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, 2020

OR

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

Commission File Number: 001-39184

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
(Address of Principal Executive Offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act: 

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	SWKH	The Nasdaq Stock Market LLC
Preferred Stock Purchase Rights	SWKH	The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted 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 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 11, 2020, there were 12,911,453 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

SWK Holdings Corporation

Form 10-Q

Quarter Ended March 31, 2020

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets—March 31, 2020 and December 31, 2019	1
	Unaudited Condensed Consolidated Statements of (Loss) Income—Three Months Ended March 31, 2020 and 2019	2
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income—Three Months Ended March 31, 2020 and 2019	3
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three Months Ended March 31, 2020 and 2019	4
	Unaudited Condensed Consolidated Statements of Cash Flows—Three Months Ended March 30, 2020 and 2019	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6
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	29
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
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

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, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	24,318		$	11,158
Interest and accounts receivable, net		2,011			2,554
Marketable investments		912			1,802
Other current assets		1,548			1,087
Total current assets		28,789			16,601
Finance receivables, net		177,981			172,825
Marketable investments		285			466
Deferred tax asset, net		24,527			25,780
Warrant assets		1,748			3,555
Intangible assets, net		21,796			25,113
Goodwill		8,404			8,404
Property and equipment, net		1,299			1,292
Other non-current assets		290			336
Total assets	$	265,119		$	254,372
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,068		$	3,061
Revolving credit facility		14,288			—
Total current liabilities		18,356			3,061
Contingent consideration payable		14,500			14,500
Warrant liability		129			76
Other non-current liabilities		137			203
Total liabilities		33,122			17,840
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		—			—
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,918,006 and 12,917,348 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		13			13
Additional paid-in capital		4,432,271			4,432,146
Accumulated deficit		(4,200,287	)		(4,195,627	)
Total stockholders’ equity		231,997			236,532
Total liabilities and stockholders’ equity	$	265,119		$	254,372

See accompanying notes to the unaudited condensed consolidated financial statements.

1

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(in thousands, except per share data)

	Three Months Ended March 31,
	2020			2019
Revenues:
Finance receivables interest income, including fees	$	7,136		$	9,391
Pharmaceutical development		148			—
Other		18			1
Total revenues		7,302			9,392
Costs and expenses:
Provision for credit losses		—			609
Impairment expense		163			—
Interest expense		101			102
Pharmaceutical manufacturing, research and development expense		1,150			—
Depreciation and amortization expense		3,505			5
General and administrative		3,040			1,264
Total costs and expenses		7,959			1,980
Other (expense) income, net
Unrealized net (loss) gain on warrants		(1,860	)		258
Unrealized net loss on equity securities		(890	)		—
(Loss) income before provision for income taxes		(3,407	)		7,670
Provision for income taxes		1,253			1,111
Consolidated net (loss) income	$	(4,660	)	$	6,559
Net (loss) income per share
Basic	$	(0.36	)	$	0.51
Diluted	$	(0.36	)	$	0.51
Weighted Average Shares
Basic		12,913			12,906
Diluted		12,913			12,909

See accompanying notes to the unaudited condensed consolidated financial statements.

2

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

	Three Months Ended March 31,
	2020			2019
Consolidated net (loss) income	$	(4,660	)	$	6,559
Other comprehensive income, net of tax		—			—
Comprehensive (loss) income	$	(4,660	)	$	6,559

See accompanying notes to the unaudited condensed consolidated financial statements.

3

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Three Months Ended March 31, 2020
						Additional						Total
	Common Stock					Paid-In			Accumulated			Stockholders’
	Shares			Amounts		Capital			Deficit			Equity
Balances at December 31, 2019		12,917,348		$	13	$	4,432,146		$	(4,195,627	)	$	236,532
Stock-based compensation		—			—		187			—			187
Issuance of common stock		5,937			—		—			—			—
Repurchases of common stock in open market		(5,279	)		—		(62	)		—			(62	)
Net loss		—			—		—			(4,660	)		(4,660	)
Balances at March 31, 2020		12,918,006		$	13	$	4,432,271		$	(4,200,287	)	$	231,997
	Three Months Ended March 31, 2019
						Additional						Total
	Common Stock					Paid-In			Accumulated			Stockholders’
	Shares			Amounts		Capital			Deficit			Equity
Balances at December 31, 2018		12,933,674		$	13	$	4,432,499		$	(4,219,455	)	$	213,057
Stock-based compensation		—			—		102			—			102
Issuance of common stock		42,225			—		—			—			—
Repurchases of common stock in open market		(77,300	)		—		(745	)		—			(745	)
Net income		—			—		—			6,559			6,559
Balances at March 31, 2019		12,898,599		$	13	$	4,431,856		$	(4,212,896	)	$	218,973

See accompanying notes to the unaudited condensed consolidated financial statements

4

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Consolidated net (loss) income	$	(4,660	)	$	6,559
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provision for loan credit losses		—			609
Security impairment expense		163			—
Amortization of debt issuance costs		47			—
Deferred income taxes		1,253			1,111
Change in fair value of warrants		1,860			(258	)
Change in fair value of equity securities		890			—
Loan discount amortization and fee accretion		(536	)		(600	)
Interest paid-in-kind		(467	)		(406	)
Stock-based compensation		187			102
Interest income in excess of cash received		—			(82	)
Depreciation and amortization expense		3,505			—
Changes in operating assets and liabilities:
Interest and accounts receivable, net		543			265
Other assets		(462	)		(9	)
Accounts payable, accrued liabilities, and other liabilities		994			(291	)
Net cash provided by operating activities		3,317			7,000
Cash flows from investing activities:
Investment in finance receivables		(5,500	)		(11,186	)
Repayment of finance receivables		1,348			23,866
Corporate debt security principal payment		18			21
Other		(249	)		—
Net cash (used in) provided by investing activities		(4,383	)		12,701
Cash flows from financing activities:
Net proceeds from credit facility		14,288			—
Repurchases of common stock, including fees and expenses		(62	)		(745	)
Net cash provided by (used in) financing activities		14,226			(745	)
Net increase in cash and cash equivalents		13,160			18,956
Cash and cash equivalents at beginning of period		11,158			20,227
Cash and cash equivalents at end of period	$	24,318		$	39,183

See accompanying notes to the unaudited condensed consolidated financial statements.

5

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. In August 2019, the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property licensing business. The Company’s operations comprise two reportable segments: “Finance Receivables” and “Pharmaceutical Development.” The Company allocates capital to each segment in order to generate income through the sales of life science products by third parties. The Company is headquartered in Dallas, Texas, and as of March 31, 2020, the Company had 32 employees.

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, the Company does not anticipate that the Finance Receivables or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior to their respective expiration dates. As such, it is possible that the Company might pursue additional strategies that it believes might result in the ability to utilize more of the NOLs.

As of May 11, 2020, and since inception of the strategy, the Company and its partners have executed transactions with 36 different parties under its specialty finance strategy, funding an aggregate $540.1 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.

On August 26, 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). SWK Products Holdings LLC (“SWK Products”), a wholly-owned subsidiary of the Company, entered into a merger agreement pursuant to which Enteris became a wholly-owned subsidiary of SWK Products.

Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform. Since its founding in 2013, Enteris has advanced multiple internal and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation. Peptelligence® utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability. Peptelligence® is protected by an extensive patent estate that extends until 2036.

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.

6

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, 2020. 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, 2019, filed with the SEC on March 30, 2020.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation. The amounts for prior periods have been reclassified to be consistent with current year presentation and have no impact on previously reported total assets, total stockholders’ equity or net (loss) income.

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; valuation of accounts receivable; impairment of financing receivables; long-lived assets; property, plant and equipment; intangible assets; goodwill; valuation of warrants; contingent consideration; 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, health crises such as the COVID-19 global pandemic, volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates and assumptions. The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change. Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under the relevant accounting standard. It is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. 

Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative expenses. Refer to Note 3, Business Combinations, for further information regarding our acquisition of Enteris.

Segment Information

The Company earns revenues from its two U.S.-based business segments: its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies, and as of August 26, 2019, the Company’s business offering oral therapeutic formulation solutions built around Enteris’ pharmaceutical Peptelligence® platform, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in an enteric-coated tablet formulation.

The financial results of Enteris are included in the Pharmaceutical Development segment as of the acquisition date.

7

Revenue Recognition

The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.

Deferred revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue. The Company classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet date. Deferred revenue was $0.7 million and $0.1 million as of March 31, 2020 and December 31, 2019, respectively, and is included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.

Research and Development

Research and development expenses include the costs associated with internal research and development and research and development conducted for the Company by third parties. These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants, and supplies. All research and development costs discussed above are expensed as incurred. Third-party expenses reimbursed under research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research and development expense in the unaudited condensed consolidated statements of (loss) income.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (Topic 848), which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity. ASU 2020-04 is effective from March 12, 2020 through December 31, 2022. An entity may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. An entity may elect to apply the amendments in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made at any time after March 12, 2020 but no later than December 31, 2022. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04; however, the Company is still evaluating the guidance, and therefore, the impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

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. On November 15, 2019, the FASB issued ASU 2019-10, “Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which finalized various effective dates delay for private companies, not-for-profit organizations, and certain smaller reporting companies. Under ASU 2019-10, the effective date for implementation of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after December 15, 2022. 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.

8

Note 2. Net (Loss) Income per Share

Basic net (loss) 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 net (loss) income per share for the following periods (in thousands, except per share amounts):

	Three Months Ended March 31,
	2020			2019
Numerator:
Net (loss) income	$	(4,660	)	$	6,559
Denominator:
Weighted-average shares outstanding		12,913			12,906
Effect of dilutive securities		—			3
Weighted-average diluted shares		12,913			12,909
Basic net (loss) income per share	$	(0.36	)	$	0.51
Diluted net (loss) income per share	$	(0.36	)	$	0.51

For the three months ended March 31, 2020 and 2019, outstanding stock options, restricted stock units and warrants to purchase shares of common stock in an aggregate of approximately 460,000 and 400,000, respectively, have been excluded from the calculation of diluted net (loss) income per share as all such securities were anti-dilutive.

9

Note 3. Business Combinations

On August 26, 2019, Enteris, a biotechnology company offering innovative formulation solutions utilizing its proprietary oral drug delivery technology, became a wholly-owned subsidiary of the Company. The total merger consideration was $34.6 million, which included contingent consideration of $14.5 million. The purchase price was subject to certain adjustments with respect to cash, debt, working capital, transaction expenses and the value of the contingent consideration agreement entered into, in connection with the transaction.

The acquisition was accounted for under the acquisition method of accounting. Accordingly, the merger consideration was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The excess of the merger consideration over the estimated fair value of the net assets of Enteris was recorded as goodwill, which consists largely of synergies and the acquisition of intangible assets. The resulting goodwill is not expected to be deductible for tax purpose.

The allocation of the merger consideration has been prepared on a preliminary basis and changes to the allocation to certain assets, liabilities, including tax estimates and potential indemnities, may be revised as additional information becomes available. The Company will finalize the acquisition accounting within the required measurement period of one year.

The following table summarizes the allocation of the merger consideration (at fair value) to the assets and liabilities of Enteris as of August 26, 2019 (the date of acquisition) (in thousands):

Cash	$	334
Accounts receivable		145
Inventory		274
Prepaid expenses and other current assets		121
Property and equipment		1,324
Patents and other intangible assets		29,850
Right of use operating lease asset		348
Other assets		110
Goodwill		8,404
Accounts payable		(255	)
Accrued expenses and other current liabilities		(1,365	)
Deferred revenue		(385	)
Lease liability		(348	)
Deferred tax liability		(3,988	)
Total purchase price	$	34,569

Unaudited Supplemental Pro Forma Information

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2019, the earliest period presented herein (in thousands):

	Three Months Ended March 31,
	2019
Revenues	$	10,871
Net income		2,812

The pro forma financial information includes adjustments that are directly attributable to the business combination and are factually supportable. The pro forma adjustments include incremental amortization and depreciation of intangible assets and property and equipment based on preliminary values of each asset and acquisition-related expenses. The pro forma financial information excludes non-recurring acquisition-related expenses. These pro forma results are illustrative only and not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.

