Equibles

10-Q

SWK Holdings Corp (SWKHL)

10-Q 2022-11-09 For: 2022-09-30
View Original
Added on April 09, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September30, 2022

OR

o****TRANSITIONREPORT 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 itsCharter)

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, a 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 x 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 November 1, 2022, there were 12,820,349

shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

SWK Holdings Corporation

Form 10-Q

Quarter Ended September 30, 2022

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Unaudited Condensed Consolidated Balance Sheets—September 30, 2022 and December 31, 2021 1
Unaudited Condensed Consolidated Statements of Income—Three and Nine Months Ended September 30, 2022 and 2021 2
Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three and Nine Months Ended September 30, 2022 and 2021 3
Unaudited Condensed Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2022 and 2021 4
Notes to the Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4 Controls and Procedures 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Mine Safety Disclosures 26
Item 5. Other Information 26
Item 6. Exhibits 27
Signatures 28

FORWARD-LOOKING STATEMENTS

In addition to historicalinformation, 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-lookingstatements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by thePrivate Securities Litigation Reform Act of 1995. The forward-looking statements are not historical facts but rather are based on currentexpectations, estimates and projections about our business and industry, and our beliefs and assumptions, and include, but are not limitedto, 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 notguarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, aredifficult to predict and could cause actual results to differ materially (both favorably and unfavorably) from those expressed or forecastedin the forward-looking statements.

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

December 31,<br> 2021
ASSETS
Current assets:
Cash and cash equivalents 19,399 $ 42,863
Interest and accounts receivable, net 7,384 1,803
Marketable investments 500 1,034
Other current assets 1,189 1,727
Total current assets 28,472 47,427
Finance receivables, net 212,959 181,553
Marketable investments 88 119
Cost method investment 3,491 3,491
Deferred tax assets, net 17,350 20,539
Warrant assets 5,140 3,419
Intangible assets, net 8,615 9,964
Goodwill 8,404 8,404
Property and equipment, net 5,945 5,779
Other non-current assets 1,802 1,970
Total assets 292,266 $ 282,665
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities 4,746 $ 5,087
Revolving credit facility — 8
Total current liabilities 4,746 5,095
Contingent consideration payable 8,530 8,530
Other non-current liabilities 1,544 1,804
Total liabilities 14,820 15,429
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, 0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively — —
Common stock, 0.001 par value; 250,000,000 shares authorized; 12,835,304 and 12,836,133 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 13 13
Additional paid-in capital 4,431,270 4,431,719
Accumulated deficit (4,153,837 ) (4,164,496 )
Total stockholders’ equity 277,446 267,236
Total liabilities and stockholders’ equity 292,266 $ 282,665

All values are in US Dollars.

See accompanying notes to the unaudited condensed consolidated financial statements.

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SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF INCOME

(in thousands, except per share data)

Three Months Ended<br> <br>September 30, Nine Months Ended<br> <br>September 30,
2022 2021 2022 2021
Revenues:
Finance receivable interest income, including fees $ 8,502 $ 9,373 $ 25,745 $ 29,857
Pharmaceutical development 5,111 187 5,461 10,846
Other 1 — 481 496
Total revenues 13,614 9,560 31,687 41,199
Costs and expenses:
Interest expense 82 53 242 292
Pharmaceutical manufacturing, research and development expense 1,792 2,487 5,173 5,577
Change in fair value of acquisition-related contingent consideration — — — (147 )
Depreciation and amortization expense 634 812 1,964 3,305
General and administrative 4,349 3,580 10,527 9,825
Income from operations 6,757 2,628 13,781 22,347
Other income (expense), net
Unrealized net gain (loss) on derivatives 1,788 (214 ) 623 678
Unrealized net gain (loss) on equity securities 13 342 (534 ) 1,557
Income before income tax expense 8,558 2,756 13,870 24,582
Income tax expense 1,942 513 3,211 4,980
Net income $ 6,616 $ 2,243 $ 10,659 $ 19,602
Net income per share
Basic $ 0.52 $ 0.18 $ 0.83 $ 1.53
Diluted $ 0.51 $ 0.17 $ 0.83 $ 1.53
Weighted average shares outstanding
Basic 12,832 12,798 12,832 12,796
Diluted 12,851 12,859 12,871 12,834

See accompanying notes to the unaudited condensed consolidated financial statements.

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SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Nine Months Ended September 30, 2022
Common Stock Additional Paid-In Accumulated Total Stockholders’
Shares Amount Capital Deficit Equity
Balances at December 31, 2021 12,836,133 13 $ 4,431,719 $ (4,164,496 ) $ 267,236
Stock-based compensation — — 85 — 85
Issuance of common stock upon vesting of restricted stock 5,495 — — — —
Forfeiture of unvested restricted stock (6,815 ) — — — —
Net income — — — 3,478 3,478
Balances at March 31, 2022 12,834,813 13 4,431,804 (4,161,018 ) 270,799
Stock-based compensation — — 166 — 166
Issuance of common stock upon vesting of restricted stock 4,305 — — — —
Net income — — — 565 565
Balances at June 30, 2022 12,839,118 13 4,431,970 (4,160,453 ) 271,530
Stock-based compensation — — 59 — 59
Issuance of common stock upon vesting of restricted stock 7,575 — — — —
Net settlement for employee taxes on restricted stock and options — — (160 ) — (160 )
Stock options exercised, net 23,074 — — — —
Repurchases of common stock in open market (34,463 ) — (599 ) — (599 )
Net income — — — 6,616 6,616
Balances at September 30, 2022 12,835,304 $ 13 $ 4,431,270 $ (4,153,837 ) $ 277,446
Nine Months Ended September 30, 2021
--- --- --- --- --- --- --- --- --- --- --- ---
Common Stock Additional Paid-In Accumulated Total Stockholders’
Shares Amount Capital Deficit Equity
Balances at December 31, 2020 12,792,586 $ 13 $ 4,430,924 $ (4,190,425 ) $ 240,512
Stock-based compensation — — 177 — 177
Issuance of common stock upon vesting of restricted stock 3,021 — — — —
Net income — — — 3,389 3,389
Balances at March 31, 2021 12,795,607 13 4,431,101 (4,187,036 ) 244,078
Stock-based compensation — — 187 — 187
Issuance of common stock upon vesting of restricted stock 2,940 — — — —
Net income — — — 13,970 13,970
Balances at June 30, 2021 12,798,547 13 4,431,288 (4,173,066 ) 258,235
Stock-based compensation — — 192 — 192
Issuance of common stock upon vesting of restricted stock 2,766 — — — —
Net income — — — 2,243 2,243
Balances at September 30, 2021 12,801,313 $ 13 $ 4,431,480 $ (4,170,823 ) $ 260,670

See accompanying notes to the unaudited condensed consolidated financial statements.

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SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS

(in thousands)

Nine Months Ended<br> <br>September 30,
2022 2021
Cash flows from operating activities:
Net income $ 10,659 $ 19,602
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance costs 26 35
Deferred income taxes 3,189 4,842
Change in fair value of warrants (623 ) (678 )
Change in fair value of equity securities 534 (1,557 )
Change in fair value of acquisition-related contingent consideration — (147 )
Loan discount amortization and fee accretion (1,357 ) (2,016 )
Interest income paid-in-kind (3,335 ) (698 )
Stock-based compensation 310 556
Depreciation and amortization expense 1,964 3,305
Changes in operating assets and liabilities:
Interest and accounts receivable (5,581 ) (343 )
Other assets (76 ) (371 )
Accounts payable and other liabilities (603 ) 542
Net cash provided by operating activities 5,107 23,072
Cash flows from investing activities:
Investment in finance receivables (71,750 ) (20,100 )
Repayment of finance receivables 43,938 31,162
Corporate debt securities principal payments 31 43
Purchases of property and equipment (194 ) (877 )
Other 171 164
Net cash (used in) provided by investing activities (27,804 ) 10,392
Cash flows from financing activities:
Net settlement for employee taxes on restricted stock and options (160 ) —
Net payments on credit facility (8 ) (11,750 )
Payment of acquisition-related contingent consideration — (6,083 )
Repurchases of common stock, including fees and expenses (599 ) —
Net cash used in financing activities (767 ) (17,833 )
Net (decrease) increase in cash and cash equivalents (23,464 ) 15,631
Cash and cash equivalents at beginning of period 42,863 3,008
Cash and cash equivalents at end of period $ 19,399 $ 18,639

See accompanying notes to the unaudited condensed consolidated financial statements.

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SWK HOLDINGS CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

Note 1. SWK Holdings Corporation andSummary 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 September 30, 2022, the Company had 33 full-time 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 and/or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior to their respective expiration dates. As such, it is possible that the Company might pursue additional strategies that it believes might result in the ability to utilize more of the NOLs.

As of November 1, 2022, the Company and its partners have executed transactions with 48 different parties under its specialty finance strategy, funding an aggregate of $691.0 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.

During 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform.

Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. The Company consolidates a variable interest entity (“VIE”) when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts and transactions.

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.

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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, 2022. 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, 2021, filed with the SEC on March 25, 2022.

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 finance receivables; long-lived assets; property and equipment; intangible assets; goodwill; valuation of warrants and other investments; 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.

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 its business offering oral therapeutic formulation solutions built around Enteris’ pharmaceutical Peptelligence® platform, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in an enteric-coated tablet formulation.

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

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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 consolidated statements of income.

