Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

+ XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

32

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 14, 2018.

SWK Holdings Corporation
By:	/s/ Winston L. Black
	Winston L. Black
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Charles M. Jacobson
	Charles M. Jacobson
	Chief Financial Officer
	(Principal Financial Officer)

33

EX-31.01

EXHIBIT 31.01

CERTIFICATION

I, Winston L. Black, Chief Executive Officer of the registrant, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SWK Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2018	/s/ Winston L. Black
	Winston L. Black Chief Executive Officer

EX-31.02

EXHIBIT 31.02

CERTIFICATION

I, Charles M. Jacobson, Chief Financial Officer of the registrant, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SWK Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2018	/s/ Charles M. Jacobson
	Charles M. Jacobson Chief Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of SWK Holdings Corporation (the “Registrant”) on Form 10-Q for the quarterly period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Winston L. Black, Chief Executive Officer of the Registrant, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report, to which this certification is attached as Exhibit 32.01, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: May 14, 2018	/s/ Winston L. Black
	Winston L. Black Chief Executive Officer

EX-32.02

EXHIBIT 32.02

CERTIFICATION PURSUANT TO

RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of SWK Holdings Corporation (the “Registrant”) on Form 10-Q for the quarterly period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles M. Jacobson, Chief Financial Officer of the Registrant, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report, to which this certification is attached as Exhibit 32.02, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: May 14, 2018	/s/ Charles M. Jacobson
	Charles M. Jacobson Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 10, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	SWK Holdings Corporation
Entity Central Index Key	0001089907
Document Type	10-Q
Trading Symbol	SWKH
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Entity Common Stock, Shares Outstanding		13,059,137

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
ASSETS
Cash and cash equivalents	$ 21,451	$ 30,557
Accounts receivable	1,579	1,637
Finance receivables, net	165,843	151,995
Marketable investments	1,713	1,856
Deferred tax asset	21,771	22,725
Warrant assets	1,519	987
Other assets	314	126
Total assets	214,190	209,883
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities	2,450	1,840
Warrant liability	65	91
Total liabilities	2,515	1,931
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
Common stock, $0.001 par value; 250,000,000 shares authorized; 13,059,190 and 13,053,422 issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	13	13
Additional paid-in capital	4,433,668	4,433,589
Accumulated deficit	(4,222,006)	(4,225,863)
Accumulated other comprehensive loss		213
Total SWK Holdings Corporation stockholders' equity	211,675	207,952
Non-controlling interests in consolidated entities
Total stockholders' equity	211,675	207,952
Total liabilities and stockholders' equity	$ 214,190	$ 209,883

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	250,000,000	250,000,000
Common stock, issued	13,059,190	13,053,422
Common stock, outstanding	13,059,190	13,053,422

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues
Finance receivable interest income, including fees	$ 6,817	$ 4,656
Income related to investments in unconsolidated entities		10,204
Other	5	4
Revenues	6,822	14,864
Costs and expenses:
Provision for loan credit losses	1,179
General and administrative	1,221	661
Total costs and expenses	2,400	661
Other income (expense), net
Unrealized net gain (loss) on derivatives	300	(472)
Unrealized net loss on equity securities	(124)
Gain on sale of marketable securities		243
Income before provision for income taxes	4,598	13,974
Provision for income taxes	954	3,706
Consolidated net income	3,644	10,268
Net income attributable to non-controlling interests		5,032
Net income (loss) attributable to SWK Holdings Corporation Stockholders	$ 3,644	$ 5,236
Net income (loss) per share attributable to SWK Holdings Corporation Stockholders
Basic (in dollars per share)	$ 0.28	$ 0.40
Diluted (in dollars per share)	$ 0.28	$ 0.40
Weighted Average Shares
Basic (in shares)	13,053,000	13,144,000
Diluted (in shares)	13,057,000	13,147,000

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Consolidated net income (loss)	$ 3,644	$ 10,268
Other comprehensive income, net of tax:
Change in fair value of securities		1,820
Total other comprehensive income		1,820
Comprehensive income	3,644	12,088
Comprehensive income attributable to non-controlling interests		5,032
Comprehensive income attributable to SWK Holdings Corporation Stockholders	$ 3,644	$ 7,056

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Consolidated net income (loss)	$ 3,644	$ 10,268
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Income from investments in unconsolidated entities		(10,204)
Provision for loan credit losses	1,179
Deferred income tax	954	3,706
Change in fair value of warrants	(300)	472
Gain on sale of equity securities	124
Gain on sale of marketable securities		(243)
Loan discount amortization and fee accretion	(837)	(568)
Interest paid-in-kind	(47)	(383)
Stock-based compensation	79	78
Interest income in excess of cash collected	(70)
Other	4	4
Changes in operating assets and liabilities:
Accounts receivable	58	(88)
Other assets	(189)	(112)
Accounts payable and other liabilities	610	48
Net cash provided by operating activities	5,209	2,978
Cash flows from investing activities:
Cash distributions from investments in unconsolidated entity		17,189
Proceeds from sale of available-for-sale marketable securities		345
Investment in finance receivables	(29,250)	(3,638)
Repayment of finance receivables	14,918	225
Marketable investment principal payment	19	24
Other	(2)	(3)
Net cash provided by (used in) investing activities	(14,315)	14,142
Cash flows from financing activities:
Distribution to non-controlling interests		(8,788)
Net cash used in financing activities		(8,788)
Net (decrease) increase in cash and cash equivalents	(9,106)	8,332
Cash and cash equivalents at beginning of period	30,557	32,182
Cash and cash equivalents at end of period	$ 21,451	$ 40,514

XML

SWK Holdings Corporation and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

SWK Holdings Corporation and Summary of Significant Accounting Policies

Note 1. SWK Holdings Corporation and Summary of Significant Accounting Policies

Nature of Operations

SWK 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. The Company’s strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions to a broad range of life science companies, institutions and inventors. The Company is primarily focused on monetizing cash flow streams derived from commercial-stage products and related intellectual property through royalty purchases and financings, as well as through the creation of synthetic revenue interests in commercialized products. The Company has been deploying its assets to earn interest, fees, and other income pursuant to this strategy, and the Company continues to identify and review financing and similar opportunities on an ongoing basis. In addition, through the Company’s wholly-owned subsidiary, SWK Advisors LLC, the Company provides non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board. The Company intends to fund transactions through its own working capital, as well as by building its asset management business by raising additional third-party capital to be invested alongside the Company’s capital.