10

Goodwill

There was no change in the carrying amount of goodwill from December 31, 2019 to March 31, 2020, and net book value remains at $8.4 million. The net book value of goodwill is solely related to the Enteris acquisition in 2019. As of March 31, 2020, the Company concluded that it is more likely than not that fair value of the reporting unit is greater than its carrying value, and goodwill is not considered to be impaired.

Intangible Assets

As of March 31, 2020, the gross book value and accumulated amortization of acquired intangible assets were as follows (in thousands, except estimated useful life data):

	As of March 31, 2020
	Gross Book Value		Accumulated Amortization		Net Book Value		Estimated Useful Life
Licensing agreement	$	29,400	$	8,174	$	21,226		10
Patents		146		28		118		1 - 20
Trade names and trademarks		210		13		197		10
Customer relationships		240		14		226		10
		29,996		8,229		21,767
Deferred patent costs		29		—		29		N/A
Total intangibles	$	30,025	$	8,229	$	21,796

Amortization expense from the acquisition of Enteris was $3.4 million for the period ended March 31, 2020 and was recorded in depreciation and amortization expense. Based on amounts recorded at March 31, 2020, the Company will recognize acquired intangible asset amortization as follows (in thousands):

2020 (remaining)	$	8,850
2021		3,019
2022		1,764
2023		1,764
2024		1,421
Thereafter		4,949
	$	21,767

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Note 4. 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.

As of March 31, 2020, the Company had a credit loss allowance of $8.4 million. Of the total $8.4 million, $1.2 million and $0.6 million are associated with the Company’s Cambia® and Besivance® royalties, respectively. The remaining $6.6 million is related to the ABT Molecular Imaging, Inc. (“ABT”), now known as Best ABT, Inc. (“Best”), second lien term loan that was recognized in order to reflect the Best royalty at its estimated fair value of $4.1 million. The carrying values of finance receivables are as follows (in thousands):

Portfolio	March 31, 2020			December 31, 2019
Term loans	$	156,592		$	150,453
Royalty purchases		29,777			30,760
Total before allowance for credit losses		186,369			181,213
Allowance for credit losses		(8,388	)		(8,388	)
Total carrying value	$	177,981		$	172,825

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

	March 31, 2020						December 31, 2019
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,337	$	148,255	$	156,592	$	8,337	$	142,116	$	150,453
Royalty purchases, net of credit loss allowance		7,614		13,775		21,389		7,614		14,758		22,372
Total carrying value	$	15,951	$	162,030	$	177,981	$	15,951	$	156,874	$	172,825

As of March 31, 2020 and December 31, 2019, the Company had three finance receivables in nonaccrual status: (a) the term loan to B&D Dental Corporation (“B&D”), with a net carrying value of $8.3 million, (b) the Best royalty, with a net carrying value of $4.1 million, and (c) the Tissue Regeneration Therapeutics, Inc. (“TRT”) royalty, with a net carrying value of $3.5 million. Although in nonaccrual status, the B&D term loan and the TRT royalty were not considered impaired as of both March 31, 2020 and December 31, 2019. The Company did not collect any cash on its nonaccrual royalties during the three months ended March 31, 2020. (Please see B&D, Best, and TRT below for further details regarding nonaccrual and impaired finance receivables).

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. The loan was scheduled to mature on December 10, 2018. Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D. As of December 31, 2019, the total amount funded was $8.3 million. B&D is currently evaluating strategic options, including a potential sale of the business.

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 2016 and 2018, the Company executed three additional amendments to the loan to advance an additional $0.7 million in order to directly pay critical vendors and protect the value of the collateral. The Company obtained a third-party valuation of B&D as of December 31, 2019. As a result of the third-party valuation and facts and circumstances regarding B&D’s operations, 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, 2020.

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Best

On October 31, 2018, ABT announced that it entered into an asset purchase agreement with Best, a wholly-owned subsidiary of Best Medical International, Inc. for aggregate consideration of (i) $500,000, paid over ten years in equal quarterly installments, plus (ii) a ten percent royalty on ABT’s net sales, including any commercialized improvements made to ABT’s technology, paid quarterly for the ten year period from closing pursuant to a royalty security agreement by and between Best and SWK Funding LLC, a wholly-owned subsidiary of the Company (“SWK Funding”). SWK Funding will receive 100 percent of the consideration. On November 8, 2018, the Bankruptcy Court approved the asset sale transaction, and the Company has no further funding liabilities.

During the year ended December 31, 2018, the Company re-evaluated its collateral position, considering the expected outcome of the Chapter 11 process, and as a result, the Company recognized an impairment expense of $5.3 million to write off the second lien term loan, as well as provision for credit losses of $5.0 million to reflect the Best royalty at its estimated fair value of $5.7 million.

During the year ended December 31, 2019, the Company re-evaluated the value of the Best royalty based on 2019 business trends, and as a result, the Company recognized a provision for credit losses of $1.6 million to reflect the Best royalty at its estimated fair value of $4.1 million.

TRT

On June 13, 2013, the Company purchased royalties from TRT related to its technology licenses in the family cord banking services sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon the achievement of royalty receipts-based milestones. During the quarter ended March 31, 2016, royalty payments from the primary U.S. licensee ended as a result of the licensee terminating a technology license. The Company and TRT continue to evaluate both options in regard to enforcing TRT’s intellectual property rights against this licensee, as well as seeking additional U.S. licensees. TRT’s Canadian licensee continues to pay royalties. The Company is in discussions with TRT to restructure the purchase agreement. Given uncertainties regarding the outcome of the negotiations and the ultimate timing of cash flows related to the U.S. intellectual property, the Company has placed the TRT royalty on non-accrual status, although does not consider it impaired as of March 31, 2020. The Company evaluated several factors in this determination, including input from intellectual property counsel regarding the strength of the related intellectual property, continued receipt of Canadian licensee royalty payments and anticipated terms of the restructured purchase agreement.

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Note 5. Marketable Investments

Investments in corporate debt securities and equity securities at March 31, 2020 and December 31, 2019 consist of the following (in thousands):

	March 31, 2020		December 31, 2019
Corporate debt securities	$	285	$	466
Equity securities		912		1,802
Total marketable investments	$	1,197	$	2,268

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, 2020 and December 31, 2019, are as follows (in thousands):

March 31, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	285	$	—	$	—	$	285
December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	466	$	—	$	—	$	466

The following table presents unrealized net losses on equity securities during the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020			2019
Unrealized net loss on equity securities reflected in the unaudited condensed consolidated statements of (loss) income	$	(890	)	$	—

Equity Securities

As of March 31, 2020, the Company’s equity securities include 96,810 shares of Misonix, Inc. (“Misonix”) common stock received pursuant to Misonix’s purchase of Solsys Medical, Inc. (“Solsys”) on September 27, 2019. During the three months ended September 30, 2019 and prior to the acquisition, the Company exercised its Solsys warrants in a cashless transaction to purchase Solsys preferred stock and exercised its preemptive right to protect against dilution of its Solsys equity position. Of the total 109,472 shares of Misonix common stock received for its Solsys equity interests, 12,662 shares are held in escrow by Misonix, are subject to reduction based on terms of the acquisition agreement, and any shares remaining at the end of the escrow period will be released within 15 to 18 months post closing of the acquisition. The 96,810 shares are subject to a one year lock-up that expires on September 27, 2020. As of March 31, 2020, the 96,810 shares of Misonix common stock are reflected at their estimated fair value of $0.9 million.

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, 2020 and 2019 was $17,660 and $21,000, respectively, which was credited to the notes’ carrying value. During the three months ended March 31, 2020, impairment expense of $0.2 million was recognized in order to reflect the notes at their estimated fair value of $0.3 million. The notes are included in long-term marketable investments in the unaudited condensed consolidated balance sheets.

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Note 6. Revolving Credit Facility

On June 29, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with State Bank and Trust Company as a lender and the administrative agent (“State Bank”) pursuant to which State Bank will provide the Company with up to a $20 million revolving senior secured credit facility, which the Company can draw down and repay until maturity, subject to borrowing base eligibility. The Loan Agreement matures on June 29, 2021.

The Loan Agreement accrues interest at the Daily LIBOR Rate, with a floor of 1.00 percent, plus a 3.25 percent margin and principal is repayable in full at maturity. Interest is generally required to be paid monthly in arrears. The Loan Agreement requires the payment of an unused line fee of 0.50 percent, which will be recorded as interest expense. The Company paid $0.5 million in fees at closing, which have been capitalized as deferred financing costs and are being amortized on a straight-line basis over the term of the Loan Agreement.

The Loan Agreement has an advance rate against the Company’s finance receivables portfolio, including 85 percent against senior first lien loans, 70 percent against second lien loans and 50 percent against royalty receivables, subject to certain eligibility requirements as defined in the Loan Agreement. The Loan Agreement contains certain affirmative and negative covenants including minimum asset coverage and minimum interest coverage ratios.

During both the three months ended March 31, 2020 and 2019, the Company recognized $0.1 million of interest expense. On March 17, 2020, the Company drew $15.0 million on its revolving credit facility in order to support existing business partners and to finance future investment opportunities. As of March 31, 2020, $14.3 million was outstanding under the revolving credit facility, and $5.7 million was available for borrowing.

Note 7. 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 unaudited condensed consolidated balance sheets. The Company recorded a nominal loss for the three months ended March 31, 2020. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: 

	March 31, 2020			December 31, 2019
Dividend rate		—			—
Risk-free rate		0.15	%		1.6	%
Expected life (years)		0.4			0.7
Expected volatility		69.9	%		31.8	%

The changes on the value of the warrant liability during the three months ended March 31, 2020 were as follows (in thousands):

Fair value – December 31, 2019	$	76
Issuances		—
Changes in fair value		53
Fair value – March 31, 2020	$	129

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Note 8. Commitments and Contingencies

Unfunded Commitments

As of March 31, 2020, the Company’s unfunded commitments were as follows (in millions):

Aimmune Therapeutics, Inc.	$	1.3
eTon Pharmaceuticals, Inc.		5.0
Total unfunded commitments	$	6.3

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.

Note 9. Stockholders’ Equity

Stock Compensation Plans 

During the three months ended March 31, 2020 and 2019, the Company’s Board of Directors (the “Board”) approved compensation for Board services by granting 5,937 and 4,725 shares, respectively, of common stock as compensation for the non-employee directors. During the three months ended March 31, 2020 and 2019, the Company recorded approximately $0.1 million and $47,000, respectively, in Board stock-based compensation expense. The aggregate stock-based compensation expense, including the quarterly Board grants, recognized by the Company for the three months ended March 31, 2020 and 2019 was $0.2 million and $0.1 million, respectively.

Share Repurchase Programs

On December 21, 2018, September 5, 2019 and March 26, 2020, the Board authorized share repurchase programs, which are more fully described in Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds. The March 26, 2020 share repurchase program will expire on September 30, 2020.

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Note 10. 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, 2020. 

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.

Marketable Investments

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.

Contingent Consideration

The Company recorded contingent consideration related to the August 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement. Please refer to Note 3, Business Combinations, for further details on the Company’s acquisition of Enteris and contingent consideration.

The fair value measurements of contingent consideration obligations and the related intangible assets arising from business combinations are classified as Level 3 estimates under the fair value hierarchy as these items have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

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As of March 31, 2020 and December 31, 2019, the Company’s contingent consideration was recorded at its estimated fair value of $14.5 million.