Recent Accounting Pronouncements

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which updates the requirements for accounting for credit losses under Accounting Standards Codification 326, eliminates the accounting guidance on troubled debt restructurings for creditors, and enhances creditors’ disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial difficulty. The ASU also amends the guidance on vintage disclosures to require disclosure of gross write-offs by year of origination. The amendments are effective in periods beginning after December 15, 2022 using either a prospective or modified retrospective transition. Early adoption of certain or all of the amendments is permitted. The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under this guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of losses. This ASU describes the impairment allowance as a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses relating to available-for-sale debt securities should be measured in a manner similar to current GAAP; however, the amendments in this update require that credit losses be presented as an allowance rather than as a write-down, which will allow an entity the ability to record reversals of credit losses in current period net income. On November 15, 2019, the FASB issued ASU 2019-10, “Financial Instruments

  • Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies. Under ASU 2019-10, the effective date for implementation of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity. ASU 2020-04 was effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024. The Company has identified existing loans that reference LIBOR and is in the process of evaluating alternatives in each situation. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04 and does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial statements.

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Note 2. Net Income per Share

Basic net income per share is computed using the weighted-average number of outstanding shares of common stock. Diluted net income per share is computed using the weighted-average number of outstanding shares of common stock, and when dilutive, shares of common stock issuable upon exercise of options and warrants deemed outstanding using the treasury stock method.

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

Schedule of Basic and Diluted Earning per Share

Three Months Ended<br> <br>September 30, Nine Months Ended<br> <br>September 30,
2022 2021 2022 2021
Numerator:
Net income $ 6,616 $ 2,243 $ 10,659 $ 19,602
Denominator:
Weighted-average shares outstanding 12,832 12,798 12,832 12,796
Effect of dilutive securities 19 61 39 38
Weighted-average diluted shares 12,851 12,859 12,871 12,834
Basic net income per share $ 0.52 $ 0.18 $ 0.83 $ 1.53
Diluted net income per share $ 0.51 $ 0.17 $ 0.83 $ 1.53

For the three months ended

September 30, 2022 and 2021, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 186,000 and 367,000, respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive. For the nine months ended September 30, 2022 and 2021, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 268,000 and 390,000, respectively, have been excluded from the calculation of diluted net income per share, as all such securities were anti-dilutive.

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Note 3. Finance Receivables, Net

Finance receivables are reported at their determined principal balances net of any unearned income, cumulative charge-offs and unamortized deferred fees and costs. Unearned income and deferred fees and costs are amortized to interest income based on all cash flows expected using the effective interest method.

As of September 30, 2022 and December 31, 2021, 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., 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. Approximately $21,000 of cash receipts received from the Company’s Besivance® royalty during the nine months ended September 30, 2022 were applied toward the allowance for credit losses.

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

Schedule of carrying value of finance receivables

September 30, 2022 December 31, 2021
Term loans $ 180,537 $ 136,312
Royalty purchases 40,779 53,629
Total before allowance for credit losses 221,316 189,941
Allowance for credit losses (8,357 ) (8,388 )
Total carrying value $ 212,959 $ 181,553

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

Schedule of analysis of nonaccrual and performing loans by portfolio segment

September 30, 2022 December 31, 2021
Nonaccrual Performing Total Nonaccrual Performing Total
Term loans $ 9,789 $ 170,748 $ 180,537 $ 18,288 $ 118,024 $ 136,312
Royalty purchases, net of credit loss allowance 3,037 29,385 32,422 3,362 41,879 45,241
Total carrying value $ 12,826 $ 200,133 $ 212,959 $ 21,650 $ 159,903 $ 181,553

As of September 30, 2022, the Company had two finance receivables in nonaccrual status: (1) the term loan to Flowonix Medical, Inc. (“Flowonix”), with a net carrying value of $9.8 million and (2) the Best royalty, with a net carrying value of $3.0 million. As of December 31, 2021, the Company had three finance receivables in nonaccrual status: (1) the term loan to Flowonix, with a net carrying value of $10.0 million, (2) the term loan with B&D Dental Corporation (“B&D”), with a carrying amount of $8.3 million, and (3) the Best royalty, with a carrying amount of $3.4 million. Although in nonaccrual status, the Flowonix and B&D term loans were not considered impaired as of September 30, 2022 and December 31, 2021. The Company collected $11.4 million on its nonaccrual finance receivables during the nine months ended September 30, 2022, which includes $10.7 million to settle the term loan with B&D.

Note 4. Marketable Investments

Investments in available-for-sale corporate debt securities and equity securities as of September 30, 2022 and December 31, 2021 consist of the following (in thousands):

Schedule of marketable investments

September 30, 2022 December 31, 2021
Corporate debt securities $ 88 $ 119
Equity securities 500 1,034
Total marketable investments $ 588 $ 1,153

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale corporate debt securities as of September 30, 2022 and December 31, 2021, are as follows (in thousands):

Schedule of marketable investments

Amortized<br> <br>Cost Gross<br> <br>Unrealized<br> <br>Gains Gross<br> <br>Unrealized<br> <br>Loss Fair Value
September 30, 2022 $ 88 $ — $ — $ 88
December 31, 2021 $ 119 $ — $ — $ 119 
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The following table presents unrealized net gain (loss) on equity securities during the three and nine months ended September 30, 2022 and 2021 (in thousands):

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

Three Months Ended<br> <br>September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Unrealized net gain (loss) on equity securities reflected in the unaudited condensed consolidated statements of income $ 13 $ 342 $ (534 ) $ 1,557

Note 5. Intangible Assets

The following table summarizes the gross book value, accumulated amortization and net book value balances of intangible assets as of September 30, 2022 and December 31, 2021 (in thousands):

Schedule of Intangible Assets

September 30, 2022 December 31, 2021
Gross Book Value Accumulated Amortization Net Book Value Gross Book Value Accumulated Amortization Net Book Value
Licensing Agreement^(1)^ $ 29,400 $ 21,096 $ 8,304 $ 29,400 $ 19,780 $ 9,620
Trade names and trademarks 210 65 145 210 50 160
Customer relationships 240 74 166 240 56 184
Total intangible assets $ 29,850 $ 21,235 $ 8,615 $ 29,850 $ 19,886 $ 9,964
(1) Prior to the acquisition, Enteris<br>entered into a non-exclusive commercial license agreement (the “License Agreement”) with Cara Therapeutics, Inc. (“Cara”),<br>for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize Oral KORSUVA^TM^ in<br>any indication worldwide, excluding South Korea and Japan. Cara is obligated to pay Enteris certain development, regulatory and tiered<br>commercial milestone payments, as well as low single-digit royalties based on net sales in the licensed territory.
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Amortization expense related to intangible assets was $0.4 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively. Amortization expense related to intangible assets was $1.3 million and $2.9 million for the nine months ended September 30, 2022 and 2021, respectively.

The estimated future amortization expense related to intangible assets as of September 30, 2022 is as follows (in thousands):

Schedule of Intangible Asset Amortization Expense

Fiscal Year Amount
Remainder of 2022 $ 426
2023 1,703
2024 1,546
2025 1,076
2026 1,076
Thereafter 2,788
Total $ 8,615 
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Note 6. Commitments and Contingencies

Contingent Consideration

The Company recorded contingent consideration related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement. Contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in the estimated fair value recognized in earnings. The estimated fair value of contingent consideration as of September 30, 2022 and December 31, 2021 was $8.5 million. The Company did not recognize a change in the estimated fair value of its contingent consideration during the nine months ended September 30, 2022. The Company recognized a $0.1 million gain on the change in fair value of its contingent consideration during the nine months ended September 30, 2021.

Unfunded Commitments

As of September 30, 2022, the Company’s unfunded commitments were as follows (in millions):

Schedule of Unfunded Commitments

Aziyo Biologics, Inc. $ 4.0
Exeevo, Inc. 2.5
MedMinder Systems, Inc. 5.0
Trio Healthcare Ltd. Loan 1.4
Total unfunded commitments $ 12.9

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

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Note 7. 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 nine months ended September 30, 2022.

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 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement.

The fair value measurements of contingent consideration obligations 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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Marketable Investments and DerivativeSecurities

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 September 30, 2022 (in thousands):

Schedule of fair value assets measured on recurring basis

Total<br> <br>Carrying<br> <br>Value in<br> <br>Consolidated<br> <br>Balance<br> <br>Sheets Quoted Prices<br> <br>in Active<br> <br>Markets for<br> <br>Identical<br> <br>Assets<br> <br>or Liabilities<br> <br>(Level 1) Significant<br> <br>Other<br> <br>Observable<br> <br>Inputs<br> <br>(Level 2) Significant<br> <br>Unobservable<br> <br>Inputs<br> <br>(Level 3)
Financial Assets
Warrant assets $ 5,140 $ — $ — $ 5,140
Marketable investments 588 500 — 88
Financial Liabilities
Contingent consideration payable $ 8,530 $ — $ — $ 8,530

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 (in thousands):

Total<br> <br>Carrying<br> <br>Value in<br> <br>Consolidated<br> <br>Balance<br> <br>Sheets Quoted Prices<br> <br>in Active<br> <br>Markets for<br> <br>Identical<br> <br>Assets<br> <br>or Liabilities<br> <br>(Level 1) Significant<br> <br>Other<br> <br>Observable<br> <br>Inputs<br> <br>(Level 2) Significant<br> <br>Unobservable<br> <br>Inputs<br> <br>(Level 3)
Financial Assets
Warrant assets $ 3,419 $ — $ — $ 3,419
Marketable investments 1,153 1,034 — 119
Financial Liabilities
Contingent consideration payable $ 8,530 $ — $ — $ 8,530 
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The changes in fair value of the warrant assets during the nine months ended September 30, 2022 and 2021 were as follows (in thousands):