The Company fills a niche that it believes is underserved in the sub-$50 million transaction size. Since many of its competitors that provide longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than the Company, they tend to not focus on transaction sizes below $50 million as it is generally inefficient for them to do so. In addition, the Company does not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market. As such, the Company believes it faces less competition from such investors in transactions that are less than $50 million.

The 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, we do not anticipate that our life science business strategy will generate sufficient income to permit us to utilize all of our NOLs prior to their respective expiration dates. As such, it is possible that we might pursue additional strategies that we believe might result in our ability to utilize more of our NOLs.

As of May 10, 2018, the Company and its partners have executed transactions with 28 different parties under its specialty finance strategy, funding an aggregate $405 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 is headquartered in Dallas, Texas.

Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“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.

The 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.

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments 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, 2018. 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, 2017, filed with the SEC on March 29, 2018.

Use of Estimates

The 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, impairment of financing receivables and long-lived assets, valuation of warrants, income taxes and contingencies and litigation, among others.  Some of these judgments can be subjective and complex, and consequently, actual results may differ from these estimates. The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable. For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable.

The 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, 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.

Recent Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 was further amended in February 2018 by ASU 2018-03, “Technical Corrections and Improvements to Financial instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” and in March 2018 by ASU 2018-04, “Investments - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117” and SEC Release No. 33-9273 (SEC Update) to clarify certain guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. This guidance changes how entities measure equity investments that do not result in consolidation and are not accounted for under the equity method. Entities will be required to measure these investments at fair value at the end of each reporting period and recognize changes in fair value in net income. A practicability exception will be available for equity investments that do not have readily determinable fair values; however, the exception requires the entity to consider relevant transactions that can be reasonably known to identify any observable price changes that would impact the fair value. Under prior GAAP, changes in fair value of available-for-sale equity securities were recorded in other comprehensive income. The Company adopted ASU 2016-01 as of January 1, 2018. As of that date, the Company reclassified the accumulated net unrealized appreciation related to our investments in equity securities as of December 31, 2017 (approximately $0.2 million) from accumulated other comprehensive income to retained earnings and does not expect the adoption of ASU 2016-01 to have a material impact on the Company’s future reported net earnings.

Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”) and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within, beginning after December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. A reporting entity may apply the amendments in the Revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach.

The Revenue ASUs became effective for the Company on January 1, 2018. The Company has been evaluating the new guidance and believes the Revenue ASUs will not have a material impact on its consolidated financial statements upon adoption since the primary source of revenue for the Company is generated through financing arrangements, which are excluded from the Revenue ASUs.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The new standard adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new 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. The 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 income. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)” (“ASU 2016-15”), which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued this guidance with the intent of reducing diversity in practice with respect to classification of eight types of cash receipts and payments: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero coupon bonds, (3) contingent consideration payments after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718)” (“ASU 2017-09”), to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting required by Topic 718. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 on January 1, 2018. The adoption of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements.

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); and Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, and (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” This guidance addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the new guidance to determine the impact on its consolidated financial statements upon adoption in fiscal 2019.

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Net Income per Share

3 Months Ended

Mar. 31, 2018

Net Income Per Share

Net Income per Share

Note 2. Net Income per Share

Basic 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.

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

	Three Months Ended
	March 31,
	2018		2017
Numerator:
Net income attributable to SWK Holdings Corporation stockholders	$	3,644	$	5,236
Denominator:
Weighted-average shares outstanding		13,053		13,144
Effect of dilutive securities		4		3
Weighted-average diluted shares		13,057		13,147
Basic income per share attributable to SWK Holdings Corporation stockholders	$	0.28	$	0.40
Diluted income per share attributable to SWK Holdings Corporation stockholders	$	0.28	$	0.40

For the three months ended March 31, 2018 and 2017, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 286,000 and 399,000, respectively, have been excluded from the calculation of diluted income per share as all such securities were anti-dilutive. 

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Finance Receivables

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Finance Receivables

Note 3. Finance Receivables, Net

Finance 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.

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

	March 31,			December 31,
Portfolio	2018			2017
Term loans	$	147,715		$	118,533
Royalty purchases		20,966			35,121
Total before allowance for credit losses		168,681			153,654
Allowance for credit losses		(2,838	)		(1,659	)
Total carrying value	$	165,843		$	151,995

Credit Quality of Finance Receivables

The 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.

On 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 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.

Receivables 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.

When 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.

The 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:

§ business characteristics and financial conditions of obligors;

§ current economic conditions and trends;

§ actual charge-off experience;

§ current delinquency levels;

§ value of underlying collateral and guarantees;

§ regulatory environment; and

§ any other relevant factors predicting investment recovery.