Marketable Investments and Derivative Securities  

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, 2020 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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	$	1,748	$	—	$	—	$	1,748
Marketable investments		1,197		912		—		285
Financial Liabilities:
Contingent consideration payable	$	14,500	$	—	$	—	$	14,500
Warrant liability		129		—		—		129

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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	$	3,555	$	—	$	—	$	3,555
Marketable investments		2,268		1,802		—		466
Financial Liabilities:
Contingent consideration payable	$	14,500	$	—	$	—	$	14,500
Warrant liability		76		—		—		76

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The changes on the value of the warrant assets during the three months ended March 31, 2020 were as follows (in thousands):

Fair value – December 31, 2019	$	3,555
Issued		—
Canceled		—
Change in fair value		(1,807	)
Fair value – March 31, 2020	$	1,748

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, 2020		December 31, 2019
Dividend rate range		—		—
Risk-free rate range		0.37% to 0.55%		1.7% to 1.8%
Expected life (years) range		4.3 to 7.1		4.6 to 7.4
Expected volatility range		70.0% to 141.1%		50.3% to 114.6%

As of March 31, 2020 and December 31, 2019, the Company had three royalties, Besivance®, Best, and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of March 31, 2020 and December 31, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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, 2020
Impaired royalties	$	9,547	$	—	$	—	$	9,547
December 31, 2019
Impaired royalties	$	10,004	$	—	$	—	$	10,004

There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2020 and December 31, 2019.

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. 

As of March 31, 2020 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	24,318	$	24,318	$	24,318	$	—	$	—
Finance receivables		177,981		177,981		—		—		177,981
Marketable investments		1,197		1,197		912		—		285
Warrant assets		1,748		1,748		—		—		1,748
Financial Liabilities
Contingent consideration payable	$	14,500	$	14,500	$	—	$	—	$	14,500
Warrant liability		129		129		—		—		129

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As of December 31, 2019 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	11,158	$	11,158	$	11,158	$	—	$	—
Finance receivables		172,825		172,825		—		—		172,825
Marketable investments		2,268		2,268		1,802		—		466
Warrant assets		3,555		3,555		—		—		3,555
Financial Liabilities
Contingent consideration payable	$	14,500	$	14,500	$	—	$	—	$	14,500
Warrant liability		76		76		—		—		76

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Note 11. Segment Information

Selected financial and descriptive information is required to be provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the Company’s internal organization, focusing on financial information that a Company’s chief operating decision-makers use to make decisions about the Company’s operating matters.

As described in Note 1, SWK Holdings Corporation and Summary of Significant Accounting Policies, the Company has determined it has two reportable segments: Finance Receivables and Pharmaceutical Development, and each are individually managed and provide separate services. Revenues by segment represent revenues earned on the services offered within each segment.

Segment performance is evaluated based on several factors, including income (loss) from continuing operations before income. Management uses this measure of profit (loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.

The following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):

Three Months Ended March 31, 2020	Finance Receivables			Pharmaceutical Development			Holdings Company and Other			Consolidated
Revenues	$	7,136		$	166		$	—		$	7,302
Provision for credit losses and impairment expense		163			—			—			163
Interest expense		101			—			—			101
Pharmaceutical manufacturing, research and development expense		—			1,150			—			1,150
Depreciation and amortization		—			3,502			3			3,505
General and administrative		512			1,047			1,481			3,040
Other expense, net		(2,697	)		—			(53	)		(2,750	)
Provision for income taxes		—			—			1,253			1,253
Net income (loss)		3,663			(5,533	)		(2,790	)		(4,660	)

Included in Holdings Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, including public company costs and non-Enteris corporate employees, which have been included for purposes of reconciling to the consolidated amounts.

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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, 2019 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.

COVID-19 Considerations

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and the disease has since spread across the world, including the United States. In March 2020, the World Health Organization characterized COVID-19 as a pandemic.

We are subject to risks related to public health crises such as the global pandemic associated with COVID-19. In the last two weeks in March 2020 and through the date of this filing, our Pharmaceutical Development segment has seen a reduction in its productivity as well as delays in receiving some of its needed supplies as a direct result of the pandemic and the impact on key vendors. This slow-down is likely to continue in the near term until such time as certain restrictions that have been imposed on us and our suppliers are lifted. Such events may result in business disruption and reduced revenues, any of which could materially affect our business, financial condition and results of operations.

Starting in late-March 2020, the governor of New Jersey, where the manufacturing facility of our Pharmaceutical Development segment is located, issued “shelter-in-place” or “stay at home” orders restricting non-essential activities, travel and business operations for an indefinite period of time, subject to certain exceptions for necessary activities. Such orders or restrictions have resulted in our Pharmaceutical Development segment significantly reducing activities at its manufacturing facility, thereby negatively impacting our operations. Other disruptions or potential disruptions include restrictions on our personnel and personnel of our customers and suppliers to travel and access customers; delays in product development efforts; and additional government requirements or other incremental mitigation efforts that may further impact our business.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets and a recession or market correction that could materially affect our business and the value of our common stock. We are continuously monitoring our own operations and intend to take appropriate actions to mitigate the risks arising from the COVID-19 pandemic to the best of our abilities, but there can be no assurances that we will be successful in doing so. To the extent we are able to obtain information about and maintain communications with our customers, suppliers, vendors and other business partners, we will seek to minimize disruptions to our Pharmaceutical Development segment’s supply chain. We are continuously monitoring the potential impact of COVID-19 on the liquidity of our business partners and remain in regular contact with the individual management teams across the portfolio of our Finance Receivables segment. We expect that we will need to amend certain performance covenants under some of our credit agreements, and may determine to advance additional capital or allow some interest payments to be paid in-kind for specified periods in order to support our business partners. The ultimate extent of the effects of the COVID-19 pandemic on us is highly uncertain and will depend on future developments which cannot be predicted.

Please refer to Part II., Item 1A., Risk Factors, for additional information on risk factors related to the pandemic or other risks that could impact our business and results of operations.

Overview

We have organized our operations into two segments: Finance Receivables and Pharmaceutical Development. These segments reflect the way the Company evaluates it business performance and manages its operations. Please refer to Item 1. Financial Statements, Note 11 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment information.

Finance Receivables Segment

In our Finance Receivables segment, 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”) by tailoring financial solutions to the needs of our business partners.

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.

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We primarily provide capital in exchange for an interest in an existing revenue stream, which can take several forms, but is most commonly either a royalty derived from the sales of a life science product from the marketing efforts of a third party or from the marketing efforts of a partner company. Our structured debt investments may include warrants or other features, giving us the potential to realize enhanced returns on a portion of our portfolio.

Pharmaceutical Development Segment

On August 26, 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris. SWK Products, a wholly-owned subsidiary of SWK, entered into a merger agreement pursuant to which Enteris became a wholly-owned subsidiary of SWK. Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform. Since its founding in 2013, Enteris has advanced multiple internal and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation.

Our strategy is to utilize the Peptelligence® platform to create a wholly-owned portfolio of milestone and royalty income, and thus increase our net income and book value, by out-licensing our technology in two ways. First, we intend to out-license our technology to pharmaceutical companies to create novel and important oral therapeutic treatments for a wide variety of indications. Second, we intend to out-license to pharmaceutical companies our internally developed reformulations of approved, off-patent injectable therapeutic treatments where Peptelligence® enables oral delivery, resulting in meaningful improvements for patients and caregivers. We also generate income by providing customers pharmaceutical development, formulation and manufacturing with the ultimate goal of generating new out-license agreements of our technology.

Finance Receivables Portfolio Overview

The table below provides an overview of our outstanding finance receivables transactions as of, and for the three months ended March 31, 2020 (in thousands, except rate, share and per share data).

Royalty Purchases and Financings	License Technology	Footnote		Funded Amount		GAAP Balance		Rate			Revenue Recognized
Beleodaq®	Oncology treatment			$	7,600	$	5,975		N/A		$	421
Besivance®	Ophthalmic antibiotic		(1)		6,000		781		N/A			31
Best ABT, Inc.	Oncology diagnosis		(1), (2)		5,784		4,123		N/A			—
Cambia®	NSAID migraine treatment		(1)		8,500		4,643		N/A			127
Forfivo XL®	Depressive disorder treatment				6,000		1,828		N/A			409
Narcan®	Opioid overdose treatment				17,500		548		N/A			707
Secured Royalty Financing (Corporate Debt Security)	Women’s health		(1), (2), (3)		3,000		285		11.5	%		—
Tissue Regeneration Therapeutics, Inc.	Umbilical cord banking		(2)		3,250		3,491		N/A			—

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Term Loans	Type	Footnote		Maturity Date	Principal		GAAP Balance		Rate			Revenue Recognized
4Web, Inc.	First Lien		(4)	06/03/23	$	20,000	$	20,189		12.8	%	$	737
Acerus Pharmaceuticals, Inc.	First Lien			10/11/23		8,750		8,188		12.0	%		368
Aimmune Therapeutics, Inc.	First Lien		(5)	12/31/24		3,686		3,851		8.50	%		55
B&D Dental Corporation	First Lien		(2), (6)	12/10/18		8,368		8,337		14.0	%		—
B&D Dental Corporation	First Lien Equipment Loan		(7)	03/31/20		3		3		16.3	%		—
BIOLASE, Inc.	First Lien			11/09/23		15,000		14,604		12.3	%		574
CeloNova BioSciences, Inc.	First Lien			07/31/21		3,500		3,893		12.5	%		131
DxTerity Diagnostics, Inc.	First Lien		(8)	12/31/21		10,697		11,015		13.3	%		431
Epica International, Inc.	First Lien			07/23/23		12,200		12,325		13.5	%		458
eTon Pharmaceuticals, Inc.	First Lien			11/13/24		5,000		4,784		12.0	%		179
Harrow Health, Inc.	First Lien		(9)	07/19/23		9,264		8,984		9.0% - 12.0	%		276
Keystone Dental, Inc.	First Lien		(10)	11/14/22		15,000		15,316		11.5	%		489
Misonix, Inc.	First Lien			06/30/23		30,096		30,075		10.0% - 12.3	%		784
Tenex Health, Inc.	First Lien			06/30/21		6,366		6,572		13.0	%		249
Thermedx, LLC	Sub Note			05/20/29		353		390		11.8	%		11
Veru, Inc.	Synthetic Royalty			03/05/25		10,000		8,066		N/A			699

Common Stock	Footnote	No of Shares		GAAP Balance		Change in Fair Value
Misonix, Inc.			96,810	$	912	$	(890	)

Warrants to Purchase Stock	Footnote		Number of Shares		Exercise Price per Share		GAAP Balance		Change in Fair Value
4Web, Inc.				TBD		TBD	$	—	$	—
Acerus Pharmaceuticals, Inc.				6,693,107		0.11 CAD		206		(109	)
B&D Dental Corporation		(2), (6)		225		0.01		—		—
BIOLASE, Inc.				372,023		1.00		114		(38	)
BIOLASE, Inc.				115,175		1.00		36		(12	)
CeloNova BioSciences, Inc.				TBD		0.01		—		—
DxTerity Diagnostics, Inc.				1,201,923		2.08		—		—
Epica International, Inc.				TBD		TBD		—		—
eTon Pharmaceuticals, Inc.				51,238		5.86		120		(92	)
EyePoint Pharmaceuticals, Inc.				409,091		1.10		249		(179	)
EyePoint Pharmaceuticals, Inc.				77,721		1.93		39		(30	)
Harrow Health, Inc.				373,847		2.08		984		(1,347	)
Tenex Health, Inc.				2,693,878		0.37		—		—

	Assets		Revenue Recognized
Total Finance Receivables	$	177,981	$	7,136
Total Marketable Investments		1,197		—
Fair Value of Warrant Assets		1,748		—
Total Assets/Revenues	$	180,926	$	7,136

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(1)	Investment considered impaired.
(2)	Investment on nonaccrual.
(3)	Security impairment expense of $163 was recognized during the three months ended March 31, 2020.
(4)	In accordance with credit agreement, $3,000 was funded on January 16, 2020.
(5)	In accordance with credit agreement, $2,500 was funded on February 19, 2020.
(6)	B&D is evaluating strategic alternatives for the business. The loan is currently in default.
(7)	B&D retired the facility in April 2020 with its final scheduled payment.
(8)	Amended facility to allow DxTerity to pay in kind the interest payments due in January 2019 and April 2019 subject to DxTerity raising additional subordinated capital, which it accomplished. Amendment also allowed DxTerity to pay in-kind the interest payments due in October 2019, January 2020 and April 2020, subject to DxTerity raising additional subordinated capital.
(9)	In accordance with credit agreement, $608 was funded on April 1, 2020.
(10)	Executed amendment on March 27, 2020, which extended the maturity date to November 2022.