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

September 30, 2022 September 30, 2021
Fair value - December 31, 2021 $ 3,419 Fair value - December 31, 2020 $ 2,972
Issued 1,098 Issued —
Canceled — Canceled —
Change in fair value 623 Change in fair value 678
Fair value - September 30, 2022 $ 5,140 Fair value - September 30, 2021 $ 3,650

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:

Schedule of weighted average assumptions

September 30, 2022 December 31, 2021
Dividend rate range — —
Risk-free rate range 4.0% to 4.3% 0.97% to 1.44%
Expected life (years) range 1.8 to 6.9 2.6 to 7.0
Expected volatility range 54.8% to 139.4% 60.2% to 142.0%

As of September 30, 2022 and December 31, 2021, the Company had two royalties, Best and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of September 30, 2022 and December 31, 2021 (in thousands):

Schedule of fair value assets and liabilities measured on nonrecurring basis

Total<br> <br>Carrying<br> <br>Value in<br> <br>Consolidated<br> <br>Balance<br> <br>Sheets Quoted Prices<br> <br>in Active<br> <br>Markets for<br> <br>Identical<br> <br>Assets<br> <br>or Liabilities<br> <br>(Level 1) Significant<br> <br>Other<br> <br>Observable<br> <br>Inputs<br> <br>(Level 2) Significant<br> <br>Unobservable<br> <br>Inputs<br> <br>(Level 3)
September 30, 2022 $ 4,071 $ — $ — $ 4,071
December 31, 2021 $ 5,612 $ — $ — $ 5,612

There were no liabilities measured at fair value on a nonrecurring basis as of September 30, 2022 and December 31, 2021.

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

Schedule of fair value by balance sheet grouping

As of September 30, 2022 (in thousands):

Carrying Value Fair Value Level 1 Level 2 Level 3
Financial Assets
Cash and cash equivalents $ 19,399 $ 19,399 $ 19,399 $ — $ —
Finance receivables 212,959 212,959 — — 212,959
Marketable investments 588 588 500 — 88
Warrant assets 5,140 5,140 — — 5,140
Financial Liabilities
Contingent consideration payable $ 8,530 $ 8,530 $ — $ — $ 8,530

As of December 31, 2021 (in thousands):

Carrying Value Fair Value Level 1 Level 2 Level 3
Financial Assets
Cash and cash equivalents $ 42,863 $ 42,863 $ 42,863 $ — $ —
Finance receivables 181,553 181,553 — — 181,553
Marketable investments 1,153 1,153 1,034 — 119
Warrant assets 3,419 3,419 — — 3,419
Financial Liabilities
Contingent consideration payable $ 8,530 $ 8,530 $ — $ — $ 8,530

Note 8. Revenue Recognition

The Company’s Pharmaceutical Development segment recognizes revenues received from contracts with its customers by revenue source, as the Company believes it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow. The Company’s Finance Receivables segment does not have any revenues received from contracts with customers.

The following table provides the contract revenue recognized by revenue source for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Schedule of Revenue Recognized by Revenue Source

Three Months Ended<br> <br>September 30, Nine Months Ended<br> <br>September 30,
2022 2021 2022 2021
Pharmaceutical Development Segment
License Agreement^(1)^ $ 5,103 $ 176 $ 5,235 $ 10,786
Pharmaceutical Development and other 8 11 706 556
Total contract revenue $ 5,111 $ 187 $ 5,941 $ 11,342
(1) $5.0 million of milestone revenue<br>related to Enteris’s License Agreement with Cara was received during the nine months ended September 30, 2022.
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The Company’s contract liabilities represent advance consideration received from customers and are recognized as revenue when the related performance obligation is satisfied.

The Company’s contract liabilities are presented as deferred revenues and are included in accounts payable and accrued liabilities in the consolidated balance sheets (in thousands):

Schedule of Company's Contract Liabilities

September 30,<br> 2022 December 31, 2021
Pharmaceutical Development Segment
Deferred revenue $ 8 $ 185
Total contract liabilities $ 8 $ 185

During the nine months ended September 30, 2022, the Company recognized $0.2 million of 2021 deferred revenue from satisfaction of performance obligations. The Company did not have any contract assets nor did it have any contract liabilities related to the License Agreement as of September 30, 2022 or December 31, 2021.

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Note 9. 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 the Company’s chief executive officer uses to make decisions about the Company’s operating matters.

As described in Note 1, the Company has determined it has two reportable segments: Finance Receivables and Pharmaceutical Development, and each are individually managed and provide separate services. Revenues by segment represent revenues earned on the services offered within each segment. The Company does not report assets by reportable segment, nor does the Company report results by geographic region, as these metrics are not used by the Company’s chief executive officer in assessing performance or allocating resources to the segments.

Segment performance is evaluated based on several factors, including income (loss) from continuing operations before income taxes. Management uses this measure of net income (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):

Schedule of Reportable Segments

Three Months Ended September 30, 2022
Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated
Revenue $ 8,502 $ 5,111 $ — $ 13,613
Other revenue — — 1 1
Interest expense 82 — — 82
Manufacturing, research and development — 1,792 — 1,792
Depreciation and amortization expense — 632 2 634
General and administrative 115 843 3,391 4,349
Other income, net 1,801 — — 1,801
Income tax expense — — 1,942 1,942
Net income (loss) 10,106 1,844 (5,334 ) 6,616
Three Months Ended September 30, 2021
--- --- --- --- --- --- --- --- --- --- ---
Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated
Revenue $ 9,373 $ 187 $ — $ 9,560
Interest expense 53 — — 53
Manufacturing, research and development — 2,487 — 2,487
Depreciation and amortization expense — 810 2 812
General and administrative 90 999 2,491 3,580
Other income, net 128 — — 128
Income tax expense — — 513 513
Net income (loss) 9,358 (4,109 ) (3,006 ) 2,243 
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| --- | | | Nine Months Ended September 30, 2022 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Finance Receivables | | Pharmaceutical Development and Other | | | Holding Company and Other | | | Consolidated | | | Revenue | $ | 25,745 | $ | 5,461 | | $ | — | | $ | 31,206 | | Other revenue | | — | | 480 | | | 1 | | | 481 | | Interest expense | | 242 | | — | | | — | | | 242 | | Manufacturing, research and development | | — | | 5,173 | | | — | | | 5,173 | | Depreciation and amortization expense | | — | | 1,961 | | | 3 | | | 1,964 | | General and administrative | | 219 | | 2,783 | | | 7,525 | | | 10,527 | | Other income, net | | 89 | | — | | | — | | | 89 | | Income tax expense | | — | | — | | | 3,211 | | | 3,211 | | Net income (loss) | | 25,373 | | (3,976 | ) | | (10,738 | ) | | 10,659 | | | Nine Months Ended September 30, 2021 | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Finance Receivables | | Pharmaceutical Development and Other | | | Holding Company and Other | | | Consolidated | | | | Revenue | $ | 29,857 | $ | 10,846 | | $ | — | | $ | 40,703 | | | Other revenue | | — | | 496 | | | — | | | 496 | | | Interest expense | | 292 | | — | | | — | | | 292 | | | Manufacturing, research and development | | — | | 5,577 | | | — | | | 5,577 | | | Depreciation and amortization expense | | — | | 3,300 | | | 5 | | | 3,305 | | | Change in fair value of acquisition-related contingent consideration | | — | | (147 | ) | | — | | | (147 | ) | | General and administrative | | 2,034 | | 3,088 | | | 4,703 | | | 9,825 | | | Other income, net | | 2,235 | | — | | | — | | | 2,235 | | | Income tax expense | | — | | — | | | 4,980 | | | 4,980 | | | Net income (loss) | | 29,766 | | (476 | ) | | (9,688 | ) | | 19,602 | |

Included in Holding 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’SDISCUSSION 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, 2021 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.

Environmental, Social and Governance

As overseers of risk and stewards of long-term enterprise value, our management and Board play a vital role in assessing, identifying and understanding the potential impact and related risks of environmental, social and governance (“ESG”) issues on the organization’s operating model. Our Board and management are committed to identifying those ESG issues most likely to impact business operations and growth by focusing our investment strategy around supporting innovative, growth-oriented companies in the life sciences industry that maximize both social and investment value.

Among the ESG issues we support within the Company, we are committed to recruiting, motivating and developing a diversity of talent. We promote and foster a company culture where every voice is welcome, heard and respected, regardless of age, gender, race, religion, sexual orientation, physical conditions, cultural background or country of origin. Our commitment to ESG initiatives is an endeavor both the Board and management undertake for the general betterment of those both inside and outside the Company.

The nature of our business supports environmental sustainability by being mindful of products we and our partners use in our businesses. We promote recycling to reduce landfill, and we offer our employees a hybrid work model, which allows employees the flexibility to work remotely, thereby reducing the carbon output from commuting in cars or buses.

Overview

We have organized our operations into two segments: Finance Receivables and Pharmaceutical Development. These segments reflect the way the Company evaluates its business performance and manages its operations. Please refer to Item 1. Financial Statements, Note 9 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment information.

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Finance Receivables Portfolio Overview

The table below provides an overview of our outstanding finance receivables transactions as of, and for the three and nine months ended September 30, 2022 (inthousands, except rate, share and per share data).