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

	March 31, 2018						December 31, 2017
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	18,919	$	128,796	$	147,715	$	11,402	$	107,131	$	118,533
Royalty purchases, net of credit loss allowance		—		18,128		18,128		—		33,462		33,462
Total carrying value	$	18,919		146,924	$	165,843	$	11,402	$	140,593	$	151,995

As of March 31, 2018, the Company had three term loans associated with three portfolio companies in nonaccrual status with a carrying value, net of credit loss allowance, of $18.9 million. As of December 31, 2017, the Company had two term loans associated with two portfolio companies in nonaccrual status with a carrying value, net of credit loss allowance, of $11.4 million. The Company collected $0.6 million on one nonaccrual loan during the three months ended March 31, 2018. No cash on nonaccrual loans was collected during the year ended December 31, 2017. Of the three nonaccrual term loans as of March 31, 2018, only one loan is deemed to be impaired. (Please see ABT Molecular Imaging, Inc., B&D Dental Corporation, and Hooper Holmes, Inc. below for further details regarding nonaccrual term loans.)

Term Loans

ABT Molecular Imaging, Inc. (“ABT”)

On October 10, 2014, the Company entered into a credit agreement pursuant to which the Company provided ABT a second lien term loan in the principal amount of $10.0 million. The loan matures on October 8, 2021. The synthetic royalty payment due to the Company on December 15, 2015 was blocked by ABT’s first lien lender pursuant to the terms of the intercreditor agreement by and between the Company and the first lien lender as a result of a forbearance agreement entered into between ABT and the first lien lender. Under the terms of the forbearance agreement, the first lien lender deferred principal payments until maturity of the first lien in March 2016 and ABT raised additional equity capital.

In February 2016, ABT violated the terms of the forbearance agreement with the first lien lender. In order to control the workout of the default under the first lien loan and prevent the equity sponsors from taking control of the first lien term loan, the Company purchased from an unrelated party the first lien term loan at par for a purchase price of $0.7 million. Since then the equity sponsors funded cash shortfalls into the second quarter of 2016. The Company continues to work with ABT’s equity sponsors to resolve the existing defaults. ABT is currently evaluating strategic options.

Since 2016, the Company has entered into additional amendments to the first lien term loan to provide for an additional $8.3 million of liquidity under the first lien credit agreement.

The Company recorded an impairment loss of $7.6 million as of December 31, 2017. The collateral for the loan has been individually reviewed, and the Company believes that its current collateral position is greater than the recorded investment in the loan as of March 31, 2018. The Company considered several factors in this determination, including an independent third-party valuation and developments in ABT’s business and industry.

B&D Dental Corporation (“B&D”)

On December 10, 2013, the Company entered into a five-year credit agreement to provide B&D a senior secured term loan with a principal amount of $6.0 million funded upon close, net of an arrangement fee of $60,000. Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D. As of March 31, 2018, the total amount funded was $8.1 million. B&D is currently evaluating strategic options.

B&D is currently in default under the terms of the credit agreement, and as a result, the Company classified the loan to nonaccrual status as of September 30, 2015. During the first and fourth quarters of 2016, the Company executed two additional amendments to the loan to advance an additional $0.5 million in order to directly pay critical vendors and protect the value of the collateral. The Company believes its collateral position is greater than the unpaid balance; thus, accrued interest has not been reversed nor has an allowance been recorded as of March 31, 2018. The Company considered several factors in this determination, including an independent third-party valuation and developments in B&D’s business and industry.

Hooper Holmes, Inc. (“Hooper”)

On May 12, 2017, the Company provided a $6.5 million term loan to Hooper to support its merger with Provant Health Solutions, LLC. On August 8, 2017, the Company provided an additional $2.0 million term loan with terms similar to the original term loan. The $2.0 million August term loan was scheduled to mature on February 1, 2018. In late January, Hooper informed the Company of tight liquidity and that it would be strained if it repaid the full $2.0 million; thus, the Company agreed to extend the maturity for twelve weeks to April 30, 2018 in exchange for a partial repayment of $0.3 million on February 1, 2018 and an additional $0.3 million on March 15, 2018. However, in mid- March, Hooper informed the Company that it would be unable to repay the $0.3 million that was due on March 15, 2018. The Company is currently working with Hooper on strategic options, including requiring Hooper to retain financial advisors to evaluate strategic options. The Company has placed Hooper on nonaccrual but believes its collateral position is greater than the unpaid balance; thus, an allowance has not been recorded as of March 31, 2018.

Royalty Purchases

Cambia®

On July 31, 2014, the Company purchased a 25 percent royalty on sales of Cambia® from royalty holder, APR Applied Pharma Research S.A. (“APR”), for $4.0 million. On December 2, 2015, the Company purchased a second 25 percent royalty on sales of Cambia® for $4.5 million. In the U.S., Cambia® is marketed by DepoMed, Inc. (“DepoMed”) while the product is marketed by Aralez Pharmaceuticals, Inc. As disclosed by DepoMed, Cambia® prescription trends decelerated in 2017, and while they have begun to stabilize, they are not growing in line with the Company’s original forecast. During the three months ended March 31, 2018, the Company reduced its expectations for future royalty receipts and recognized an allowance for credit loss on the royalty purchase of $1.2 million.

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Marketable Investments

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Marketable Investments

Note 4. Marketable Investments

Investments in marketable investments at March 31, 2018 and December 31, 2017 consist of the following (in thousands):

	March 31, 2018		December 31, 2017
Corporate debt securities	$	581	$	600
Equity securities		1,132		1,256
Total	$	1,713	$	1,856

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities as of March 31, 2018 and December 31, 2017, are as follows (in thousands):

March 31, 2018	Amortized Cost		Gross Unrealized    Gains		Gross Unrealized    Loss		Fair Value
Corporate debt securities	$	581	$	—	$	—	$	581
Total	$	581	$	—	$	—	$	581

December 31, 2017	Amortized Cost		Gross Unrealized    Gains		Gross Unrealized    Loss		Fair Value
Corporate debt securities	$	600	$	—	$	—	$	600
Total	$	600	$	—	$	—	$	600

The following table presents the proceeds from sales of equity securities, realized gain on sale of equity securities, and unrealized net loss on equity securities as prescribed by ASC 321, “Investment - Equity Securities.” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” was adopted on January 1, 2018, at which time a cumulative effect adjustment of $213,000 was recorded to reclassify the amount of accumulated unrealized gains related to equity securities from accumulated other comprehensive income to retained earnings.