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.

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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, 2019, filed with the SEC on March 30, 2020. 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, 2020, compared to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.

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, 2020 and 2019 (in millions)

	Three Months Ended March 31,
	2020			2019		Change
Revenues	$	7.3		$	9.4	$	(2.1	)
Provision for credit losses and impairment expenses		0.2			0.6		(0.4	)
Interest expense		0.1			0.1		—
Pharmaceutical manufacturing, research and development expense		1.2			—		1.2
Depreciation and amortization expense		3.5			—		3.5
General and administrative expense		3.0			1.3		1.7
Other (expense) income, net		(2.8	)		0.3		(3.1	)
Provision for income taxes		1.3			1.1		0.2
Consolidated net (loss) income		(4.7	)		6.6		(11.3	)

Revenues

We generated revenues of $7.3 million and $9.4 million for the three months ended March 31, 2020 and 2019, respectively, which consisted primarily of interest and fees earned on our finance receivables. The decrease in revenue was primarily due to a $3.5 million decrease in interest and fees earned on a finance receivable that was paid off during the first quarter of 2019 partially offset by approximately $1.2 million increase in interest and fees earned on new investments or increased funding.

Provision for Credit Losses and Impairment Expense

We recognized impairment expense of $0.2 million on our debt security during the three months ended March 31, 2020.

During the three months ended March 31, 2019, we recognized credit loss provision expense of $0.6 million related to the Besivance® royalty, which was due to increases in sales chargebacks and various rebates (gross sales to net sales deductions) and lower sales volumes.

Interest Expense

Interest expense consists of unused line of credit and maintenance fees, as well as amortization of debt issuance costs on our revolving line of credit. Interest expense for both the three months ended March 31, 2020 and 2019 was $0.1 million.

Pharmaceutical Manufacturing, Research and Development Expense

Pharmaceutical manufacturing, research and development expense totaling $1.2 million was incurred by our Pharmaceutical Development segment which was acquired in the third quarter of 2019.

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Depreciation and Amortization

Depreciation and amortization increased by $3.5 million due to the increase in fixed and intangible assets that were obtained in the acquisition of Enteris, which was acquired in the third quarter of 2019.

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 $3.0 million for the three months ended March 31, 2020 from $1.3 million for the three months ended March 31, 2019, which was due to a $0.6 million increase in consulting and advisory and legal fees, a $0.4 million increase in office and rent expenses and a $0.6 million increase in salaries and benefits expense due to the addition of Enteris, which was acquired in the third quarter of 2019.

Other Income (Expense), Net

Other income (expense), net for the three months ended March 31, 2020 reflected a net fair market value loss of $1.9 million on our warrant derivatives and a net fair market value loss of $0.9 million on our Misonix common stock. We believe that the net fair market value losses in our warrant derivative and common stock holdings is primarily attributable to the impact the COVID-19 pandemic has had on global markets.

Other income for the three months ended March 31, 2019 reflected a net fair market value gain of $0.3 million on our warrant derivatives.

Income Tax Expense

During the three months ended March 31, 2020 and 2019, we recognized income tax expense of $1.3 million and $1.1 million, respectively, which represented effective tax rates of negative 37.0 percent and 14.2 percent, respectively. The provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income or loss for the interim reporting period. The annual effective tax rate is adjusted for nondeductible expenses and other permanent differences, including changes in fair value on our warrant derivatives and equity securities, which resulted in a $0.2 million increase in income tax expense during the three months ended March 31, 2020 when compared to the same period of the prior year.

On March 27, 2020, The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. There were no significant tax implications as a result of the CARES Act during the three months ended March 31, 2020.

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Liquidity and Capital Resources

As of March 31, 2020, we had $24.3 million in cash and cash equivalents, compared to $11.2 million in cash and cash equivalents as of December 31, 2019. The primary driver of the increase in our cash balance was a result of a $15.0 million draw on the credit facility and receipt of $7.1 million of interest, principal, and royalty payments during the quarter. The increase was offset by $5.0 million of investment funding, $0.8 million of interest and loan repayments and $0.1 million to repurchase shares of the Company’s common stock on the open market.

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

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;

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

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

As of March 31, 2020, our finance receivables portfolio contains $178.0 million of finance receivables and $1.2 million of marketable investments. We expect these assets to generate positive cash flows in 2020. However, the COVID-19 pandemic has created substantial uncertainty in the global markets and economy; therefore, we will continue to monitor the short and long-term impact this may have on our finance receivables portfolio. 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, our finance receivables segment may not be able to generate positive cash flow above what our existing assets will produce in 2020.

As of March 31, 2020, our Pharmaceutical Development segment did not have a material impact on our cash flow. We expect the Pharmaceutical Development segment to generate positive cash flow above its expenses from proceeds received under its license agreements and customer relationships; however, the timing of the receipt of payments under the license agreements is uncertain and dependent upon the success of our technology licensees’ pharmaceutical development candidates. Also, the COVID-19 pandemic has resulted in disruption and delays to pharmaceutical clinical trials in general and may impact the expected timing of our technology licensees' ability to achieve milestones upon which we receive income pursuant to our license agreements.

We expect in the aggregate that the Company will generate positive cash flow in excess of our expenses.

We entered into a $20 million revolving credit facility in June 2018. On March 17, 2020, the Company drew $15.0 million on its revolving credit facility in order to support existing business partners and to finance future investment opportunities. As of March 31, 2020, $14.3 million was outstanding under the revolving credit facility and $5.7 million was available for borrowing.

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. Please refer to Item 1. Financial Statements, Note 8 of the notes to the unaudited condensed consolidated financial statements.

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ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 

During the three months ended March 31, 2020, 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, 2020 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.

During 2018, we entered into a revolving credit facility. As 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 are 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.

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 

Other than accounting integration of the Enteris acquisition, there have been no changes during the three months ended March 31, 2020 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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, 2019, filed with the SEC on March 30, 2020. Below are material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The COVID-19 pandemic is highly dynamic in the United States and throughout the world and may adversely affect our operations and financial condition.

We are subject to risks related to the public health crises such as the global pandemic associated with COVID-19. Economic and health conditions in the United States and across most of the globe continue to change rapidly. In the last two weeks in March and through the date of this filing, our Pharmaceutical Development segment has seen a reduction in its productivity as well as delays in receiving some of its needed supplies as a direct result of the pandemic and the impact on key vendors. This slow-down is likely to continue in the near term until such time as certain restrictions that have been imposed on us and our suppliers are lifted. Such events may result in business disruption and reduced revenues, any of which could materially affect our business, financial condition and results of operations.

Numerous state and local jurisdictions have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. Starting in late-March 2020, the governor of New Jersey, where the manufacturing facility of our Pharmaceutical Development segment is located, issued “shelter-in-place” or “stay at home” orders restricting non-essential activities, travel and business operations for an indefinite period of time, subject to certain exceptions for necessary activities. Such orders or restrictions have resulted in our Pharmaceutical Development segment significantly reducing activities at its manufacturing facility, thereby negatively impacting our operations. Other disruptions or potential disruptions include restrictions on our personnel and personnel of our customers and suppliers to travel and access customers; delays in product development efforts; and additional government requirements or other incremental mitigation efforts that may further impact our business.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets and a recession or market correction that could materially affect our business and the value of our common stock. We are continuously monitoring our own operations and intend to take appropriate actions to mitigate the risks arising from the COVID-19 pandemic, but there can be no assurances that we will be successful in doing so. To the extent we are able to obtain information about and maintain communications with our customers, suppliers, vendors and other business partners, we will seek to minimize disruptions to our Pharmaceutical Development segment’s supply chain. The ultimate extent of the effects of the COVID-19 pandemic on us is highly uncertain and will depend on future developments which cannot be predicted.

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

On December 21, 2018, the Board authorized a share repurchase program under which the Company was authorized to repurchase up to $3.5 million of the Company’s outstanding shares of common stock, or approximately 312,497 common shares, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act. The December 21, 2018 share repurchase program expired on May 31, 2019 and was renewed on September 5, 2019 and March 26, 2020. Under the March 26, 2020 automatic share repurchase program, the Board authorized the repurchase of up to $2.0 million worth of common shares and will expire the earlier of September 30, 2020, the date on which a total of 157,318 common shares have been repurchased, or the date on which $2.0 million worth of common shares have been repurchased.

Since commencing the repurchase programs, the Company has repurchased an aggregate of 234,745 shares of its outstanding common stock, including three privately negotiated purchases outside of the share repurchase programs. As of March 31, 2020, an aggregate of 155,179 shares have been repurchased under the share repurchase programs at a total cost of $1.5 million, or $9.79 per share.

The table below summarizes information about our purchases of common stock during the three months ended March 31, 2020:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares That May Yet Be Purchased Under the Plan
Balance as of December 31, 2019		—	$	—		—		162,597
January 1, 2020 through January 31, 2020		4,379		11.99		4,379		158,218
February 1, 2020 through February 29, 2020		—		—		—		158,218
March 1, 2020 through March 31, 2020		900		11.04		900		157,318
		5,279	$	11.83		5,279

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.      MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5.      OTHER INFORMATION.

None.

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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, 2020. 

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, 2020	/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, 2020	/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, 2020 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, 2020	/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, 2020 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, 2020	/s/ Charles M. Jacobson
		Charles M. Jacobson
		Chief Financial Officer

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

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, 2020 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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	$	1,748	$	—	$	—	$	1,748
Marketable investments		1,197		912		—		285
Financial Liabilities:
Contingent consideration payable	$	14,500	$	—	$	—	$	14,500
Warrant liability		129		—		—		129

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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	$	3,555	$	—	$	—	$	3,555
Marketable investments		2,268		1,802		—		466
Financial Liabilities:
Contingent consideration payable	$	14,500	$	—	$	—	$	14,500
Warrant liability		76		—		—		76

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, 2020 were as follows (in thousands):

Fair value – December 31, 2019	$	3,555
Issued		—
Canceled		—
Change in fair value		(1,807	)
Fair value – March 31, 2020	$	1,748

Schedule of weighted average assumptions

The following ranges of assumptions were used in the models to determine fair value:

	March 31, 2020		December 31, 2019
Dividend rate range		—		—
Risk-free rate range		0.37% to 0.55%		1.7% to 1.8%
Expected life (years) range		4.3 to 7.1		4.6 to 7.4
Expected volatility range		70.0% to 141.1%		50.3% to 114.6%

Schedule of fair value assets and liabilities measured on nonrecurring basis

The following table presents these royalties measured at fair value on a nonrecurring basis as of March 31, 2020 and December 31, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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, 2020
Impaired royalties	$	9,547	$	—	$	—	$	9,547
December 31, 2019
Impaired royalties	$	10,004	$	—	$	—	$	10,004

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. 