Revenue Recognized
Royalty Purchases Licensed Technology Footnote Funded Amount GAAP Balance Q3 YTD
Beleodaq® Oncology treatment (1) $ 7,600 $ — $ 27 $ 799
Besivance® Ophthalmic antibiotic (2) 6,000 — 8 21
Best ABT, Inc. Oncology diagnosis (3), (4) 5,784 3,037 — —
Coflex®/Kybella® Spinal stenosis/submental fullness 4,350 3,929 105 397
Cambia® NSAID migraine treatment (3) 8,500 1,034 (94 ) (153 )
Forfivo XL® Depressive disorder treatment 6,000 1,408 185 857
Ideal Implant, Inc. Aesthetics 3,000 3,289 134 402
Iluvien® Diabetic macular edema 16,501 15,729 570 1,691
Narcan® Opioid overdose treatment 17,500 487 248 1,908
Ostomy Products Royalty Ostomy products (1) 3,900 — 1,746 1,927
Veru, Inc. Women’s health 10,000 3,509 30 555
Revenue Recognized
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Term Loans Type Footnote Maturity Date Principal GAAP Balance Rate Q3 YTD
4Web, Inc. First lien 06/03/23 $ 28,808 $ 31,060 15.8 % $ 1,185 $ 3,329
AOTI, Inc. First lien 03/21/27 12,000 11,970 11.0 % 426 840
Acer Therapeutics, Inc. First lien 03/04/24 6,704 6,849 12.0 % 457 1,003
Acerus Pharmaceuticals Corporation First lien (5) 10/11/23 — — 12.0 % — 538
Aziyo Biologics, Inc. First lien 10/08/27 21,000 20,294 11.5 % 265 265
B&D Dental Corporation First lien (5) 12/10/18 — — 14.0 % — 2,401
BIOLASE, Inc. First lien 05/31/25 13,300 13,734 10.5 % 484 1,390
Biotricity, Inc. First lien 12/26/26 12,000 11,845 11.5 % 407 1,193
Epica International, Inc. First lien 07/23/24 12,000 12,374 9.5 % 385 1,097
eTon Pharmaceuticals, Inc. First lien 11/13/24 6,615 6,659 10.0 % 221 666
Exeevo, Inc. First lien 07/01/27 5,010 4,969 12.5 % 187 187
Flowonix Medical, Inc. First lien (4), (6) 12/23/25 10,428 9,789 14.0 % — —
Keystone Dental Group First lien (5) 08/01/23 — — 11.5 % — 888
MedMinder Systems, Inc. First lien 07/22/27 20,000 19,831 10.9 % 291 291
MolecuLight, Inc. First lien 12/29/26 10,000 10,007 12.5 % 413 1,036
Sincerus Pharmaceuticals, Inc. First lien 03/19/26 12,820 13,039 13.0 % 534 1,437
Trio Healthcare Ltd. First lien 07/01/26 8,150 8,117 12.5 % 288 780 
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| --- | | | | | | | | | | | | | Revenue Recognized | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Cost Method Investment | Licensed Technology | Footnote | | Maturity Date | Principal | | GAAP Balance | | Rate | | Q3 | | YTD | | | Tissue Regeneration Therapeutics, Inc. | Umbilical cord banking | | (4) | N/A | $ | 3,491 | $ | 3,491 | | N/A | $ | — | $ | — | | | | | | | | | | | Income (Loss) Recognized | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Marketable Investments | Number of Shares | | Footnote | | Funded Amount | | GAAP Balance | | Q3 | | YTD | | | | Secured Royalty Financing (Marketable Investment) | | N/A | | (4) | $ | 3,000 | $ | 88 | $ | — | $ | — | | | Bioventus, Inc. Common Stock | | 71,361 | | | | N/A | | 500 | | 13 | | (534 | ) | | Epica International, Inc. | | 25,000 | | | | N/A | | — | | — | | — | | | Sincerus Pharmaceuticals, Inc. | | 26,575 | | | | N/A | | — | | — | | — | | | | | | | | | | | Income (Loss) Recognized | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Warrants to Purchase Stock | Number of Shares | | Footnote | | Exercise Price per Share () | GAAP Balance | | Q3 | | | YTD | | | | 4Web, Inc. | | TBD | | | | $ | — | $ | — | | $ | — | | | AOTI, Inc. | | 92,490 | | | | | — | | — | | | — | | | Acer Therapeutics, Inc. | | 150,000 | | | | | 116 | | 17 | | | (110 | ) | | Acer Therapeutics, Inc. | | 100,000 | | | | | 90 | | (2 | ) | | (2 | ) | | Acerus Pharmaceuticals Corporation | | 7,764,004 | | | | | 20 | | (33 | ) | | (82 | ) | | Aziyo Biologics | | 157,895 | | | | | 895 | | 116 | | | 116 | | | BIOLASE, Inc. | | 22,039 | | | | | 26 | | (37 | ) | | (158 | ) | | Biotricity, Inc. | | 57,536 | | | | | 21 | | (39 | ) | | (155 | ) | | CeloNova BioSciences, Inc. | | TBD | | (7) | | | — | | — | | | — | | | DxTerity Diagnostics, Inc. | | 2,019,231 | | (7) | | | — | | — | | | — | | | Epica International, Inc. | | TBD | | | | | — | | — | | | — | | | eTon Pharmaceuticals, Inc. | | 51,238 | | | | | 21 | | (15 | ) | | (74 | ) | | eTon Pharmaceuticals, Inc. | | 18,141 | | | | | 8 | | (5 | ) | | (26 | ) | | Exeevo, Inc. | | 930 | | | | | — | | — | | | — | | | EyePoint Pharmaceuticals, Inc. | | 40,910 | | | | | 129 | | (4 | ) | | (147 | ) | | EyePoint Pharmaceuticals, Inc. | | 7,773 | | | | | 17 | | (1 | ) | | (24 | ) | | Flowonix Medical, Inc. | | 155,561 | | (4), (6) | | | — | | — | | | — | | | Harrow Health, Inc. | | 373,847 | | (7) | | | 3,797 | | 1,791 | | | 1,285 | |

All values are in US Dollars.

Total Revenue
Assets Q3 YTD
Total finance receivables $ 212,959 $ 8,502 $ 25,745
Total marketable investments 588 N/A N/A
Cost method investment 3,491 N/A N/A
Fair value of warrant assets 5,140 N/A N/A
Total assets/revenues $ 222,178 $ 8,502 $ 25,745
(1) Royalty was paid off during the third quarter of 2022.
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(2) US royalty was paid off during the year ended December 31, 2021. SWK<br> continues to receive insignificant royalties on international sales.
(3) Investment considered impaired.
(4) Investment on nonaccrual.
(5) Loan was paid off during the nine months ended September 30, 2022.
(6) Flowonix is evaluating strategic alternatives for the business.
(7) Loan was paid off during the year ended December 31, 2021.

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. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the nine months ended September 30, 2022, compared to those discussed in our Annual Report.

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 September30, 2022 and 2021(in millions)

Three Months Ended<br> <br>September 30,
2022 2021 Change
Revenues $ 13.6 $ 9.6 $ 4.0
Interest expense 0.1 0.1 —
Pharmaceutical manufacturing, research and development expense 1.8 2.5 (0.7 )
Depreciation and amortization expense 0.6 0.8 (0.2 )
General and administrative 4.3 3.6 0.7
Other income, net 1.8 0.1 1.7
Income tax expense 1.9 0.5 1.4
Net income 6.6 2.2 4.4

Revenues

Revenues increased to $13.6 million for the three months ended September 30, 2022 from $9.6 million for the three months ended September 30, 2021. The $4.0 million increase in revenue was due to $5.0 million of milestone revenue related to Enteris’ License Agreement with Cara received during the three months ended September 30, 2022, which did not occur during the three months ended September 30, 2021. The increase in revenue was partially offset by a $0.9 million net decrease in Finance Receivables segment revenues. The decrease in Finance Receivables segment revenue was due to a $1.3 million net decrease in royalty income primarily due to the achievement of return premiums that caused a step down in royalty rates, which was partially offset by a net increase of $0.4 million in interest and fees earned on finance receivables.

Interest Expense

Interest expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense for both the three months ended September 30, 2022 and 2021 was $0.1 million, respectively.

Pharmaceutical Manufacturing, Researchand Development Expense

Pharmaceutical manufacturing, research and development expense decreased from $2.5 million for the three months ended September 30, 2021 to $1.8 million for the three months ended September 30, 2022. The $0.7 million decrease was primarily due to a decrease in manufacturing materials for pipeline projects and clinical trials.

Depreciation and Amortization

The $0.2 million decrease in depreciation and amortization expense for the three months ended September 30, 2022 primarily consists of a decrease in amortization expense related to the intangible assets of Enteris. Amortization expense is aligned with the expected future cash flows of the intangible assets.

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General and Administrative

General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses increased to $4.3 million for the three months ended September 30, 2022 from $3.6 million for the three months ended September 30, 2021. The $0.7 million increase was primarily due to a $1.3 million increase in salaries and benefits expense, of which $1.1 million is related to the former CEO’s severance pay pursuant to the Separation and Release Agreement dated August 31, 2022, and a $0.2 million increase in salaries and benefits expense due to an increase in personnel and the performance-based bonus accrual. The increase in general and administrative expense also included a $0.7 million increase in audit and legal fees related to amending the Company’s Articles of Incorporation and Bylaws and other corporate governance, financing and strategic matters. The increase was partially offset by a $0.9 million decrease in corporate strategic planning and related special committee board fees, as well as a $0.1 million decrease in stock-based compensation expense related to the forfeiture of stock-options held by the former CEO upon his departure on September 30, 2022.