(in thousands)	Three Months Ended March 31,
	2018			2017
Proceeds from sale of equity securities	$	—		$	—
Realized gain on sale of equity securities		—			243
Unrealized net loss on equity securities reflected in the Consolidated Statement of Operations		(124	)		—

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, as of March 31, 2018 and December 31, 2017 were as follows (in thousands):

March 31, 2018	Less than Twelve Months				Twelve Months or Greater					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity securities		—		—		41		(72	)		41		(72	)
Total	$	—	$	—	$	41	$	(72	)	$	41	$	(72	)

December 31, 2017	Less than Twelve Months				Twelve Months or Greater					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity securities		—		—		33		(117	)		33		(117	)
Total	$	—	$	—	$	33	$	(117	)	$	33	$	(117	)

Equity Securities

The Company’s equity securities include 661,076 shares of Cancer Genetics common stock and 77,922 shares of Hooper common stock. During the three months ended March 31, 2017, the Company sold 75,000 shares of Cancer Genetics common stock, which resulted in a realized gain of $0.2 million. As of March 31, 2018, the Cancer Genetics and Hooper equity securities are reflected at fair value of $1.1 million and $41,000 respectively.

Debt Securities

On July 9, 2013, the Company entered into a note purchase agreement to purchase, at par, $3.0 million of a total of $100.0 million aggregate principal amount of senior secured notes due in November 2026.  The agreement allows the first interest payment date to include paid-in-kind notes for any cash shortfall, of which the Company received $0.1 million on November 15, 2013. The notes are secured only by certain royalty and milestone payments associated with the sales of pharmaceutical products.

The senior secured notes have been placed on non-accrual status as of June 30, 2016. Total cash collected during the three months ended March 31, 2018 was $19,500, which was credited to the notes’ carrying value. As of March 31, 2018, the notes are reflected at their estimated fair value of $0.6 million.

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Variable Interest Entities

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Variable Interest Entities

Note 5. Variable Interest Entities

The Company consolidates the activities of VIEs of which it is the primary beneficiary. The primary beneficiary of a VIE is the variable interest holder possessing a controlling financial interest through (i) its power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) its obligation to absorb losses or its right to receive benefits from the VIE that could potentially be significant to the VIE. In order to determine whether the Company owns a variable interest in a VIE, the Company performs qualitative analysis of the entity’s design, organizational structure, primary decision makers and relevant agreements.

Consolidated VIE

SWK HP Holdings LP (“SWK HP”) was formed in December 2012 to acquire a limited partnership interest in Holmdel Pharmaceuticals LP (“Holmdel”).   Holmdel acquired the U.S. marketing authorization rights to a beta blocker pharmaceutical product indicated for the treatment of hypertension for a total purchase price of $13.0 million. The Company, through its wholly owned subsidiary SWK Holdings GP LLC (“SWK Holdings GP”), acquired a direct general partnership interest in SWK HP, which in turn acquired a limited partnership interest in Holmdel. The total investment in SWK HP of $13.0 million included $6.0 million provided by SWK Holdings GP and $7.0 million provided by non-controlling interests.  Subject to customary limited partner protections afforded the investors by the terms of the limited partnership agreement, the Company maintained voting and managerial control of SWK HP and therefore included it in its consolidated financial statements.

SWK HP had significant influence over the decisions made by Holmdel. SWK HP received quarterly distributions of cash flow generated by InnoPran XL according to a tiered scale that was subject to certain cash on cash returns received by SWK HP. SWK HP achieved the 2x cash on cash return threshold with the November 2016 distribution as such its economic ownership in Holmdel approximated 49 percent.

On February 23, 2017, Holmdel sold the U.S. marketing authorization rights to InnoPran XL to ANI Pharmaceuticals, Inc. SWK Holdings GP received net proceeds from the transaction of approximately $8.0 million. The approximate $8.0 million of proceeds includes a 5 percent incentive fee earned from SWK HP, and SWK Holdings GP’s share of the sale proceeds. As part of the transaction, SWK HP and all involved parties executed mutual releases and terminations of all license and supply agreements. SWK Holdings GP received an additional distribution regarding InnoPran XL sales covering the period from January 1, 2017 through the date of sale and has not received any further material distributions.

Unconsolidated VIE

For the three months ended March 31, 2018, the Company did not recognize any income related to this entity accounted for under the equity method, nor did the Company receive any cash distributions.

For the three months ended March 31, 2017, the Company recognized $10.2 million of equity method gains, of which $5.0 million was attributable to the non-controlling interest in SWK HP. In addition, SWK HP received cash distributions totaling $17.2 million during the three months ended March 31, 2017, of which $8.8 million was subsequently paid to holders of the non-controlling interests in SWK HP. There has been no change in the carrying amount of the Company’s investment in Holmdel since December 31, 2017.

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Related Party Transactions

3 Months Ended

Mar. 31, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Note 6. Related Party Transactions

On September 6, 2013, in connection with entering into a credit facility, the Company issued warrants to an affiliate of a stockholder, Carlson Capital, L.P. (the “Stockholder”), for 100,000 shares of the Company’s common stock at a strike price of $13.88 per share. The warrants have a price anti-dilution mechanism that was triggered by the price that shares were sold by the Company in a rights offering in 2014, and as a result, the strike price of the warrants was reduced to $13.48 per share.