As of March 31, 2020 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	24,318	$	24,318	$	24,318	$	—	$	—
Finance receivables		177,981		177,981		—		—		177,981
Marketable investments		1,197		1,197		912		—		285
Warrant assets		1,748		1,748		—		—		1,748
Financial Liabilities
Contingent consideration payable	$	14,500	$	14,500	$	—	$	—	$	14,500
Warrant liability		129		129		—		—		129

As of December 31, 2019 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	11,158	$	11,158	$	11,158	$	—	$	—
Finance receivables		172,825		172,825		—		—		172,825
Marketable investments		2,268		2,268		1,802		—		466
Warrant assets		3,555		3,555		—		—		3,555
Financial Liabilities
Contingent consideration payable	$	14,500	$	14,500	$	—	$	—	$	14,500
Warrant liability		76		76		—		—		76

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Finance Receivables (Tables)

3 Months Ended

Mar. 31, 2020

Receivables [Abstract]

Schedule of carrying value of finance receivables

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

Portfolio	March 31, 2020			December 31, 2019
Term loans	$	156,592		$	150,453
Royalty purchases		29,777			30,760
Total before allowance for credit losses		186,369			181,213
Allowance for credit losses		(8,388	)		(8,388	)
Total carrying value	$	177,981		$	172,825

Schedule of analysis of nonaccrual and performing loans by portfolio segment

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

	March 31, 2020						December 31, 2019
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,337	$	148,255	$	156,592	$	8,337	$	142,116	$	150,453
Royalty purchases, net of credit loss allowance		7,614		13,775		21,389		7,614		14,758		22,372
Total carrying value	$	15,951	$	162,030	$	177,981	$	15,951	$	156,874	$	172,825

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Consolidated net (loss) income	$ (4,660)	$ 6,559
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan credit losses		609
Security impairment expense	163
Amortization of debt issuance costs	47
Deferred income taxes	1,253	1,111
Change in fair value of warrants	1,860	(258)
Change in fair value of equity securities	890
Loan discount amortization and fee accretion	(536)	(600)
Interest paid-in-kind	(467)	(406)
Stock-based compensation	187	102
Interest income in excess of cash collected		(82)
Depreciation and amortization expense	3,505
Changes in operating assets and liabilities:
Interest and accounts receivable, net	543	265
Other assets	(462)	(9)
Accounts payable, accrued liabilities, and other liabilities	994	(291)
Net cash provided by operating activities	3,317	7,000
Cash flows from investing activities:
Investment in finance receivables	(5,500)	(11,186)
Repayment of finance receivables	1,348	23,866
Corporate debt security principal payment	18	21
Other	(249)
Net cash provided by (used in) investing activities	(4,383)	12,701
Cash flows from financing activities:
Net proceeds from credit facility	14,288
Repurchases of common stock, including fees and expenses	(62)	(745)
Net cash used in financing activities	14,226	(745)
Net decrease in cash and cash equivalents	13,160	18,956
Cash and cash equivalents at beginning of period	11,158	20,227
Cash and cash equivalents at end of period	$ 24,318	$ 39,183

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
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	12,918,006	12,917,348
Common stock, outstanding	12,918,006	12,917,348

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Commitments and Contingencies (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Aimmune Therapeutics, Inc. [Member]
Total unfunded commitments	$ 1,300
eTon Pharmaceuticals, Inc. [Member]
Total unfunded commitments	5,000
Unfunded Loan Commitment [Member]
Total unfunded commitments	$ 6,300

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Fair Value Measurements (Details 3)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Expected Dividend Rate [Member]
Dividend rate range
Risk Free Interest Rate [Member] | Minimum [Member]
Risk-free rate range	0.37%	1.70%
Risk Free Interest Rate [Member] | Maximum [Member]
Risk-free rate range	0.55%	1.80%
Expected Term [Member] | Minimum [Member]
Expected life (years) range	4 years 3 months 18 days	4 years 7 months 6 days
Expected Term [Member] | Maximum [Member]
Expected life (years) range	7 years 1 month 6 days	7 years 4 months 24 days
Price Volatility [Member] | Minimum [Member]
Expected volatility range	70.00%	50.30%
Price Volatility [Member] | Maximum [Member]
Expected volatility range	141.10%	114.60%

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Finance Receivables (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Portfolio
Total before allowance for credit losses	$ 186,369	$ 181,213
Allowance for credit losses	(8,388)	(8,388)
Total carrying value	177,981	172,825
Life Science Term Loans [Member]
Portfolio
Total before allowance for credit losses	156,592	150,453
Total carrying value	156,592	150,453
Life Science Royalty Purchases [Member]
Portfolio
Total before allowance for credit losses	29,777	30,760
Total carrying value	$ 21,389	$ 22,372

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Marketable Investments and Corporate Debt Securities (Details 2) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2019
Available for Sale Securities:
Gross Unrealized Gains
Gross Unrealized Loss
Equity investment losses reflected in the Consolidated Statements of Income	(890)
Corporate Debt Securities [Member]
Available for Sale Securities:
Amortized Cost	285			$ 466
Gross Unrealized Gains
Gross Unrealized Loss
Fair Value	$ 285			$ 466

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Related Party Transactions

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Note 7. 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 unaudited condensed consolidated balance sheets. The Company recorded a nominal loss for the three months ended March 31, 2020. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: 

	March 31, 2020			December 31, 2019
Dividend rate		—			—
Risk-free rate		0.15	%		1.6	%
Expected life (years)		0.4			0.7
Expected volatility		69.9	%		31.8	%

The changes on the value of the warrant liability during the three months ended March 31, 2020 were as follows (in thousands):

Fair value – December 31, 2019	$	76
Issuances		—
Changes in fair value		53
Fair value – March 31, 2020	$	129

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Business Combinations

3 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Business Combinations

Note 3. Business Combinations

On August 26, 2019, Enteris, a biotechnology company offering innovative formulation solutions utilizing its proprietary oral drug delivery technology, became a wholly-owned subsidiary of the Company. The total merger consideration was $34.6 million, which included contingent consideration of $14.5 million. The purchase price was subject to certain adjustments with respect to cash, debt, working capital, transaction expenses and the value of the contingent consideration agreement entered into, in connection with the transaction.

The acquisition was accounted for under the acquisition method of accounting. Accordingly, the merger consideration was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The excess of the merger consideration over the estimated fair value of the net assets of Enteris was recorded as goodwill, which consists largely of synergies and the acquisition of intangible assets. The resulting goodwill is not expected to be deductible for tax purpose.

The allocation of the merger consideration has been prepared on a preliminary basis and changes to the allocation to certain assets, liabilities, including tax estimates and potential indemnities, may be revised as additional information becomes available. The Company will finalize the acquisition accounting within the required measurement period of one year.

The following table summarizes the allocation of the merger consideration (at fair value) to the assets and liabilities of Enteris as of August 26, 2019 (the date of acquisition) (in thousands):

Cash	$	334
Accounts receivable		145
Inventory		274
Prepaid expenses and other current assets		121
Property and equipment		1,324
Patents and other intangible assets		29,850
Right of use operating lease asset		348
Other assets		110
Goodwill		8,404
Accounts payable		(255	)
Accrued expenses and other current liabilities		(1,365	)
Deferred revenue		(385	)
Lease liability		(348	)
Deferred tax liability		(3,988	)
Total purchase price	$	34,569

Unaudited Supplemental Pro Forma Information

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2019, the earliest period presented herein (in thousands):

	Three Months Ended March 31,
	2019
Revenues	$	10,871
Net income		2,812

The pro forma financial information includes adjustments that are directly attributable to the business combination and are factually supportable. The pro forma adjustments include incremental amortization and depreciation of intangible assets and property and equipment based on preliminary values of each asset and acquisition-related expenses. The pro forma financial information excludes non-recurring acquisition-related expenses. These pro forma results are illustrative only and not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.

Goodwill

There was no change in the carrying amount of goodwill from December 31, 2019 to March 31, 2020, and net book value remains at $8.4 million. The net book value of goodwill is solely related to the Enteris acquisition in 2019. As of March 31, 2020, the Company concluded that it is more likely than not that fair value of the reporting unit is greater than its carrying value, and goodwill is not considered to be impaired.

Intangible Assets

As of March 31, 2020, the gross book value and accumulated amortization of acquired intangible assets were as follows (in thousands, except estimated useful life data):

	As of March 31, 2020
	Gross Book Value		Accumulated Amortization		Net Book Value		Estimated Useful Life
Licensing agreement	$	29,400	$	8,174	$	21,226		10
Patents		146		28		118		1 - 20
Trade names and trademarks		210		13		197		10
Customer relationships		240		14		226		10
		29,996		8,229		21,767
Deferred patent costs		29		—		29		N/A
Total intangibles	$	30,025	$	8,229	$	21,796

Amortization expense from the acquisition of Enteris was $3.4 million for the period ended March 31, 2020 and was recorded in depreciation and amortization expense. Based on amounts recorded at March 31, 2020, the Company will recognize acquired intangible asset amortization as follows (in thousands):

2020 (remaining)	$	8,850
2021		3,019
2022		1,764
2023		1,764
2024		1,421
Thereafter		4,949
	$	21,767

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Segment Information

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Information

Note 11. Segment Information

Selected financial and descriptive information is required to be provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the Company’s internal organization, focusing on financial information that a Company’s chief operating decision-makers use to make decisions about the Company’s operating matters.

As described in Note 1, SWK Holdings Corporation and Summary of Significant Accounting Policies, the Company has determined it has two reportable segments: Finance Receivables and Pharmaceutical Development, and each are individually managed and provide separate services. Revenues by segment represent revenues earned on the services offered within each segment.

Segment performance is evaluated based on several factors, including income (loss) from continuing operations before income. Management uses this measure of profit (loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.

The following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):

Three Months Ended March 31, 2020	Finance Receivables			Pharmaceutical Development			Holdings Company and Other			Consolidated
Revenues	$	7,136		$	166		$	—		$	7,302
Provision for credit losses and impairment expense		163			—			—			163
Interest expense		101			—			—			101
Pharmaceutical manufacturing, research and development expense		—			1,150			—			1,150
Depreciation and amortization		—			3,502			3			3,505
General and administrative		512			1,047			1,481			3,040
Other expense, net		(2,697	)		—			(53	)		(2,750	)
Provision for income taxes		—			—			1,253			1,253
Net income (loss)		3,663			(5,533	)		(2,790	)		(4,660	)

Included in Holdings Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, including public company costs and non-Enteris corporate employees, which have been included for purposes of reconciling to the consolidated amounts.

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Business Combinations (Details 4) $ in Thousands	Mar. 31, 2020 USD ($)
Total	$ 21,796
Intangible Assets [Member]
2020 (remaining)	8,850
2021	3,019
2022	1,764
2023	1,764
2024	1,421
Thereafter	4,949
Total	$ 21,767

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Marketable Investments and Corporate Debt Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]
Corporate debt securities	$ 285	$ 466
Equity securities	912	1,802
Total	$ 1,197	$ 2,268

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

3 Months Ended

Mar. 31, 2020

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. In August 2019, the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property licensing business. The Company’s operations comprise two reportable segments: “Finance Receivables” and “Pharmaceutical Development.” The Company allocates capital to each segment in order to generate income through the sales of life science products by third parties. The Company is headquartered in Dallas, Texas, and as of March 31, 2020, the Company had 32 employees.

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, the Company does not anticipate that the Finance Receivables or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior to their respective expiration dates. As such, it is possible that the Company might pursue additional strategies that it believes might result in the ability to utilize more of the NOLs.

As of May 11, 2020, and since inception of the strategy, the Company and its partners have executed transactions with 36 different parties under its specialty finance strategy, funding an aggregate $540.1 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.

On August 26, 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). SWK Products Holdings LLC (“SWK Products”), a wholly-owned subsidiary of the Company, entered into a merger agreement pursuant to which Enteris became a wholly-owned subsidiary of SWK Products.

Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform. Since its founding in 2013, Enteris has advanced multiple internal and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation. Peptelligence® utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability. Peptelligence® is protected by an extensive patent estate that extends until 2036.

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, 2020. 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, 2019, filed with the SEC on March 30, 2020.

Reclassification

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation. The amounts for prior periods have been reclassified to be consistent with current year presentation and have no impact on previously reported total assets, total stockholders’ equity or net (loss) income.