Other (Expense) Income, Net

Other expense, net for three months ended September 30, 2022 reflected a net aggregate fair market value gain of $1.8 million on our warrant derivatives and Bioventus common stock. Other income, net for three months ended September 30, 2021 reflected a net fair market value loss of $0.2 million on our warrant derivatives and a net fair market value gain of $0.3 million on our Misonix common stock, which was tendered in October 2021 in exchange for $1.9 million in cash and 71,361 shares of Bioventus common stock.

Income Tax Expense

During the three months ended September 30, 2022 and 2021, we recognized income tax expense of $1.9 million and $0.5 million, respectively. The $1.4 million increase in income tax expense is the result of an increase in taxable income for the three months ended September 30, 2022 when compared to the same period of the previous year.

Comparison of the Nine Months Ended September30, 2022 and 2021(in millions)

Nine Months Ended September 30,
2022 2021 Change
Revenues $ 31.7 $ 41.2 $ (9.5 )
Interest expense 0.2 0.3 (0.1 )
Pharmaceutical manufacturing, research and development expense 5.2 5.6 (0.4 )
Change in fair value of acquisition-related contingent consideration — (0.1 ) 0.1
Depreciation and amortization expense 2.0 3.3 (1.3 )
General and administrative 10.5 9.8 0.7
Other income, net 0.1 2.2 (2.1 )
Income tax expense 3.2 5.0 (1.8 )
Net income 10.7 19.6 (8.9 ) 
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Revenues

Revenues decreased to $31.7 million for the nine months ended September 30, 2022 from $41.2 million for the nine months ended September 30, 2021. The $9.5 million decrease in revenue consisted of a $5.4 million decrease in Pharmaceutical Development segment revenue and a $4.1 million decrease in Finance Receivables segment revenue. The decrease in Pharmaceutical Development segment revenue included $5.0 million of milestone revenue related to Enteris’ License Agreement with Cara received during the nine months ended September 30, 2022, compared to $10.0 million of milestone revenue for the same period of 2021. The decrease in Finance Receivables segment revenue was due to a $5.1 million net decrease in royalty income primarily due to the achievement of return premiums that caused a step down in royalty rates, which was partially offset by a net increase of $1.0 million in interest and fees earned on finance receivables.

Interest Expense

Interest expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense for the nine months ended September 30, 2022 and 2021 was $0.2 million and $0.3 million, respectively.

Pharmaceutical Manufacturing, Researchand Development Expense

Pharmaceutical manufacturing, research and development expense decreased from $5.6 million for the nine months ended September 30, 2021 to $5.2 million for the nine months ended September 30, 2022. The $0.4 million decrease was primarily due to a decrease in manufacturing materials for pipeline projects and clinical trials.

Depreciation and Amortization

The $1.3 million decrease in depreciation and amortization expense for the nine months ended September 30, 2022 primarily consists of a decrease in amortization expense related to the intangible assets of Enteris. Amortization expense is aligned with the expected future cash flows of the intangible assets.

General and Administrative

General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses increased to $10.5 million for the nine months ended September 30, 2022 from $9.8 million for the nine months ended September 30, 2021. The $0.7 million increase was primarily due to a $1.1 million increase in salaries and benefits expense related to the former CEO’s severance pay pursuant to the Separation and Release Agreement dated August 31, 2022. The increase in general and administrative expense also included a $0.9 million increase in audit and legal fees related to amending the Company’s Articles of Incorporation and Bylaws and other corporate governance, financing and strategic matters. The increase was partially offset by a $1.4 million decrease in corporate strategic planning and related special committee board fees, as well as a $0.1 million decrease in stock-based compensation expense related to the forfeiture of stock-options held by the former CEO upon his departure on September 30, 2022.

Other Income, Net

Other income, net for the nine months ended September 30, 2022 reflected a net aggregate fair market value gain of $0.1 million on our warrant derivatives and Bioventus common stock. Other income, net for the nine months ended September 30, 2021 reflected a net fair market value gain of $0.7 million on our warrant derivatives and a net fair market value gain of $1.6 million on our Misonix common stock, which was tendered in October 2021 in exchange for $1.9 million in cash and 71,361 shares of Bioventus common stock.

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Income Tax Expense

During the nine months ended September 30, 2022 and 2021, we recognized income tax expense of $3.2 million and $5.0 million, respectively. The $1.8 million decrease in income tax expense is the result of a decrease in taxable income for the nine months ended September 30, 2022 when compared to the same period of the previous year.

Liquidity and Capital Resources

As of September 30, 2022, we had $19.4 million in cash and cash equivalents, compared to $42.9 million in cash and cash equivalents as of December 31, 2021. The primary driver of the $23.5 million decrease in our cash balance was $71.2 million of investment funding, net of deferred fees and origination expenses; $8.2 million for payments of accounts payable, including $1.9 million for Enteris’s internal pipeline and business development projects; payroll and benefits expense of $8.3 million; $0.6 million to repurchase shares of the Company’s common stock on the open market; and $0.3 million of credit facility interest and other expenses. The decrease in cash and cash equivalents was partially offset by $64.4 million of interest, fees, principal and royalty payments received on our finance receivables and $0.7 million of customer payments generated by our Pharmaceutical Development segment.

Our ability to generate cash in the future depends primarily upon our success in implementing our Finance Receivables 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<br>property;
2. Receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector;
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3. Pharmaceutical development, manufacturing, and licensing activities utilizing the Peptelligence® platform; and
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4. To a lesser extent, realizing capital appreciation from equity-related investments in the life science sector.
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As of September 30, 2022, our finance receivables portfolio contains $213.0 million of finance receivables, $0.6 million of marketable investments, and $3.5 million related to our cost method investment. In the aggregate, we expect these assets to generate positive cash flows in 2022. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates with a reference rate-based interest rate floor. Changes in interest rates, including the underlying reference rates, may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future.

We entered into a $20.0 million revolving credit facility in June 2018. The credit facility was amended on September 26, 2022 to extend the termination date to November 29, 2022. We continue to work with our current lender to extend our credit facility. As of September 30, 2022, $22.0 million was available for borrowing under the credit facility.

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 6 of the notes to the unaudited condensed consolidated financial statements

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ITEM 3.      QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

During the nine months ended September 30, 2022, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at September 30, 2022 approximated its carrying value.

Investment and Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flow.

As we seek to provide capital to a broad range of life science companies, institutions and investors with the majority of our finance receivables portfolio paying interest based on floating interest rates with a reference rate floor, 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 are 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 do not currently engage in any interest rate hedging activities. We constantly monitor our portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any of our investments.

We have 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. We generally seek to mitigate this risk by pricing our debt investments with floating interest rates to maintain the spread of our portfolio over the cost of leverage. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations, which we have not done. 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. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our investment income, net of borrowing expenses.

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 overFinancial Reporting

There have been no changes during the nine months ended September 30, 2022 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, 2021, filed with the SEC on March 25, 2022. There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

On May 31, 2022, the Board authorized a share repurchase program under which the Company was authorized to repurchase up to $10.0 million of the Company’s outstanding shares of common stock, or approximately 714,286 common shares, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act. The purchase period is July 1, 2022 through May 15, 2023.

As of September 30, 2022, the Company has repurchased 34,463 shares under the share repurchase programs at a total cost of $0.6 million, or $17.49 per share. As of September 30, 2022, the maximum number of shares that may yet be purchased under the plan is 679,823 shares.

The table below summarizes information about our purchases of common stock during the three months ended September 30, 2022:

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
July 1, 2022 - July 31, 2022 10,361 $ 17.84 10,361 703,925
August 1, 2022 - August 31, 2022 7,524 18.12 7,524 696,401
September 1, 2022 - September 30, 2022 16,578 16.72 16,578 679,823
34,463 $ 17.49 34,463

ITEM 3.      DEFAULTS UPON SENIORSECURITIES.

None.

ITEM 4.      MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5.      OTHER INFORMATION.

None.

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ITEM 6.       EXHIBITS

Number Exhibit Description Filing Filed
Form Exhibit Date Herewith
3.1 Third Amended and Restated Certificate of Incorporation. 8-K 3.1 08/10/22
3.2 Amended and Restated Bylaws as of August 12, 2022. 8-K 3.2 08/10/22
10.1 Offer Letter, dated September 19, 2022, by and between the Company and Jody Staggs. X
10.2 Separation and Release Agreement, dated August 31, 2022, by and between the Company and Winston L. Black III. X
10.3 Fourth Amendment to Loan and Security Agreement, dated September 26, 2022, by and among SWK Holdings Corporation, SWK Funding LLC and Cadence Bank, N.A. 8-K 10.1 09/28/22
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.

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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 November 9, 2022.