Due to certain provisions within the warrant agreement, the warrants meet the definition of a derivative and do not qualify for a scope exception, as it is not considered indexed to the Company’s stock. As such, the warrants are reflected as a warrant liability in the consolidated balance sheets. The Company recorded a nominal gain for the three months ended March 31, 2018. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: 

	March 31,  2018			December 31,  2017
Dividend rate		—			—
Risk-free rate		2.3	%		2.0	%
Expected life (years)		2.4			2.7
Expected volatility		19.4	%		21.9	%

The changes on the value of the warrant liability during the three months ended March 31, 2018 were as follows (in thousands):

Fair value – December 31, 2017	$	91
Issuances		—
Changes in fair value		(26	)
Fair value – March 31, 2018	$	65

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Stockholders' Equity

3 Months Ended

Mar. 31, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Note 7. Stockholders’ Equity

Stock Compensation Plans

During the three months ended March 31, 2018 and 2017, the Board approved compensation for Board services by granting 5,768 and 5,928 shares, respectively, of common stock as compensation for the non-employee directors. During both the three months ended March 31, 2018 and 2017, the Company recorded approximately $62,000 in Board compensation expense. The aggregate stock-based compensation expense, including the quarterly Board grants, recognized by the Company for both of the three months ended March 31, 2018 and 2017 was $0.1 million.

Non-controlling Interests

As discussed in Note 5, SWK HP had a limited partnership interest in Holmdel. There has been no change to the carrying amount of the non-controlling interest since December 31, 2017.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 8. Fair Value Measurements

The 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). 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.

Level 1 Unadjusted 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.

Level 2 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.

Level 3 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.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the three months ended March 31, 2018. 

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in affiliates.

Following 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

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

Equity Securities

Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).

Finance Receivables

The 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. Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below.

Marketable Investments and Warrants

Marketable Investments

If 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.

Derivative securities

For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	1,519	$	—	$	—	$	1,519
Marketable investments		1,713		1,132		—		581
Financial Liabilities:
Warrant liability	$	65	$	—	$	—	$	65

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	987	$	—	$	—	$	987
Marketable investments		1,856		1,256		—		600
Financial Liabilities:
Warrant liability	$	91	$	—	$	—	$	91

The changes on the value of the warrant assets during the three months ended March 31, 2018 were as follows (in thousands):

Fair value – December 31, 2017	$	987
Issued		258
Canceled		—
Change in fair value		274
Fair value – March 31, 2018	$	1,519

The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the unaudited condensed consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value:

	March 31,		December 31,
	2018		2017
Dividend rate range		—		—
Risk-free rate range		2.3% to 2.7%		2.0% to 2.3%
Expected life (years) range		2.4 to 7.0		2.6 to 6.6
Expected volatility range		55.6% to 94.9%		72.5% to 95.7%

The following table presents the financial assets measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
March 31, 2018
Impaired loans	$	12,574	$	—	$	—	$	12,574
December 31, 2017
Impaired loans	$	6,087	$	—	$	—	$	6,087

There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017.

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in unconsolidated entity.

As of March 31, 2018 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	21,451	$	21,451	$	21,451	$	—	$	—
Finance receivables		165,843		165,843		—		—		165,843
Marketable investments		1,713		1,713		1,132		—		581
Warrant assets		1,519		1,519		—		—		1,519
Financial Liabilities
Warrant liability	$	65	$	65	$	—	$	—	$	65

As of December 31, 2017 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	30,557	$	30,557	$	30,557	$	—	$	—
Finance receivables		151,995		151,995		—		—		151,995
Marketable investments		1,856		1,856		1,256		—		600
Warrant assets		987		987		—		—		987
Financial Liabilities
Warrant liability	$	91	$	91	$	—	$	—	$	91

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Subsequent Events

3 Months Ended

Mar. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

Note 9. Subsequent Events

OraMetrix, Inc.

On May 1, 2018, OraMetrix, Inc. retired its credit facility with SWK Funding LLC, a wholly-owned subsidiary of the Company (“SWK Funding”), in conjunction with its sale to Dentsply Sirona Inc. SWK Funding received an aggregate of approximately $9.2 million at pay-off, including payment of accrued interest and exit fees.

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SWK Holdings Corporation and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

SWK 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. The Company’s strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions to a broad range of life science companies, institutions and inventors. The Company is primarily focused on monetizing cash flow streams derived from commercial-stage products and related intellectual property through royalty purchases and financings, as well as through the creation of synthetic revenue interests in commercialized products. The Company has been deploying its assets to earn interest, fees, and other income pursuant to this strategy, and the Company continues to identify and review financing and similar opportunities on an ongoing basis. In addition, through the Company’s wholly-owned subsidiary, SWK Advisors LLC, the Company provides non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board. The Company intends to fund transactions through its own working capital, as well as by building its asset management business by raising additional third-party capital to be invested alongside the Company’s capital.

The Company fills a niche that it believes is underserved in the sub-$50 million transaction size. Since many of its competitors that provide longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than the Company, they tend to not focus on transaction sizes below $50 million as it is generally inefficient for them to do so. In addition, the Company does not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market. As such, the Company believes it faces less competition from such investors in transactions that are less than $50 million.

The 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, we do not anticipate that our life science business strategy will generate sufficient income to permit us to utilize all of our NOLs prior to their respective expiration dates. As such, it is possible that we might pursue additional strategies that we believe might result in our ability to utilize more of our NOLs.

As of May 10, 2018, the Company and its partners have executed transactions with 28 different parties under its specialty finance strategy, funding an aggregate $405 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 is headquartered in Dallas, Texas.

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“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.

The 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.

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments 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, 2018. 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, 2017, filed with the SEC on March 29, 2018.

Use of Estimates

Use of Estimates

The 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, impairment of financing receivables and long-lived assets, valuation of warrants, income taxes and contingencies and litigation, among others.  Some of these judgments can be subjective and complex, and consequently, actual results may differ from these estimates. The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable. For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable.