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; valuation of accounts receivable; impairment of financing receivables; long-lived assets; property, plant and equipment; intangible assets; goodwill; valuation of warrants; contingent consideration; 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, health crises such as the COVID-19 global pandemic, volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates and assumptions. The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change. Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under the relevant accounting standard. It is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

Business Combination

Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative expenses. Refer to Note 3, Business Combinations, for further information regarding our acquisition of Enteris.

Segment Reporting

Segment Information

The Company earns revenues from its two U.S.-based business segments: its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies, and as of August 26, 2019, the Company’s business offering oral therapeutic formulation solutions built around Enteris’ pharmaceutical Peptelligence® platform, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in an enteric-coated tablet formulation.

The financial results of Enteris are included in the Pharmaceutical Development segment as of the acquisition date.

Revenue Recognition

Revenue Recognition

The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.

Deferred revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue. The Company classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet date. Deferred revenue was $0.7 million and $0.1 million as of March 31, 2020 and December 31, 2019, respectively, and is included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.

Research and Development

Research and Development

Research and development expenses include the costs associated with internal research and development and research and development conducted for the Company by third parties. These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants, and supplies. All research and development costs discussed above are expensed as incurred. Third-party expenses reimbursed under research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research and development expense in the unaudited condensed consolidated statements of (loss) income.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (Topic 848), which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity. ASU 2020-04 is effective from March 12, 2020 through December 31, 2022. An entity may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. An entity may elect to apply the amendments in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made at any time after March 12, 2020 but no later than December 31, 2022. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04; however, the Company is still evaluating the guidance, and therefore, the impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

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. On November 15, 2019, the FASB issued ASU 2019-10, “Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which finalized various effective dates delay for private companies, not-for-profit organizations, and certain smaller reporting companies. Under ASU 2019-10, the effective date for implementation of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after December 15, 2022. 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.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 8. Commitments and Contingencies

Unfunded Commitments

As of March 31, 2020, the Company’s unfunded commitments were as follows (in millions):

Aimmune Therapeutics, Inc.	$	1.3
eTon Pharmaceuticals, Inc.		5.0
Total unfunded commitments	$	6.3

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.

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Finance Receivables, Net

3 Months Ended

Mar. 31, 2020

Receivables [Abstract]

Finance Receivables, Net

Note 4. 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.

As of March 31, 2020, the Company had a credit loss allowance of $8.4 million. Of the total $8.4 million, $1.2 million and $0.6 million are associated with the Company’s Cambia® and Besivance® royalties, respectively. The remaining $6.6 million is related to the ABT Molecular Imaging, Inc. (“ABT”), now known as Best ABT, Inc. (“Best”), second lien term loan that was recognized in order to reflect the Best royalty at its estimated fair value of $4.1 million. The carrying values of finance receivables are as follows (in thousands):

Portfolio	March 31, 2020			December 31, 2019
Term loans	$	156,592		$	150,453
Royalty purchases		29,777			30,760
Total before allowance for credit losses		186,369			181,213
Allowance for credit losses		(8,388	)		(8,388	)
Total carrying value	$	177,981		$	172,825

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

	March 31, 2020						December 31, 2019
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,337	$	148,255	$	156,592	$	8,337	$	142,116	$	150,453
Royalty purchases, net of credit loss allowance		7,614		13,775		21,389		7,614		14,758		22,372
Total carrying value	$	15,951	$	162,030	$	177,981	$	15,951	$	156,874	$	172,825

As of March 31, 2020 and December 31, 2019, the Company had three finance receivables in nonaccrual status: (a) the term loan to B&D Dental Corporation (“B&D”), with a net carrying value of $8.3 million, (b) the Best royalty, with a net carrying value of $4.1 million, and (c) the Tissue Regeneration Therapeutics, Inc. (“TRT”) royalty, with a net carrying value of $3.5 million. Although in nonaccrual status, the B&D term loan and the TRT royalty were not considered impaired as of both March 31, 2020 and December 31, 2019. The Company did not collect any cash on its nonaccrual royalties during the three months ended March 31, 2020. (Please see B&D, Best, and TRT below for further details regarding nonaccrual and impaired finance receivables).

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. The loan was scheduled to mature on December 10, 2018. Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D. As of December 31, 2019, the total amount funded was $8.3 million. B&D is currently evaluating strategic options, including a potential sale of the business.

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 2016 and 2018, the Company executed three additional amendments to the loan to advance an additional $0.7 million in order to directly pay critical vendors and protect the value of the collateral. The Company obtained a third-party valuation of B&D as of December 31, 2019. As a result of the third-party valuation and facts and circumstances regarding B&D’s operations, 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, 2020.

Best

On October 31, 2018, ABT announced that it entered into an asset purchase agreement with Best, a wholly-owned subsidiary of Best Medical International, Inc. for aggregate consideration of (i) $500,000, paid over ten years in equal quarterly installments, plus (ii) a ten percent royalty on ABT’s net sales, including any commercialized improvements made to ABT’s technology, paid quarterly for the ten year period from closing pursuant to a royalty security agreement by and between Best and SWK Funding LLC, a wholly-owned subsidiary of the Company (“SWK Funding”). SWK Funding will receive 100 percent of the consideration. On November 8, 2018, the Bankruptcy Court approved the asset sale transaction, and the Company has no further funding liabilities.

During the year ended December 31, 2018, the Company re-evaluated its collateral position, considering the expected outcome of the Chapter 11 process, and as a result, the Company recognized an impairment expense of $5.3 million to write off the second lien term loan, as well as provision for credit losses of $5.0 million to reflect the Best royalty at its estimated fair value of $5.7 million.

During the year ended December 31, 2019, the Company re-evaluated the value of the Best royalty based on 2019 business trends, and as a result, the Company recognized a provision for credit losses of $1.6 million to reflect the Best royalty at its estimated fair value of $4.1 million.

TRT

On June 13, 2013, the Company purchased royalties from TRT related to its technology licenses in the family cord banking services sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon the achievement of royalty receipts-based milestones. During the quarter ended March 31, 2016, royalty payments from the primary U.S. licensee ended as a result of the licensee terminating a technology license. The Company and TRT continue to evaluate both options in regard to enforcing TRT’s intellectual property rights against this licensee, as well as seeking additional U.S. licensees. TRT’s Canadian licensee continues to pay royalties. The Company is in discussions with TRT to restructure the purchase agreement. Given uncertainties regarding the outcome of the negotiations and the ultimate timing of cash flows related to the U.S. intellectual property, the Company has placed the TRT royalty on non-accrual status, although does not consider it impaired as of March 31, 2020. The Company evaluated several factors in this determination, including input from intellectual property counsel regarding the strength of the related intellectual property, continued receipt of Canadian licensee royalty payments and anticipated terms of the restructured purchase agreement.

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Schedule of Reportable Segments

The following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):

Three Months Ended March 31, 2020	Finance Receivables			Pharmaceutical Development			Holdings Company and Other			Consolidated
Revenues	$	7,136		$	166		$	—		$	7,302
Provision for credit losses and impairment expense		163			—			—			163
Interest expense		101			—			—			101
Pharmaceutical manufacturing, research and development expense		—			1,150			—			1,150
Depreciation and amortization		—			3,502			3			3,505
General and administrative		512			1,047			1,481			3,040
Other expense, net		(2,697	)		—			(53	)		(2,750	)
Provision for income taxes		—			—			1,253			1,253
Net income (loss)		3,663			(5,533	)		(2,790	)		(4,660	)

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Marketable Investments and Corporate Debt Securities (Tables)

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Schedule of marketable investments

Investments in corporate debt securities and equity securities at March 31, 2020 and December 31, 2019 consist of the following (in thousands):

	March 31, 2020		December 31, 2019
Corporate debt securities	$	285	$	466
Equity securities		912		1,802
Total marketable investments	$	1,197	$	2,268

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, 2020 and December 31, 2019, are as follows (in thousands):

March 31, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	285	$	—	$	—	$	285
December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	466	$	—	$	—	$	466

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

The following table presents unrealized net losses on equity securities during the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020			2019
Unrealized net loss on equity securities reflected in the unaudited condensed consolidated statements of (loss) income	$	(890	)	$	—

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance at Dec. 31, 2018	$ 13	$ 4,432,499	$ (4,219,455)	$ 213,057
Beginning Balance, in Shares at Dec. 31, 2018	12,933,674
Stock-based compensation		102		102
Issuance of common stock
Issuance of common stock, in Shares	42,225
Repurchases of common stock in open market		(745)		(745)
Repurchases of common stock in open market (in shares)	(77,300)
Net income			6,559	6,559
Ending Balance at Mar. 31, 2019	$ 13	4,431,856	(4,212,896)	218,973
Ending Balance, in Shares at Mar. 31, 2019	12,898,599
Beginning Balance at Dec. 31, 2019	$ 13	4,432,146	(4,195,627)	236,532
Beginning Balance, in Shares at Dec. 31, 2019	12,917,348
Stock-based compensation		187		187
Issuance of common stock
Issuance of common stock, in Shares	5,937
Repurchases of common stock in open market		(62)		(62)
Repurchases of common stock in open market (in shares)	(5,279)
Net income			(4,660)	(4,660)
Ending Balance at Mar. 31, 2020	$ 13	$ 4,432,271	$ (4,200,287)	$ 231,997
Ending Balance, in Shares at Mar. 31, 2020	12,918,006

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 24,318	$ 11,158
Accounts receivable	2,011	2,554
Marketable investments	912	1,802
Other current assets	1,548	1,087
Total current assets	28,789	16,601
Finance receivables, net	177,981	172,825
Marketable investments	285	466
Deferred tax asset, net	24,527	25,780
Warrant assets	1,748	3,555
Intangible assets, net	21,796	25,113
Goodwill	8,404	8,404
Property, plant and equipment, net	1,299	1,292
Other assets	290	336
Total assets	265,119	254,372
Current Liabilities:
Accounts payable and accrued liabilities	4,068	3,061
Revolving credit facility	14,288
Total current liabilities	18,356	3,061
Contingent consideration payable	14,500	14,500
Warrant liability	129	76
Other non-current liabilities	137	203
Total liabilities	33,122	17,840
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,918,006 and 12,917,348 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	13	13
Additional paid-in capital	4,432,271	4,432,146
Accumulated deficit	(4,200,287)	(4,195,627)
Total stockholders' equity	231,997	236,532
Total liabilities and stockholders' equity	$ 265,119	$ 254,372

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Related Party Transactions (Details Narartive) - Delayed Draw [Member] - $ / shares	3 Months Ended
	Mar. 31, 2019	Sep. 06, 2013
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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Fair Value Measurements (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Fair Value Disclosures [Abstract]
Fair value - December 31, 2017	$ 3,555
Issuances
Canceled
Change in fair value	(1,807)
Fair value - June 30, 2018	$ 1,748

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Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 10. 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, 2020. 

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.

Marketable Investments

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.

Contingent Consideration

The Company recorded contingent consideration related to the August 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement. Please refer to Note 3, Business Combinations, for further details on the Company’s acquisition of Enteris and contingent consideration.

The fair value measurements of contingent consideration obligations and the related intangible assets arising from business combinations are classified as Level 3 estimates under the fair value hierarchy as these items have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

As of March 31, 2020 and December 31, 2019, the Company’s contingent consideration was recorded at its estimated fair value of $14.5 million.

Marketable Investments and Derivative Securities  

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, 2020 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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	$	1,748	$	—	$	—	$	1,748
Marketable investments		1,197		912		—		285
Financial Liabilities:
Contingent consideration payable	$	14,500	$	—	$	—	$	14,500
Warrant liability		129		—		—		129

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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	$	3,555	$	—	$	—	$	3,555
Marketable investments		2,268		1,802		—		466
Financial Liabilities:
Contingent consideration payable	$	14,500	$	—	$	—	$	14,500
Warrant liability		76		—		—		76

The changes on the value of the warrant assets during the three months ended March 31, 2020 were as follows (in thousands):

Fair value – December 31, 2019	$	3,555
Issued		—
Canceled		—
Change in fair value		(1,807	)
Fair value – March 31, 2020	$	1,748

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, 2020		December 31, 2019
Dividend rate range		—		—
Risk-free rate range		0.37% to 0.55%		1.7% to 1.8%
Expected life (years) range		4.3 to 7.1		4.6 to 7.4
Expected volatility range		70.0% to 141.1%		50.3% to 114.6%

As of March 31, 2020 and December 31, 2019, the Company had three royalties, Besivance®, Best, and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of March 31, 2020 and December 31, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheets		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, 2020
Impaired royalties	$	9,547	$	—	$	—	$	9,547
December 31, 2019
Impaired royalties	$	10,004	$	—	$	—	$	10,004

There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2020 and December 31, 2019.