SWK Holdings Corporation
By: /s/ Joe D. Staggs
Joe D. Staggs
President and Interim Chief Executive Officer
(Principal Executive Officer)
By: /s/ Yvette M. Heinrichson
Yvette M. Heinrichson
Chief Financial Officer
(Principal Financial Officer) 
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Exhibit10.1

14755 Preston Road, Suite 105

Dallas, Texas 75254

September 16, 2022

BYEMAILJody Staggs

Dear Jody,

SWK Holdings Corporation (the “Company”) is pleased to extend this offer letter to you in connection with your appointment as the Company’s President, effective September 1, 2022, and Interim Chief Executive Officer, effective September 30, 2022. The terms contained herein will be effective through December 31, 2022. We look forward to engaging with you in the near term regarding entering into an employment agreement for January 2023 forward. The terms of this offer letter are as follows:

· Annual<br> Base Salary: $350,000, effective as of September<br> 1, 2022, payable in accordance with the Company’s ordinary payroll practices as established<br> from time to time.
· 2022<br> Annual Bonus: You will be eligible to receive up<br> to 35% of the bonus pool of the Company as determined by the Board and in which you currently<br> participate. This bonus pool represents the aggregate potential bonus award for the Company’s<br> entire executive team and will be calculated using all existing methodologies.
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· Restricted<br> Stock Award: You will be eligible to receive an<br> award of shares of restricted Common Stock of the Company with a value equal to $400,000<br> based on the Company’s closing share price as of September 1, 2022 (which is equal<br> to 23,655 shares) pursuant to the Company’s 2010 Equity Incentive Plan (the “Award”),<br> subject to the approval of the Company’s board of directors. The Award shall vest ratably<br> on each of the first four anniversaries of the Award’s date of grant and be subject<br> to the terms and conditions of the grant agreement pursuant to which is granted, including<br> restrictive covenants.
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Nothing in this letter changes the “at will” status of your employment with the Company, which notwithstanding any other agreement or arrangement can only be changed by the Board, nor modifies any restrictive covenants in favor of the Company to which you are subject.

If you agree with the terms of this letter, we ask that you please sign and date this letter and return an executed copy to me. We look forward to you continuing to be a part of our team.

[Signaturepage to follow]

Sincerely,

SWK HOLDINGS CORPORATION

By: /s/ Wendy F. DiCicco
Name: Wendy F.<br>DiCicco
Title: Member of the Board, Compensation Committee Chair

Agreedto and accepted:

Jody Staggs

Signature: /s/ Jody Staggs

Date: September 19, 2022

[Signature Page toOffer Letter]

Exhibit10.2

EXECUTIONVERSION

SEPARATIONAND RELEASE AGREEMENT

This SEPARATION AGREEMENT (this “Agreement”), effective as of August 31, 2022 (the “Effective Date”) is made and entered into by and between SWK Holdings Corporation, a Delaware corporation (the “Company”), and Winston L. Black III (“Executive”), with reference to the following circumstances, namely:

RECITALS

WHEREAS, Executive has been employed by the Company as Chief Executive Officer pursuant to an employment agreement between Executive and the Company, dated as of January 28, 2019, as extended (the “Employment Agreement”);

WHEREAS, Executive entered into a restrictive covenants agreement with the Company dated as of January 28, 2019 (the “Restrictive Covenants Agreement”);

WHEREAS, in connection with Executive’s employment, Executive was granted stock option awards with respect to the common stock of the Company under the Company’s 2010 Equity Incentive Plan (the “Plan”) and certain of these stock option awards remain outstanding as of the date hereof, namely, pursuant to the Stock Option Award Agreement, dated August 18, 2014, by and between the Company and Executive, as amended (the “2014 Option Award Agreement”), Executive was granted stock options to purchase 100,000 shares of common stock of the Company, of which 50% have vested, and under the Stock Option Award Agreement, dated January 28, 2019, by and between the Company and Executive, (the “2019 Option Award Agreement”), Executive was granted stock options to purchase 75,000 shares of common stock of the Company, all of which have vested (together, the “Options”);

WHEREAS, Executive and the Company have mutually agreed that Executive will resign his positions with the Company (including his role of Chief Executive Officer of the Company and as Chairman of the Board of Directors) as of September 30, 2022 (the “Separation Date”); and

WHEREAS, Executive and the Company mutually desire to bring the employment relationship to an amicable conclusion and fully and finally resolve any claims Executive might have against the Company.

NOW,THEREFORE, in consideration of the promises and mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.            Termination of Employment. Effective as of the Separation Date, (a) Executive resigns from all of Executive’s positions with the Company and any of its subsidiaries or affiliates (together, the “Company Group”), including his role as Chief Executive Officer of the Company and as the Chairman of the Board of Directors of the Company and relinquishes all authority to act on behalf of the Company Group, and (b) Executive’s employment relationship with the Company Group shall terminate.

2.            Consulting Role. Executive agrees that, during the period beginning on the Separation Date and ending on the six-month anniversary of the Separation Date (meaning, October 1, 2022 to March 31, 2023) (the “Consulting Period”), Executive will be reasonably available to provide the following services: (i) assist in transitioning duties and responsibilities; (ii) participate in meetings and in connecting other individuals as reasonably requested by the Company; and (iii) providing advice on matters related to the business of the Company as reasonably requested (collectively, the “Consulting Services”); provided, that, following the 31st day after the Separation Date (meaning on or after November 1, 2022), Executive will only be required to provide the Consulting Services for up to five hours per week. During the Consulting Period, the Company will reimburse Executive for all reasonable, pre-approved and documented out-of-pocket expenses incurred as a result of the Consulting Services in accordance with the Company’s expense reimbursement policy as in effect from time to time.

3.            Compensation and Benefits. Executive shall be entitled to receive Executive’s earned but unpaid base salary through and including the Separation Date. In addition, in consideration of the provision of the Consulting Services, Executive’s timely execution of this Agreement and the general release of claims contained herein (the “Executive Release”), non-revocation of the Executive Release and compliance with this Agreement, Executive shall be entitled to (the “Separation Payments”):

(a)          Six months of continued base salary ($150,250 in total), to be paid in accordance with the regular payroll practices of the Company and to begin on the first ordinary payroll date following the 30th day after the Separation Date (the first pay date will include a payment for any payroll dates between the Separation Date and the first pay date in which Executive did not receive a payment);

(b)          A monthly payment for a period of six months equal to the monthly cost of COBRA continuation coverage under the Company’s medical plans less the amount of Executive’s portion of the premium as if Executive were an active employee, to be paid in accordance with the regular payroll practices of the Company and to begin on the first ordinary payroll date following the 30th day after the Separation Date;

(c)          $1,100,000, payable in a lump sum on the 30th day after the Separation Date;

(d)          An amount equal to $11,510.19, representing all of Executive’s accrued, unused vacation time as of the Separation Date, which shall be paid on the first ordinary payroll date following the 30th day after Separation Date; and

(e)          An amount equal to the attorneys’ fees associated with negotiating this Agreement, subject to a cap of $10,000, which shall be paid by the Company upon receipt of proper documentation regarding such attorneys’ fees from Executive within 30 days of the date hereof.

4.            Equity Awards. Any Options that remain unvested on the Separation Date, which include the 50,000 unvested Options granted pursuant to the 2014 Option Award Agreement, will be forfeited for no consideration upon the Separation Date. In accordance with the terms of the Plan and the 2019 Option Award Agreement, any vested Options will remain exercisable for a period of three months following the Separation Date. Executive may, at his discretion, exercise any such vested Options either (i) by paying the applicable exercise price and any applicable tax withholding obligations with respect to such exercise to the Company in cash or by check; or (ii) pursuant to a broker-assisted or company-assisted cashless exercise for both the payment of the exercise price and applicable tax withholding obligations.

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5.            Executive Representations. Executive warrants and represents that: (a) Executive has not filed or authorized the filing of any complaints, charges or lawsuits against any member of the Company Group with any governmental agency or court, and that if, unbeknownst to Executive, such a complaint, charge or lawsuit has been filed on Executive’s behalf, Executive will immediately cause it to be withdrawn and dismissed; (b) provided that Executive is paid Executive’s normal base salary and benefits through the Separation Date, Executive has been paid all compensation, wages, bonuses, commissions and benefits to which Executive may be entitled and no other compensation, wages, bonuses, commissions and benefits will be due to Executive, except the Separation Payments; (c) Executive has no outstanding awards with respect to equity of the Company other than the Options; (d) as of the Separation Date, Executive will have returned all property of the Company Group in Executive’s possession, custody or control, including, but not limited to, all Confidential and Proprietary Information (as defined below) and every other matter, thing or material of any kind that relates in any way to the business of the Company Group, other than Executive’s pay stubs, financial documents needed for Executive’s tax filings, contracts between Executive and the Company related to Executive’s employment, and documents related to the Options; (e) Executive has no known workplace injuries or occupational diseases and has been provided and has not been denied any leave requested under the Family and Medical Leave Act or any similar state law; (f) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject; and (g) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a valid and binding obligation of Executive, enforceable in accordance with its terms.

6.            Restrictive Covenants. In consideration of the Separation Payments, along with the other good and valuable consideration contained herein, and as a material inducement for the Company to enter into this Agreement:

(a)          Confidentiality. Executive represents that Executive has held, and agrees to hold, all Confidential and Proprietary Information in strictest confidence and further represents Executive has not, and agrees not to, make use of Confidential and Proprietary Information on behalf of Executive or any person or entity other than the Company Group, except where such a disclosure is compelled by applicable law. As used in this Agreement, “Confidential and Proprietary Information” means any non-public information of a confidential or proprietary nature of any of the Company Group, including, without limitation: (a) information of a commercially sensitive, proprietary or personal nature that, if disclosed, could have an adverse effect on the Company Group’s standing in the community, its business reputation, operations or competitive positions; (b) information and documents that have been designated or treated as confidential; (c) financial data; customer, guest, vendor or shareholder lists or data; advertising, business, sales or marketing plans, tactics and strategies; projects; technical or strategic information about the Company Group’s businesses; plans or strategies to market or distribute the services or products of such businesses; plans, tactics or strategies for third-party negotiations, including, without limitation, planned or actual collective bargaining negotiations; economic or commercially sensitive information, policies, practices, procedures or techniques; trade secrets and other intellectual property; merchandising, advertising, marketing or sales strategies or plans; litigation theories or strategies; terms of agreements with third parties and third party trade secrets; information about the Company Group’s employees, guests, agents, compensation (including, without limitation, bonuses, incentives and commissions) or other human resources policies, plans and procedures, or any other non-public material or information relating to the Company Group; and (d) any information (personal, proprietary or otherwise) Executive learned about any officer, director or member of management of any member of the Company Group, whether prior to or during Executive’s service to the Company Group. Notwithstanding the foregoing, the obligations of this Section shall not apply to: (i) information that is already in the public domain; (ii) information that is disclosed to Executive by a third party with the right to disclose it in good faith; or (iii) information that is specifically exempted in writing from the applicability of this Agreement. Notwithstanding anything elsewhere in this Agreement, Executive is authorized to make any disclosure required by any federal, state and local laws, after providing the Company Group with prior written notice and an opportunity to respond prior to such disclosure, and that Executive shall only disclose the specific information required by law.