The 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, 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.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 was further amended in February 2018 by ASU 2018-03, “Technical Corrections and Improvements to Financial instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” and in March 2018 by ASU 2018-04, “Investments - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117” and SEC Release No. 33-9273 (SEC Update) to clarify certain guidance for the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. This guidance changes how entities measure equity investments that do not result in consolidation and are not accounted for under the equity method. Entities will be required to measure these investments at fair value at the end of each reporting period and recognize changes in fair value in net income. A practicability exception will be available for equity investments that do not have readily determinable fair values; however, the exception requires the entity to consider relevant transactions that can be reasonably known to identify any observable price changes that would impact the fair value. Under prior GAAP, changes in fair value of available-for-sale equity securities were recorded in other comprehensive income. The Company adopted ASU 2016-01 as of January 1, 2018. As of that date, the Company reclassified the accumulated net unrealized appreciation related to our investments in equity securities as of December 31, 2017 (approximately $0.2 million) from accumulated other comprehensive income to retained earnings and does not expect the adoption of ASU 2016-01 to have a material impact on the Company’s future reported net earnings.

Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”) and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within, beginning after December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. A reporting entity may apply the amendments in the Revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach.

The Revenue ASUs became effective for the Company on January 1, 2018. The Company has been evaluating the new guidance and believes the Revenue ASUs will not have a material impact on its consolidated financial statements upon adoption since the primary source of revenue for the Company is generated through financing arrangements, which are excluded from the Revenue ASUs.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The new standard adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new 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. The 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 income. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)” (“ASU 2016-15”), which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued this guidance with the intent of reducing diversity in practice with respect to classification of eight types of cash receipts and payments: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero coupon bonds, (3) contingent consideration payments after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718)” (“ASU 2017-09”), to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting required by Topic 718. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 on January 1, 2018. The adoption of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements.

In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); and Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, and (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” This guidance addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the new guidance to determine the impact on its consolidated financial statements upon adoption in fiscal 2019.

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Net Income per Share (Tables)

3 Months Ended

Mar. 31, 2018

Net Income Per Share Tables

Schedule of earnings per share, basic and diluted

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

	Three Months Ended
	March 31,
	2018		2017
Numerator:
Net income attributable to SWK Holdings Corporation stockholders	$	3,644	$	5,236
Denominator:
Weighted-average shares outstanding		13,053		13,144
Effect of dilutive securities		4		3
Weighted-average diluted shares		13,057		13,147
Basic income per share attributable to SWK Holdings Corporation stockholders	$	0.28	$	0.40
Diluted income per share attributable to SWK Holdings Corporation stockholders	$	0.28	$	0.40

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Finance Receivables (Tables)

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Schedule of carrying value of finance receivables

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

	March 31,			December 31,
Portfolio	2018			2017
Term loans	$	147,715		$	118,533
Royalty purchases		20,966			35,121
Total before allowance for credit losses		168,681			153,654
Allowance for credit losses		(2,838	)		(1,659	)
Total carrying value	$	165,843		$	151,995

Schedule of total unfunded loan commitments

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

	March 31, 2018						December 31, 2017
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	18,919	$	128,796	$	147,715	$	11,402	$	107,131	$	118,533
Royalty purchases, net of credit loss allowance		—		18,128		18,128		—		33,462		33,462
Total carrying value	$	18,919		146,924	$	165,843	$	11,402	$	140,593	$	151,995

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Marketable Investments (Tables)

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of marketable investments

Investments in marketable investments at March 31, 2018 and December 31, 2017 consist of the following (in thousands):

	March 31, 2018		December 31, 2017
Corporate debt securities	$	581	$	600
Equity securities		1,132		1,256
Total	$	1,713	$	1,856

Schedule of available-for-sale securities reconciliation

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities as of March 31, 2018 and December 31, 2017, are as follows (in thousands):

March 31, 2018	Amortized Cost		Gross Unrealized    Gains		Gross Unrealized    Loss		Fair Value
Corporate debt securities	$	581	$	—	$	—	$	581
Total	$	581	$	—	$	—	$	581

December 31, 2017	Amortized Cost		Gross Unrealized    Gains		Gross Unrealized    Loss		Fair Value
Corporate debt securities	$	600	$	—	$	—	$	600
Total	$	600	$	—	$	—	$	600

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

The following table presents the proceeds from sales, gross unrealized gains and gross unrealized losses for available-for-sale securities that were sold during the following periods

(in thousands)	Three Months Ended March 31,
	2018			2017
Proceeds from sale of equity securities	$	—		$	—
Realized gain on sale of equity securities		—			243
Unrealized net loss on equity securities reflected in the Consolidated Statement of Operations		(124	)		—

Schedule of securities in a continuous unrealized loss position aggregated by investment category and length of time

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

March 31, 2018	Less than Twelve Months				Twelve Months or Greater					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity securities		—		—		41		(72	)		41		(72	)
Total	$	—	$	—	$	41	$	(72	)	$	41	$	(72	)

December 31, 2017	Less than Twelve Months				Twelve Months or Greater					Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity securities		—		—		33		(117	)		33		(117	)
Total	$	—	$	—	$	33	$	(117	)	$	33	$	(117	)

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Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of assumptions used

The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: 

	March 31,  2018			December 31,  2017
Dividend rate		—			—
Risk-free rate		2.3	%		2.0	%
Expected life (years)		2.4			2.7
Expected volatility		19.4	%		21.9	%

Schedule of value of the warrant liability

The changes on the value of the warrant liability during the three months ended March 31, 2018 were as follows (in thousands):

Fair value – December 31, 2017	$	91
Issuances		—
Changes in fair value		(26	)
Fair value – March 31, 2018	$	65

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of fair value assets measured on recurring basis

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	1,519	$	—	$	—	$	1,519
Marketable investments		1,713		1,132		—		581
Financial Liabilities:
Warrant liability	$	65	$	—	$	—	$	65