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. 

As of March 31, 2020 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	24,318	$	24,318	$	24,318	$	—	$	—
Finance receivables		177,981		177,981		—		—		177,981
Marketable investments		1,197		1,197		912		—		285
Warrant assets		1,748		1,748		—		—		1,748
Financial Liabilities
Contingent consideration payable	$	14,500	$	14,500	$	—	$	—	$	14,500
Warrant liability		129		129		—		—		129

As of December 31, 2019 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	11,158	$	11,158	$	11,158	$	—	$	—
Finance receivables		172,825		172,825		—		—		172,825
Marketable investments		2,268		2,268		1,802		—		466
Warrant assets		3,555		3,555		—		—		3,555
Financial Liabilities
Contingent consideration payable	$	14,500	$	14,500	$	—	$	—	$	14,500
Warrant liability		76		76		—		—		76

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Revolving Credit Facility

3 Months Ended

Mar. 31, 2020

SWKHP Holdings LP [Member]

Revolving Credit Facility

Note 6. Revolving Credit Facility

On June 29, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with State Bank and Trust Company as a lender and the administrative agent (“State Bank”) pursuant to which State Bank will provide the Company with up to a $20 million revolving senior secured credit facility, which the Company can draw down and repay until maturity, subject to borrowing base eligibility. The Loan Agreement matures on June 29, 2021.

The Loan Agreement accrues interest at the Daily LIBOR Rate, with a floor of 1.00 percent, plus a 3.25 percent margin and principal is repayable in full at maturity. Interest is generally required to be paid monthly in arrears. The Loan Agreement requires the payment of an unused line fee of 0.50 percent, which will be recorded as interest expense. The Company paid $0.5 million in fees at closing, which have been capitalized as deferred financing costs and are being amortized on a straight-line basis over the term of the Loan Agreement.

The Loan Agreement has an advance rate against the Company’s finance receivables portfolio, including 85 percent against senior first lien loans, 70 percent against second lien loans and 50 percent against royalty receivables, subject to certain eligibility requirements as defined in the Loan Agreement. The Loan Agreement contains certain affirmative and negative covenants including minimum asset coverage and minimum interest coverage ratios.

During both the three months ended March 31, 2020 and 2019, the Company recognized $0.1 million of interest expense. On March 17, 2020, the Company drew $15.0 million on its revolving credit facility in order to support existing business partners and to finance future investment opportunities. As of March 31, 2020, $14.3 million was outstanding under the revolving credit facility, and $5.7 million was available for borrowing.

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Marketable Investments and Corporate Debt Securities (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	Nov. 15, 2013	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Jul. 09, 2013
Senior notes		$ 285		$ 466
Paid-in-kind interest		467	$ 406
Agreement To Purchase Senior Secured Notes [Member]
Senior notes					$ 3,000
Paid-in-kind interest	$ 100
Cash collected from debt		$ 17	$ 21
Tribute [Member] | Agreement To Purchase Senior Secured Notes [Member]
Senior notes					$ 100,000

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Business Combinations (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Disclosure Business Combinations Details 2Abstract
Revenues	$ 10,871
Net income	$ 2,812

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Finance Receivables (Details 2) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Nonaccrual	$ 15,951	$ 15,951
Performing	162,030	156,874
Total	177,981	172,825
Life Science Term Loans [Member]
Nonaccrual	8,337	8,337
Performing	148,255	142,116
Total	156,592	150,453
Life Science Royalty Purchases [Member]
Nonaccrual	7,614	7,614
Performing	13,775	14,758
Total	$ 21,389	$ 22,372

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Schedule of Unfunded Commitments

As of March 31, 2020, the Company’s unfunded commitments were as follows (in millions):

Aimmune Therapeutics, Inc.	$	1.3
eTon Pharmaceuticals, Inc.		5.0
Total unfunded commitments	$	6.3

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Business Combinations (Tables)

3 Months Ended

Mar. 31, 2020

ABT Molecular Imaging, Inc [Member]

Schedule of Business Combination

The following table summarizes the allocation of the merger consideration (at fair value) to the assets and liabilities of Enteris as of August 26, 2019 (the date of acquisition) (in thousands):

Cash	$	334
Accounts receivable		145
Inventory		274
Prepaid expenses and other current assets		121
Property and equipment		1,324
Patents and other intangible assets		29,850
Right of use operating lease asset		348
Other assets		110
Goodwill		8,404
Accounts payable		(255	)
Accrued expenses and other current liabilities		(1,365	)
Deferred revenue		(385	)
Lease liability		(348	)
Deferred tax liability		(3,988	)
Total purchase price	$	34,569

Schedule of Unaudited Supplemental Pro Forma Information

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2019, the earliest period presented herein (in thousands):

	Three Months Ended March 31,
	2019
Revenues	$	10,871
Net income		2,812

Schedule of Intangible Assets

As of March 31, 2020, the gross book value and accumulated amortization of acquired intangible assets were as follows (in thousands, except estimated useful life data):

	As of March 31, 2020
	Gross Book Value		Accumulated Amortization		Net Book Value		Estimated Useful Life
Licensing agreement	$	29,400	$	8,174	$	21,226		10
Patents		146		28		118		1 - 20
Trade names and trademarks		210		13		197		10
Customer relationships		240		14		226		10
		29,996		8,229		21,767
Deferred patent costs		29		—		29		N/A
Total intangibles	$	30,025	$	8,229	$	21,796

Schedule of Intangible Asset Amortization Expense

Amortization expense from the acquisition of Enteris was $3.4 million for the period ended March 31, 2020 and was recorded in depreciation and amortization expense. Based on amounts recorded at March 31, 2020, the Company will recognize acquired intangible asset amortization as follows (in thousands):

2020 (remaining)	$	8,850
2021		3,019
2022		1,764
2023		1,764
2024		1,421
Thereafter		4,949
	$	21,767

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Business Combinations (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Aug. 26, 2019
Patents and other intangible assets	$ 30,025
Goodwill	$ 8,404	$ 8,404
Enteris BioPharma Inc. [Member]
Cash			$ 334
Accounts receivable			145
Inventory			274
Prepaid expenses and other current assets			121
Property and equipment			1,324
Patents and other intangible assets			29,850
Right of use operating lease asset			348
Other assets			110
Goodwill			8,404
Accounts payable			(255)
Accrued expenses and other current liabilities			(1,365)
Deferred revenue			(385)
Lease liability			(348)
Deferred tax liability			(3,988)
Total purchase price			$ 34,569

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Fair Value Measurements (Details 4) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Financial Assets:
Impaired loans	$ 1,748	$ 3,555
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Impaired loans	1,748	3,555
Tribute Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Impaired loans	9,547	10,004
Marketable Securities [Member] | Tribute Warrant [Member]
Financial Assets:
Impaired loans	$ 9,547	$ 10,004

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Related Party Transactions (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Expected Dividend Rate [Member]
Dividend rate
Loan Credit Agreement [Member] | Expected Dividend Rate [Member]
Dividend rate
Loan Credit Agreement [Member] | Risk Free Interest Rate [Member]
Risk-free rate	0.15%	1.60%
Loan Credit Agreement [Member] | Expected Term [Member]
Expected life (years)	4 months 24 days	8 months 12 days
Loan Credit Agreement [Member] | Price Volatility [Member]
Expected volatility	69.90%	31.80%

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Stockholders' Equity (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stockholders' Equity Note [Abstract]
Compensation for non-employee directors (in shares)	5,937	4,758
Allocated share-based compensation	$ 100	$ 47
Value of compensation for non-employee directors	$ 200	$ 100

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenues
Finance receivable interest income, including fees	$ 7,136	$ 9,391
Pharmaceutical development	148
Other	18	1
Revenues	7,302	9,392
Costs and expenses:
Provision for loan credit losses		609
Impairment expense	163
Interest expense	101	102
Pharmaceutical manufacturing, research and development expense	1,150
Depreciation and amortization expense	3,505	5
General and administrative	3,040	1,264
Total costs and expenses	7,959	1,980
Other income (expense), net
Unrealized net (loss) gain on warrants	(1,860)	258
Unrealized net loss on equity securities	(890)
Income (loss) before provision (benifit) for income taxes	(3,407)	7,670
Provision (benefit) for income taxes	1,253	1,111
Consolidated net income	$ (4,660)	$ 6,559
Net income (loss) per share attributable to SWK Holdings Corporation Stockholders
Basic (in dollars per share)	$ (0.36)	$ 0.51
Diluted (in dollars per share)	$ (0.36)	$ 0.51
Weighted Average Shares
Basic (in shares)	12,913,000	12,906,000
Diluted (in shares)	12,913,000	12,909,000

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SWK Holdings Corporation and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

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. In August 2019, the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property licensing business. The Company’s operations comprise two reportable segments: “Finance Receivables” and “Pharmaceutical Development.” The Company allocates capital to each segment in order to generate income through the sales of life science products by third parties. The Company is headquartered in Dallas, Texas, and as of March 31, 2020, the Company had 32 employees.

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, the Company does not anticipate that the Finance Receivables or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior to their respective expiration dates. As such, it is possible that the Company might pursue additional strategies that it believes might result in the ability to utilize more of the NOLs.

As of May 11, 2020, and since inception of the strategy, the Company and its partners have executed transactions with 36 different parties under its specialty finance strategy, funding an aggregate $540.1 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.

On August 26, 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). SWK Products Holdings LLC (“SWK Products”), a wholly-owned subsidiary of the Company, entered into a merger agreement pursuant to which Enteris became a wholly-owned subsidiary of SWK Products.

Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform. Since its founding in 2013, Enteris has advanced multiple internal and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation. Peptelligence® utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability. Peptelligence® is protected by an extensive patent estate that extends until 2036.

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, 2020. 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, 2019, filed with the SEC on March 30, 2020.

Reclassification

Certain prior year amounts have been reclassified to conform to current year presentation. The amounts for prior periods have been reclassified to be consistent with current year presentation and have no impact on previously reported total assets, total stockholders’ equity or net (loss) income.

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; valuation of accounts receivable; impairment of financing receivables; long-lived assets; property, plant and equipment; intangible assets; goodwill; valuation of warrants; contingent consideration; 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, health crises such as the COVID-19 global pandemic, volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates and assumptions. The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change. Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under the relevant accounting standard. It is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. 

Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative expenses. Refer to Note 3, Business Combinations, for further information regarding our acquisition of Enteris.

Segment Information

The Company earns revenues from its two U.S.-based business segments: its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies, and as of August 26, 2019, the Company’s business offering oral therapeutic formulation solutions built around Enteris’ pharmaceutical Peptelligence® platform, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in an enteric-coated tablet formulation.

The financial results of Enteris are included in the Pharmaceutical Development segment as of the acquisition date.

Revenue Recognition

The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.

Deferred revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue. The Company classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet date. Deferred revenue was $0.7 million and $0.1 million as of March 31, 2020 and December 31, 2019, respectively, and is included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.