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(b)          Non-Competition. Executive hereby acknowledges and agrees that due to Executive’s position with the Company and Executive’s knowledge of the Confidential and Proprietary Information, Executive’s employment by or affiliation with certain entities would be materially detrimental to the Company. Executive hereby agrees that Executive has not and will not from the Separation Date though the six-month anniversary of the Separation Date (meaning, October 1, 2022 to March 31, 2023) (the “Restricted Period”), become employed by, assist, consult to, advise in any manner or have any material interest in, any Competitive Entity operating in a jurisdiction in which the Company Group operates. A “Competitive Entity” shall mean any person, entity or business that competes with any of the Company Group’s pharmaceutical or medical technology financing businesses, as well as such other businesses as the Company Group engages in as of the Separation Date. Ownership of not more than 1% of the outstanding stock of any publicly traded company shall not, by itself, constitute a violation of this provision.

(c)          Non-Solicitation. Executive hereby agrees that Executive has not and will not for the duration of the Restricted Period, solicit, contact for the purpose of soliciting, or persuade, directly or indirectly (whether for Executive’s own interest or any other person or entity’s interest) any employee, customer (from which the Company Group received payment or payment-in-kind), consultant or vendor of the Company Group to leave the employ of the Company Group or to cease or reduce working for or doing business with the Company Group. It is not a violation of this Agreement for Executive to retain an attorney or consultant that the Company Group uses or has used so long as Executive’s retention of such attorney or consultant is not a conflict and does not require the attorney or consultant to decline or reduce the amount of work performed on behalf of any member of the Company Group, and such retention would not be reasonably likely to result in a violation of Section 6(a).

(d)          Non-Disparagement. Executive agrees that Executive will not make, at any time, any negative comments about or otherwise disparage any member of the Company Group or any member’s officers, boards or individual directors, employees, shareholders or agents. The Company agrees to instruct its officers, boards, individual directors, and shareholders to refrain from making any negative comments about or otherwise disparage Executive.

(e)          Return of Property. In the event Executive discovers that Executive has not returned any property of the Company Group in Executive’s possession, custody or control, including, but not limited to, all Confidential Information and every other matter, thing or material of any kind that relates in any way to the business of the Company Group, Executive shall immediately return such property.

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(f)           Cooperation. Executive shall, upon reasonable notice (a) furnish such information and assistance to any member of the Company Group, as may reasonably be requested by any such member, with respect to any matter, project, initiative or effort for which Executive was responsible or has relevant knowledge or had substantial involvement in while providing services to the Company Group, (b) cooperate with any member of the Company Group during the course of all third-party proceedings arising out of any member of the Company Group’s business about which Executive has knowledge or information and (c) cooperate with any member of the Company Group with respect to any other matter arising out of Executive’s service with the Company, including the transition of Executive’s duties and responsibilities to any successor of the Company. Following the Consulting Period, the Company will pay Executive the amount of $300 per hour for any assistance provided under this Section, and at all times will reimburse Executive for all reasonable, pre-approved and documented out-of-pocket expenses incurred as a result of Executive’s obligations under this paragraph in accordance with the Company’s expense reimbursement policy as in effect from time to time. For the avoidance of doubt, the services described in this Section are in addition to the Consulting Services.

(g)          Reasonableness. Executive expressly acknowledges that the geographic boundaries, scope of prohibited activities and time durations set forth in this Section are all reasonable in nature and no broader than are necessary to protect the legitimate business interests of the Company Group, and Executive further acknowledges that any violation of these covenants would cause substantial irreparable injury to the Company Group.

(h)          Blue Pencil. Notwithstanding anything herein to the contrary, if a court of competent jurisdiction shall at any time deem the duration or the geographic scope of any of the provisions of this Section unenforceable, the other provisions of this Section shall nevertheless stand and the duration and geographic scope set forth herein shall be deemed to be the longest period or greatest size permissible by law under the circumstances, and the parties hereto agree that such court shall reduce the time period or geographic scope to permissible duration or size.

7.            General Release of Claims by Executive. In consideration of the Separation Payments, to which Executive acknowledges Executive has no right to receive without execution of the Executive Release, along with the other good and valuable consideration contained herein, and as a material inducement for the Company to enter into this Agreement:

(a)          Executive, together with Executive’s administrators, agents, executors, heirs, trustees, successors and assigns (the “Executive Releasors”), knowingly and voluntarily agrees to irrevocably and unconditionally waive and release all charges, complaints, claims, causes of action, liabilities, obligations, promises, sums of money, agreements, controversies, damages, actions, suits, rights, demands, sanctions, costs, losses and expenses of any nature whatsoever (collectively, “Claims”) related to or arising from Executive’s employment with and termination of employment from the Company Group, against all members of the Company Group and their current and former officers, directors, managers and shareholders (the “Company Releasees”). This general release of Claims includes, but is not limited to, a release of Claims or causes of actions arising out of or related to Executive’s employment and termination of employment from the Company Group and all such Claims that were asserted, or that could be asserted, known or unknown, against any of the Company Releasees, including, without limitation, alleged contract and negligence Claims or Claims or causes of action arising under any federal, state or local law, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Employee Retirement Income Security Act of 1974, the Sarbanes-Oxley Act of 2002, the False Claims Act, the Equal Pay Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act, the Texas Labor Code including the Texas Payday Act, the Texas Anti-Retaliation Act, Chapter 21 of the Texas Labor Code and the Texas Whistleblower Act, all as may be amended, inasmuch as is permissible under each law, and any and all statutory or common law Claims for defamation, libel, slander, assault, battery, reprisal, retaliation, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of oral or written, express or implied, contract, violation of public policy, promissory estoppel, fraud, wrongful discharge, tortious interference with contract, breach of covenant of good faith and fair dealing or any other theory, whether legal or equitable and any and all other employment-related Claims that any Executive Releasor had, has or may have against any Company Releasee individually and collectively. The Executive Release also includes, but is not limited to, waiving the right to pursue any Claims or legal actions against the Company Releasees relating to Executive’s employment and termination of employment brought under the National Labor Relations Act, the Fair Labor Standards Act and the Occupational Safety and Health Act, all as may be amended, and all other federal, state, county and city government employment laws inasmuch as is permissible under each law. The Executive Release also includes, but is not limited to, waiving the right to pursue any civil tort or contract Claims against the Company Releasees relating to Executive’s employment and termination of employment.

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(b)          Executive expressly waives any and all further Claims that Executive ever had, now has or may have in the future against the Company Releasees for expense reimbursements, salary or wage payments, commission payments, bonus payments of any type, accrued or unused vacation and/or sick pay, short- and/or long-term disability benefits, payments for any other type of business expense, leave of absence or time off work or any other benefit paid by the Company Group to its executives, except as provided to Executive under the Consolidated Omnibus Budget Reconciliation Act of 1985 and to the Separation Payments.

(c)          Executive understands that Executive is fully and finally releasing all past and present Claims, and that this Executive Release includes the release of any Claims that any Executive Releasor now has or might have in the future as a result of past events, even if Executive does not know of them at the time Executive signs this Agreement. Executive understands that this Executive Release of Claims applies only to Claims arising before the date this Agreement is signed, and not to Claims that may arise after the signing of this Executive Release.

(d)          Executive understands that this Executive Release does not prevent Executive from filing a charge of discrimination with the Equal Employment Opportunity Commission or the Texas Workforce Commission Civil Rights Division. However, by signing this Agreement, Executive hereby waives any right to receive any compensation or damages if Executive prevails in such a claim. Executive also agrees not to authorize any other person or entity, including any governmental agency, to seek individual remedies against any Company Releasee. Notwithstanding anything in this Agreement to the contrary, in the event that Executive receives any proceeds of or payments from any such claim, such proceeds and/or payments shall be remitted and paid to the Company. This Agreement does not limit Executive’s ability to communicate with any government agencies or otherwise participate in any investigation or proceeding that may be conducted by any government agency, including providing documents or other information. Executive will retain all rights and consideration provided in this Agreement regardless of whether Executive communicates with any governmental authorities, or if Executive receives a whistleblower award. Nothing in this Agreement limits Executive’s right to receive an award for information provided to any government agency.

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(e)          Executive acknowledges and understands that in accordance with ADEA, the Company has provided the opportunity for Executive to considerthe terms of this Executive Release for at least 21 days before signing it; and that if Executive has signed and returned this Agreementprior to the expiration of 21 days, Executive has done so voluntarily and has therefore declined Executive’s right to considerthis Executive Release for the full 21-day period. Executive acknowledges that Executive has been advised to consult with legal counselof Executive’s own choosing. Executive acknowledges that Executive has been informed that Executive may revoke Executive’ssignature within seven days of signing this Agreement and void this Executive Release.