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	987	$	—	$	—	$	987
Marketable investments		1,856		1,256		—		600
Financial Liabilities:
Warrant liability	$	91	$	—	$	—	$	91

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

The changes on the value of the warrant assets during the three months ended March 31, 2018 were as follows (in thousands):

Fair value – December 31, 2017	$	987
Issued		258
Canceled		—
Change in fair value		274
Fair value – March 31, 2018	$	1,519

Schedule of weighted average assumptions

The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the unaudited condensed consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value:

	March 31,		December 31,
	2018		2017
Dividend rate range		—		—
Risk-free rate range		2.3% to 2.7%		2.0% to 2.3%
Expected life (years) range		2.4 to 7.0		2.6 to 6.6
Expected volatility range		55.6% to 94.9%		72.5% to 95.7%

Schedule of fair value assets and liabilities measured on nonrecurring basis

The following table presents the financial assets measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
March 31, 2018
Impaired loans	$	12,574	$	—	$	—	$	12,574
December 31, 2017
Impaired loans	$	6,087	$	—	$	—	$	6,087

There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2018 and December 31, 2017.

Schedule of fair value by balance sheet grouping

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in unconsolidated entity.

As of March 31, 2018 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	21,451	$	21,451	$	21,451	$	—	$	—
Finance receivables		165,843		165,843		—		—		165,843
Marketable investments		1,713		1,713		1,132		—		581
Warrant assets		1,519		1,519		—		—		1,519
Financial Liabilities
Warrant liability	$	65	$	65	$	—	$	—	$	65

As of December 31, 2017 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	30,557	$	30,557	$	30,557	$	—	$	—
Finance receivables		151,995		151,995		—		—		151,995
Marketable investments		1,856		1,856		1,256		—		600
Warrant assets		987		987		—		—		987
Financial Liabilities
Warrant liability	$	91	$	91	$	—	$	—	$	91

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Net Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net income (loss) attributable to SWK Holdings Corporation Stockholders	$ 3,644	$ 5,236
Denominator:
Weighted-average shares outstanding	13,053,000	13,144,000
Effect of dilutive securities	4,000	3,000
Weighted-average diluted shares	13,057,000	13,147,000
Basic income (loss) per share attributable to SWK Holdings Corporation Stockholders	$ 0.28	$ 0.40
Diluted income (loss) per share attributable to SWK Holdings Corporation Stockholders	$ 0.28	$ 0.40
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	286,000	399,000

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Finance Receivables (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Portfolio
Total before allowance for credit losses	$ 168,681	$ 153,654
Allowance for credit losses	(2,838)	(1,659)
Total carrying value	165,843	151,995
Life Science Term Loans [Member]
Portfolio
Total before allowance for credit losses	147,715	118,533
Total carrying value	147,715	118,533
Life Science Royalty Purchases [Member]
Portfolio
Total before allowance for credit losses	20,966	35,121
Total carrying value	$ 18,128	$ 33,462

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Finance Receivables (Details 2) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Nonaccrual	$ 18,919	$ 11,402
Performing	146,924	140,593
Total	165,843	151,995
Life Science Term Loans [Member]
Nonaccrual	18,919	11,402
Performing	128,796	107,131
Total	147,715	118,533
Life Science Royalty Purchases [Member]
Nonaccrual
Performing	18,128	33,462
Total	$ 18,128	$ 33,462

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Finance Receivables (Details Narrative) - USD ($) $ in Thousands							1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 31, 2018	Dec. 02, 2017	Aug. 08, 2017	Jul. 31, 2017	Oct. 10, 2014	Dec. 10, 2013	Feb. 28, 2016	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	May 12, 2017
Face amount								$ 18,900		$ 11,400
Number of shares outstanding								0		0
B&D Dental [Member]
Face amount						$ 6,000				$ 8,100
Credit agreement term						5 years
Arrangement fee						$ 60
Advance loan to collateral									$ 500
Hooper Holmes, Inc. (Hooper)
Face amount											$ 6,500
Additional term loan			$ 200
Debt instrument maturity date	Apr. 30, 2018		Feb. 01, 2018
ABT Molecular Imaging, Inc [Member]
Impairment loss										$ 7,600
ABT Molecular Imaging, Inc [Member] | Second Lien Loan [Member]
Face amount					$ 10,000
Debt instrument maturity date					Oct. 08, 2021
ABT Molecular Imaging, Inc [Member] | First Lien Loan [Member]
Face amount								$ 8,300
Payments to aquire loans receivable							$ 700
Cambia [Member]
Acquisation percentage		25.00%		25.00%
Payments to acquire business gross		$ 4,500		$ 4,000
Allowance for credit loss								$ 1,200

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Marketable Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Corporate debt securities	$ 581	$ 600
Equity securities	1,132	1,256
Total	$ 1,713	$ 1,856

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Marketable Investments (Details 2) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Available for Sale Securities:
Amortized Cost	$ 581		$ 600
Gross Unrealized Gains
Gross Unrealized Loss		(87)
Fair Value	581		600
Gain on sale of marketable securities		243
Unrealized net loss on equity securities	(124)
Corporate Debt Securities [Member]
Available for Sale Securities:
Amortized Cost	581		600
Gross Unrealized Gains
Gross Unrealized Loss
Fair Value	$ 581		$ 600

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Marketable Investments (Details 3) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available For Sale Securities
Less than 12 Months, Fair Value
Less than 12 Months, Unrealized Losses
Greater than 12 Months, Fair Value	41	33
Greater than 12 Months, Unrealized Losses	(72)	(117)
Total, Fair Value	41	33
Total, Unrealized Losses	(72)	(117)
Equity Securities [Member]
Available For Sale Securities
Less than 12 Months, Fair Value
Less than 12 Months, Unrealized Losses
Greater than 12 Months, Fair Value	41	33
Greater than 12 Months, Unrealized Losses	(72)	(117)
Total, Fair Value	41	33
Total, Unrealized Losses	$ (72)	$ (117)