Research and Development

Research and development expenses include the costs associated with internal research and development and research and development conducted for the Company by third parties. These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants, and supplies. All research and development costs discussed above are expensed as incurred. Third-party expenses reimbursed under research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research and development expense in the unaudited condensed consolidated statements of (loss) income.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (Topic 848), which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity. ASU 2020-04 is effective from March 12, 2020 through December 31, 2022. An entity may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. An entity may elect to apply the amendments in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made at any time after March 12, 2020 but no later than December 31, 2022. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04; however, the Company is still evaluating the guidance, and therefore, the impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

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. On November 15, 2019, the FASB issued ASU 2019-10, “Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which finalized various effective dates delay for private companies, not-for-profit organizations, and certain smaller reporting companies. Under ASU 2019-10, the effective date for implementation of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after December 15, 2022. 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.

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Net (Loss) Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator:
Consolidated net income	$ (4,660)	$ 6,559
Denominator:
Weighted-average shares outstanding	12,913,000	12,906,000
Effect of dilutive securities		3,000
Weighted-average diluted shares	12,913,000	12,909,000
Basic net (loss) income per share	$ (0.36)	$ 0.51
Diluted net (loss) income per share	$ (0.36)	$ 0.51
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	460,000	400,000

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Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2020

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, 2020			December 31, 2019
Dividend rate		—			—
Risk-free rate		0.15	%		1.6	%
Expected life (years)		0.4			0.7
Expected volatility		69.9	%		31.8	%

Schedule of value of the warrant liability

The changes on the value of the warrant liability during the three months ended March 31, 2020 were as follows (in thousands):

Fair value – December 31, 2019	$	76
Issuances		—
Changes in fair value		53
Fair value – March 31, 2020	$	129

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Net (Loss) Income per Share (Tables)

3 Months Ended

Mar. 31, 2020

Disclosure Net Loss Income Per Share Tables Abstract

Schedule of earnings per share, basic and diluted

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

	Three Months Ended March 31,
	2020			2019
Numerator:
Net (loss) income	$	(4,660	)	$	6,559
Denominator:
Weighted-average shares outstanding		12,913			12,906
Effect of dilutive securities		—			3
Weighted-average diluted shares		12,913			12,909
Basic net (loss) income per share	$	(0.36	)	$	0.51
Diluted net (loss) income per share	$	(0.36	)	$	0.51

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Related Party Transactions (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Fair value at beginning	$ 76
Issuances
Changes in fair value	(1,807)
Fair value at ending	$ 129
Warrant Liability [Member]
Fair value at beginning		$ 76
Issuances
Changes in fair value		53
Fair value at ending		$ 129

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Financial Assets:
Warrant assets	$ 1,748	$ 3,555
Marketable investments	1,197	2,268
Financial Liabilities:
Contingent consideration payable	14,500	14,500
Warrant liability	129	76
Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Warrant assets
Marketable investments	912	1,802
Financial Liabilities:
Contingent consideration payable
Warrant liability
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Warrant assets
Marketable investments
Financial Liabilities:
Contingent consideration payable
Warrant liability
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Warrant assets	1,748	3,555
Marketable investments	285	466
Financial Liabilities:
Contingent consideration payable	14,500	14,500
Warrant liability	$ 129	$ 76

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Fair Value Measurements (Details 5) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Financial Assets
Cash and cash equivalents	$ 24,318	$ 11,158	$ 39,183	$ 20,227
Cash and cash equivalents at fair value	24,318	11,158
Finance receivables	177,981	172,825
Finance receivables at fair value	177,981	172,825
Marketable investments	1,197	2,268
Marketable investments at fair value	1,197	2,268
Warrant assets	1,748	3,555
Warrant assets at fair value	1,748	3,555
Financial Liabilities
Contingent consideration payable	14,500	14,500
Contingent consideration payable at fair value	14,500	14,500
Warrant liability	129	76
Gross liability at fair value	129	76
Fair Value, Inputs, Level 1 [Member]
Financial Assets
Cash and cash equivalents at fair value	24,318	11,158
Finance receivables at fair value
Marketable investments at fair value	912	1,802
Warrant assets at fair value
Financial Liabilities
Contingent consideration payable
Contingent consideration payable at fair value
Gross liability at fair value
Fair Value, Inputs, Level 3 [Member]
Financial Assets
Cash and cash equivalents at fair value
Finance receivables at fair value	177,981	172,825
Marketable investments at fair value	285	466
Warrant assets at fair value	1,748	3,555
Financial Liabilities
Contingent consideration payable	14,500	14,500
Contingent consideration payable at fair value	14,500	14,500
Gross liability at fair value	$ 129	$ 76

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Net (Loss) Income per Share

3 Months Ended

Mar. 31, 2020

Net Loss Income Per Share

Net (Loss) Income per Share

Note 2. Net (Loss) Income per Share

Basic net (loss) 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 net (loss) income per share for the following periods (in thousands, except per share amounts):

	Three Months Ended March 31,
	2020			2019
Numerator:
Net (loss) income	$	(4,660	)	$	6,559
Denominator:
Weighted-average shares outstanding		12,913			12,906
Effect of dilutive securities		—			3
Weighted-average diluted shares		12,913			12,909
Basic net (loss) income per share	$	(0.36	)	$	0.51
Diluted net (loss) income per share	$	(0.36	)	$	0.51

For the three months ended March 31, 2020 and 2019, outstanding stock options, restricted stock units and warrants to purchase shares of common stock in an aggregate of approximately 460,000 and 400,000, respectively, have been excluded from the calculation of diluted net (loss) income per share as all such securities were anti-dilutive.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Consolidated net income	$ (4,660)	$ 6,559
Other comprehensive income (loss), net of tax
Other comprehensive income, net of tax
Comprehensive income	$ (4,660)	$ 6,559

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 11, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Current Fiscal Year End Date	--12-31
Entity File Number	000-27163
Entity Registrant Name	SWK Holdings Corp
Entity Central Index Key	0001089907
Entity Tax Identification Number	77-0435679
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	14755 Preston Road
Entity Address, Address Line Two	Suite 105
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75254
City Area Code	972
Local Phone Number	687-7250
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		12,911,453
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

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Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenues	$ 7,302	$ 9,392
Provision for credit losses and impairment expense	163
Interest expense	101	102
Pharmaceutical manufacturing, research and development expense	1,150
Depreciation and amortization	3,505	5
General and administrative expense	3,040	1,264
Income (loss) from continuing operations before income tax benefit	(3,407)	7,670
Provision for income taxes	1,253	1,111
Consolidated net income	(4,660)	$ 6,559
Finance Receivables [Member]
Revenues	7,136
Provision for credit losses and impairment expense	163
Interest expense	101
Pharmaceutical manufacturing, research and development expense
Depreciation and amortization
General and administrative expense	512
Income (loss) from continuing operations before income tax benefit	(2,697)
Provision for income taxes
Consolidated net income	3,663
Pharmaceutical Development [Member]
Revenues	166
Provision for credit losses and impairment expense
Interest expense
Pharmaceutical manufacturing, research and development expense	1,150
Depreciation and amortization	3,502
General and administrative expense	1,047
Income (loss) from continuing operations before income tax benefit
Provision for income taxes
Consolidated net income	(5,533)
Holding Company and Other [Member]
Revenues
Provision for credit losses and impairment expense
Interest expense
Pharmaceutical manufacturing, research and development expense
Depreciation and amortization	3
General and administrative expense	1,481
Income (loss) from continuing operations before income tax benefit	(53)
Provision for income taxes	1,253
Consolidated net income	$ (2,790)

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Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Note 9. Stockholders’ Equity

Stock Compensation Plans 

During the three months ended March 31, 2020 and 2019, the Company’s Board of Directors (the “Board”) approved compensation for Board services by granting 5,937 and 4,725 shares, respectively, of common stock as compensation for the non-employee directors. During the three months ended March 31, 2020 and 2019, the Company recorded approximately $0.1 million and $47,000, respectively, in Board stock-based compensation expense. The aggregate stock-based compensation expense, including the quarterly Board grants, recognized by the Company for the three months ended March 31, 2020 and 2019 was $0.2 million and $0.1 million, respectively.

Share Repurchase Programs

On December 21, 2018, September 5, 2019 and March 26, 2020, the Board authorized share repurchase programs, which are more fully described in Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds. The March 26, 2020 share repurchase program will expire on September 30, 2020.

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Marketable Investments and Corporate Debt Securities

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Marketable Investments and Corporate Debt Securities

Note 5. Marketable Investments

Investments in corporate debt securities and equity securities at March 31, 2020 and December 31, 2019 consist of the following (in thousands):

	March 31, 2020		December 31, 2019
Corporate debt securities	$	285	$	466
Equity securities		912		1,802
Total marketable investments	$	1,197	$	2,268

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, 2020 and December 31, 2019, are as follows (in thousands):

March 31, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	285	$	—	$	—	$	285
December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	466	$	—	$	—	$	466

The following table presents unrealized net losses on equity securities during the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020			2019
Unrealized net loss on equity securities reflected in the unaudited condensed consolidated statements of (loss) income	$	(890	)	$	—

Equity Securities

As of March 31, 2020, the Company’s equity securities include 96,810 shares of Misonix, Inc. (“Misonix”) common stock received pursuant to Misonix’s purchase of Solsys Medical, Inc. (“Solsys”) on September 27, 2019. During the three months ended September 30, 2019 and prior to the acquisition, the Company exercised its Solsys warrants in a cashless transaction to purchase Solsys preferred stock and exercised its preemptive right to protect against dilution of its Solsys equity position. Of the total 109,472 shares of Misonix common stock received for its Solsys equity interests, 12,662 shares are held in escrow by Misonix, are subject to reduction based on terms of the acquisition agreement, and any shares remaining at the end of the escrow period will be released within 15 to 18 months post closing of the acquisition. The 96,810 shares are subject to a one year lock-up that expires on September 27, 2020. As of March 31, 2020, the 96,810 shares of Misonix common stock are reflected at their estimated fair value of $0.9 million.

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, 2020 and 2019 was $17,660 and $21,000, respectively, which was credited to the notes’ carrying value. During the three months ended March 31, 2020, impairment expense of $0.2 million was recognized in order to reflect the notes at their estimated fair value of $0.3 million. The notes are included in long-term marketable investments in the unaudited condensed consolidated balance sheets.

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Business Combinations (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2020
Gross Book Value		$ 30,025
Accumulated Amortization		8,229
Net Book Value		21,796
Minimum [Member]
Estimated Useful Life	1 year
Maximum [Member]
Estimated Useful Life	20 years
Cara Licensing Agreement [Member]
Gross Book Value		29,400
Accumulated Amortization		8,174
Net Book Value		21,226
Estimated Useful Life	10 years
Patent [Member]
Gross Book Value		146
Accumulated Amortization		28
Net Book Value		118
Trademarks and Trade Names [Member]
Gross Book Value		210
Accumulated Amortization		13
Net Book Value		197
Estimated Useful Life	10 years
Customer Relationships [Member]
Gross Book Value		240
Accumulated Amortization		14
Net Book Value		226
Estimated Useful Life	10 years
Intangible Assets [Member]
Gross Book Value		29,996
Accumulated Amortization		8,229
Net Book Value		21,767
Deferred Patent Costs [Member]
Gross Book Value		29
Accumulated Amortization
Net Book Value		$ 29

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Finance Receivables (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2019
Best ABT, Inc. [Member]
Face amount	$ 4,100			$ 4,100
Allowance for credit loss		$ 1,600
Fair Value of Allowance for Credit Losses		$ 4,100
Best ABT, Inc. [Member] | First Lien Loan [Member]
Allowance for credit loss			$ 5,000
Best ABT, Inc. [Member] | Second Lien Loan [Member]
Allowance for credit loss			$ 5,700
Cambia [Member]
Allowance for credit loss	1,200
Besivance [Member]
Allowance for credit loss	600
Tissue Regeneration Therapeutics, Inc. [Member]
Face amount	3,500			3,500
B&D Dental [Member]
Face amount	$ 8,300			$ 8,300

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Revolving Credit Facility (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disclosure Revolving Credit Facility Details Narrative Abstract
Maximum Revolving Credit Available	$ 5,700
Remaining Revolving Credit	14,300
Interest expense	$ 101	$ 102