8.            General Release of Claims by the Company Group. In consideration of Executive’s promises and covenants made in this Agreement, along with the other good and valuable consideration contained herein, and as a material inducement for Executive to enter into this Agreement:

(a)          The Company, together with each member of the Company Group and their current and former officers, directors, managers and shareholders (the “Company Releasors”), knowingly and voluntarily agrees to irrevocably and unconditionally waive and release all known Claims whatsoever related to or arising from Executive’s employment with and termination of employment from the Company Group, against Executive and Executive’s administrators, agents, executors, heirs, trustees, successors and assigns (the “Executive Releasees”). This general release of Claims (the “Company Release”) includes, but is not limited to, a release of Claims or causes of actions arising out of or related to Executive’s employment and termination of employment from the Company Group and all such Claims that were asserted, or that could be asserted, against any of the Executive Releasees, including, without limitation, alleged contract and negligence Claims or Claims or causes of action arising under any federal, state or local law, and any and all statutory or common law Claims for defamation, libel, slander, assault, battery, reprisal, retaliation, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of oral or written, express or implied, contract, violation of public policy, promissory estoppel, wrongful discharge, tortious interference with contract, breach of covenant of good faith and fair dealing or any other theory, whether legal or equitable and any and all other known Claims that any Company Releasor had, has or may have against any Executive Releasee individually and collectively arising out of or relating to Executive’s employment. The Release also includes, but is not limited to, waiving the right to pursue any civil tort or contract Claims against the Executive Releasees relating to Executive’s employment and termination of employment.

(b)          Excluded from the Company Release set forth in this Section are: (i) Claims arising out of, in whole or in part, facts, circumstances or events, in each case, that are not known to the Company at the time it enters into this Agreement; (ii) Claims arising after the date the Company signs this Agreement; (iii) any Claims for fraud or misappropriation of funds; and (iv) any Claims that the Company cannot lawfully release. For purposes of this Section, “known” means actually known by a member of the Board or an executive officer of the Company (in either case, other than Executive) as of the date hereof.

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9.            No Other Compensation or Benefits. Except as otherwise specifically provided herein or as required by applicable law, Executive will not be entitled to any compensation or benefits or to participate in any past, present or future employee benefit programs or arrangements of the Company Group on or after the Separation Date.

10.          Tax Withholding. All payments made by the Company to Executive pursuant to this Agreement will be reduced by applicable tax withholdings and any other deductions as required by law.

11.          Review and Approval of Public Documents. The Company will provide Executive a copy of the press release and Form 8-K concerning the cessation of Executive’s employment with the Company as contemplated herein prior to making such documents public.

12.          Code Section 409A. Executive and the Company agree that it is the intent of the parties that payments and benefits under this Agreement shall comply with or be exempt from Section 409A of the U.S. Internal Revenue Code of 1986, as amended (“Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted in accordance therewith. Notwithstanding any other provision with respect to the timing of payments under this Agreement, to the extent necessary to comply with the requirements of Section 409A, any payments to which Executive may become entitled under this Agreement which are subject to Section 409A (and not otherwise exempt from its application) that are payable (i) in a lump sum within six months following the date of termination will be withheld until the first business day after the six-month anniversary of the date of termination, at which time Executive shall be paid the amount of such lump sum payments in a lump sum and (ii) in installments within six months following the date of termination will be withheld until the first business day after the six-month anniversary of the date of termination, at which time Executive shall be paid the aggregate amount of such installment payments in a lump sum, and after the first business day of the seventh month following the date of termination and continuing each month thereafter, Executive shall be paid the regular payments otherwise due to Executive in accordance with the payment terms and schedule set forth herein. In no event whatsoever shall the Company be liable for any tax, interest or penalties that may be imposed on Executive by Section 409A or any damages for failing to comply with Section 409A. In the case of any reimbursement to Executive pursuant to this Agreement, such reimbursement will be made reasonably promptly following Executive’s submission of a request for reimbursement. Any reimbursement by the Company during any taxable year of Executive will not affect any reimbursement by the Company in another taxable year of Executive. Any right to reimbursement is not subject to liquidation or exchange for another benefit. For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of deferred compensation under this Agreement shall be treated as a separate payment of deferred compensation. In addition, to the extent that the right to any payment (including the provision of benefits) hereunder provides for the deferral of compensation within the meaning of Section 409A, references to Executive’s “termination” or “resignation” of employment will be construed to mean Executive’s “separation from service” within the meaning of Section 409A(a)(2)(A)(i).

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13.          Waiver. The failure of either party to enforce or to require timely compliance with any term or provision of this Agreement shall not be deemed to be a waiver or relinquishment of rights or obligations arising hereunder, nor shall this failure preclude the enforcement of any term or provision or avoid the liability for any breach of this Agreement.

14.          Severability. Each part, term or provision of this Agreement is severable from the others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term or provision is invalid, void or unenforceable, this Agreement has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby, except that if the Executive Release is invalidated, Executive shall execute a valid release.

15.          Construction. This Agreement shall be deemed drafted equally by all the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. This Agreement is not to be construed as an admission, direct or indirect, against any interest of the parties. Any references to paragraphs, subparagraphs, or sections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all, and each and every;” (d) “includes” and “including” are each “without limitation;” and (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection.

16.          Amendment. This Agreement may not be amended or modified in any manner, except by an instrument in writing authorized by Executive and a duly authorized officer on behalf of the Company.

17.          Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective heirs, successors and assigns, except that Executive may not assign his rights or delegate his obligations hereunder other than by will or the laws of descent and distribution without the prior consent of the Company. Any successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. Any attempted assignment in contravention of this Section shall be void ab initio.

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18.          Notices. All notices and other communications hereunder must be in writing and will be deemed duly given (x) on the date of transmission, if delivered by confirmed facsimile or electronic mail, or (y) if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid or by overnight courier, and addressed to the intended recipient at the addresses below.

Notices sent to the Company should be directed to:

Robert K. Hatcher

SWK Holdings Corporation

14755 Preston Road

Suite 105

Dallas, TX 75254

Email: hatcher@avalonadvisors.com

with a copy (that does not constitute notice) to:

Gillian Emmett Moldowan

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

Email: Gillian.Moldowan@shearman.com

Notices sent to Executive should be directed to: Winston L. Black III, at the address on the records of the Company

with a copy (that does not constitute notice) to:

Jennifer Trulock

Baker Botts L.L.P.

2001 Ross Avenue, Suite 900

Dallas, TX 75201

Email: jennifer.trulock@bakerbotts.com

Notwithstanding anything else in this Agreement to the contrary, any document or notice required or permitted by this Agreement that is required to be delivered in writing may be delivered and accepted electronically. Signatures also may be electronic. The term “written” as used in this Agreement shall include any document that is delivered and/or accepted electronically.

19.          Entire Agreement. This Agreement together with the Release, constitutes the entire agreement of the parties relating to the subject matter hereof. Any previous agreements with respect to Executive’s employment are superseded by this Agreement and hereby terminated, including, without limitation, the Employment Agreement and the Restrictive Covenants Agreement. The 2014 Option Award Agreement and the 2019 Option Award Agreement are incorporated by reference herein and form a part hereof and shall continue and survive following the Effective Date.

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20.          Choice of Law. This Agreement shall be interpreted and construed in accordance with and shall be governed by the laws of the State of Texas, without reference to principles of conflict of law of Texas or any other jurisdiction, and, when applicable, the laws of the United States. Any claim or dispute arising under or relating to this Agreement or the breach, termination, or validity of any term of this Agreement shall be brought only in state or federal court located in the state of Texas, Dallas County or the United States District Court for the Northern District of Texas. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of such action or proceeding such venue and each of the parties hereto here irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement.

21.          Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

[Remainderof page intentionally left blank.Signature page follows.]

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Executiveacknowledges that Executive has carefully read this Agreement; that Executive has had the opportunity for review of it by Executive’sattorney; that Executive fully understands its final and binding effect; that the Company admits to no wrongdoing in connection withExecutive’s employment, or any other matter covered by the Executive Release; that this Agreement is intended as a compromise ofall Claims that Executive has alleged or may allege against any of the Company Releasees (as such terms are defined in the ExecutiveRelease); that the only promises or representations made to Executive to sign this Agreement are those stated herein; and that Executiveis signing this Agreement voluntarily.

INWITNESS WHEREOF, the parties have caused this Agreement to be executed on the date and year first above written.

SWK HOLDINGS CORPORATION
/s/<br> Robert K. Hatcher
By:<br> Robert K. Hatcher
Title:<br> Director
EXECUTIVE
/s/<br> Winston L. Black
By:<br> Winston L. Black III

[Signature Page toSeparation and Release Agreement]

EXHIBIT 31.1

CERTIFICATION

I, Joe D. Staggs, President and Interim 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.

  1. 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: November 9, 2022 /s/ Joe D. Staggs
Joe D. Staggs<br><br> <br>President and Interim Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Yvette M. Heinrichson, 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.

  1. 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: November 9, 2022 /s/ Yvette M. Heinrichson
Yvette M. Heinrichson<br><br> <br>Chief Financial Officer

EXHIBIT 32.1

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 September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joe D. Staggs, President and Interim 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: November 9, 2022 /s/ Joe D. Staggs
Joe D. Staggs<br><br> <br>President and Interim Chief Executive Officer

EXHIBIT 32.2

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 September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yvette M. Heinrichson, 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: November 9, 2022 /s/ Yvette M. Heinrichson
Yvette M. Heinrichson<br><br> <br>Chief Financial Officer

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