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Marketable Investments (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	Nov. 15, 2013	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Jul. 09, 2013
Number of common shares		13,059,190		13,053,422
Gain on sale of marketable securities			$ 243
Fair Value		581		$ 600
Senior notes		581		$ 600
Paid-in-kind interest		$ 47	$ 383
Cancer Genetics, Inc [Member]
Number of common shares		661,076
Number of common shares sold			75,000
Gain on sale of marketable securities			$ 200
Fair Value		$ 1,100
Hooper Holmes [Member]
Number of common shares		77,922
Fair Value		$ 41
Agreement To Purchase Senior Secured Notes [Member]
Senior notes					$ 3,000
Paid-in-kind interest	$ 100
Tribute [Member] | Agreement To Purchase Senior Secured Notes [Member]
Senior notes					$ 100,000

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Variable Interest Entities (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Dec. 31, 2012	Mar. 31, 2018	Mar. 31, 2017
Income (loss) from equity method investments			$ 10,204
Proceeds from equity method investment, dividends or distributions			17,189
Payments to noncontrolling interests			8,788
Non-controlling Interests in Consolidated Entities [Member]
Investments in advance to affiliates, subsidiaries, associates, and joint ventures	$ 7,000
SWKHP Holdings [Member]
Income (loss) from equity method investments			$ 5,000
Holmdel Pharmaceuticals LP [Member]
Payments to acquire intangible assets	13,000
SWKHP Holdings LP [Member]
Investments in advance to affiliates, subsidiaries, associates, and joint ventures	13,000
SWKHP Holdings GP [Member]
Investments in advance to affiliates, subsidiaries, associates, and joint ventures	$ 6,000

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Related Party Transactions (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Dividend rate	0.00%	0.00%
Loan Credit Agreement [Member]
Dividend rate	0.00%	0.00%
Risk-free rate	2.30%	2.00%
Expected life (years)	2 years 4 months 24 days	2 years 8 months 12 days
Expected volatility	19.40%	21.90%

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Related Party Transactions (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Fair value at beginning	$ 91
Fair value at ending	65
Warrant Liability [Member]
Fair value at beginning	91
Issuances
Changes in fair value	(26)
Fair value at ending	$ 65

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Related Party Transactions (Details Narartive) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Sep. 06, 2013
Warrants and rights outstanding	$ 65	$ 91
Delayed Draw [Member]
Number of securities called by warrants or rights (in shares)			100,000
Exercise price of warrants or rights (in dollars per Share)			$ 13.88
Reduction in strike price	$ 13.48

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Stockholders' Equity (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stockholders' Equity Note [Abstract]
Compensation for non-employee directors (in shares)	5,768	5,928
Allocated share-based compensation	$ 62	$ 62
Value of compensation for non-employee directors	$ 100	$ 100

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial Assets:
Warrant assets	$ 1,519	$ 987
Marketable investments	581	600
Financial Liabilities:
Warrant liability	65	91
Tribute Warrant [Member] | Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Marketable investments	1,132	1,256
Tribute Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Warrant assets	1,519	987
Marketable investments	581	600
Financial Liabilities:
Warrant liability	65	91
Warrant Liability [Member]
Financial Liabilities:
Warrant liability	65	91
Marketable Securities [Member] | Tribute Warrant [Member]
Financial Assets:
Warrant assets	1,519	987
Marketable investments	1,713	1,856
Financial Liabilities:
Warrant liability	$ 65	$ 91

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Fair Value Measurements (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Fair value - December 31, 2017	$ 987
Fair value - March 31, 2018	1,519
Tribute Warrant [Member]
Fair value - December 31, 2017	987
Issuances	258
Canceled
Change in fair value	274
Fair value - March 31, 2018	$ 1,519

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Fair Value Measurements (Details 3)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Dividend rate range	0.00%	0.00%
Minimum [Member]
Risk-free rate range	2.30%	2.00%
Expected life (years) range	2 years 4 months 24 days	2 years 7 months 6 days
Expected volatility range	55.60%	72.50%
Maximum [Member]
Risk-free rate range	2.70%	2.30%
Expected life (years) range	7 years	6 years 7 months 6 days
Expected volatility range	94.90%	95.70%

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Fair Value Measurements (Details 4) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial Assets:
Impaired loans	$ 1,519	$ 987
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Impaired loans	1,519	987
Tribute Warrant [Member]
Financial Assets:
Impaired loans	1,519	987
Tribute Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Impaired loans	12,574	6,087
Marketable Securities [Member] | Tribute Warrant [Member]
Financial Assets:
Impaired loans	$ 12,574	$ 6,087

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Fair Value Measurements (Details 5) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Financial Assets
Cash and cash equivalents	$ 21,451	$ 30,557	$ 40,514	$ 32,182
Cash and cash equivalents at fair value	21,451	30,557
Finance receivables	165,843	151,995
Finance receivables at fair value	165,843	151,995
Marketable investments	1,713	1,856
Marketable investments at fair value	1,713	1,856
Warrant assets	1,519	987
Warrant assets at fair value	1,519	987
Financial Liabilities
Warrant liability	65	91
Gross liability at fair value	65	91
Fair Value, Inputs, Level 1 [Member]
Financial Assets
Cash and cash equivalents at fair value	21,451	30,557
Marketable investments at fair value	1,132	1,256
Fair Value, Inputs, Level 3 [Member]
Financial Assets
Cash and cash equivalents
Finance receivables at fair value	165,843	151,995
Marketable investments at fair value	581	600
Warrant assets at fair value	1,519	987
Financial Liabilities
Gross liability at fair value	$ 65	$ 91