SEC Info - SWK Holdings Corp. - ‘10-Q’ for 6/30/22

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		Alternative Formats (Word, et al.) Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Statements Item 1 Item 1A Item 2 Item 3 Item 4 Item 5 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to the Unaudited Condensed Consolidated Financial Statements Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Unaudited Condensed Consolidated Balance Sheets-June 30, 2022 and December 31, 2021 Unaudited Condensed Consolidated Statements of Cash Flows-Six Months Ended June 30, 2022 and 2021 Unaudited Condensed Consolidated Statements of Income -Three and Six Months Ended June 30, 2022 and 2021 Unaudited Condensed Consolidated Statements of Stockholders' Equity-Three and Six Months Ended June 30, 2022 and 2021 Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Item 1
"	Financial Statements
"	Unaudited Condensed Consolidated Balance Sheets-June 30, 2022 and December 31, 2021
"	Unaudited Condensed Consolidated Statements of Income -Three and Six Months Ended June 30, 2022 and 2021
"	Unaudited Condensed Consolidated Statements of Stockholders' Equity-Three and Six Months Ended June 30, 2022 and 2021
"	Unaudited Condensed Consolidated Statements of Cash Flows-Six Months Ended June 30, 2022 and 2021
"	Notes to the Unaudited Condensed Consolidated Financial Statements
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures About Market Risk
"	Item 4
"	Controls and Procedures
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Item 5
"	Other Information
"	Item 6
"	Exhibits
"	Signatures

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

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

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 i 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 i 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:

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 i No

As of August 3, 2022, there were i 12,828,704 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

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

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

See accompanying notes to the unaudited condensed consolidated financial statements.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.

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.

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.

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

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.

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 six months ended June 30, 2022, compared to those discussed in our Annual Report.

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.

Revenues decreased to $6.9 million for the three months ended June 30, 2022 from $22.3 million for the three months ended June 30, 2021. The $15.4 million decrease in revenue consisted of a $10.3 million decrease in Pharmaceutical Development segment revenue and a $5.0 million decrease in Finance Receivables segment revenue. The decrease in Pharmaceutical Development segment revenue included $10.0 million of milestone revenue related to Enteris’ License Agreement with Cara received during the three months ended June 30, 2021, which did not recur during the three months ended June 30, 2022. The $5.0 million decrease in Finance Receivables segment revenues primarily consists of a $3.1 million decrease in interest and fees earned on finance receivables that were either paid off or paid down since the second quarter of 2021 and a $4.0 million decrease in net royalty income primarily due to the achievement of return premiums that caused a step down in royalty rates. The decrease in revenue was partially offset by a $2.1 million increase in interest and fees earned due to funding new and existing loans.

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 June 30, 2022 and 2021 was $0.1 million, respectively.

Pharmaceutical manufacturing, research and development expense for both the three months ended June 30, 2022 and 2021 was $1.5 million, respectively. Pharmaceutical manufacturing, research and development expense primarily consists of manufacturing materials for our pipeline projects and clinical trials.

The $0.2 million decrease in depreciation and amortization expense for the three months ended June 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 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 decreased to $3.0 million for the three months ended June 30, 2022 from $3.4 million for the three months ended June 30, 2021. The $0.4 million decrease was primarily due to a $0.4 million decrease in corporate strategic planning and related board fees and a $0.2 million decrease in the performance-based bonus accrual. The decrease was partially offset by a $0.2 million increase in legal fees related to corporate governance.

Other expense, net for three months ended June 30, 2022 reflected a net aggregate fair market value loss of $1.0 million on our warrant derivatives and Bioventus common stock. Other income, net for three months ended June 30, 2021 reflected a net fair market value gain of $0.6 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.

During the three months ended June 30, 2022 and 2021, we recognized income tax expense of $0.2 million and $3.5 million, respectively. The $3.3 million decrease in income tax expense is a result of lower taxable income when compared to the same period of 2021.

Revenues decreased to $18.1 million for the six months ended June 30, 2022 from $31.6 million for the six months ended June 30, 2021. The $13.5 million decrease in revenue consisted of a $10.3 million decrease in Pharmaceutical Development segment revenue and a $3.2 million decrease in Finance Receivables segment revenue. The decrease in Pharmaceutical Development segment revenue included $10.0 million of milestone revenue related to Enteris’ License Agreement with Cara received during the six months ended June 30, 2021, which did not recur during the six months ended June 30, 2022. The $3.2 million decrease in Finance Receivables segment revenues primarily consists of a $5.0 million decrease in interest and fees earned on finance receivables that were either paid off or paid down since the second quarter of 2021 and a $3.8 million decrease in net royalty income primarily due to the achievement of return premiums that caused a step down in royalty rates. The decrease in revenue was partially offset by a $3.4 million increase in interest and fees earned due to funding new and existing loans and a $2.4 million increase in interest and fees earned on the payoff of a term loan during the six months ended June 30, 2022.

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 six months ended June 30, 2022 and 2021 was $0.2 million, respectively.

Pharmaceutical manufacturing, research and development expense increased from $3.1 million for the six months ended June 30, 2021 to $3.4 million for the six months ended June 30, 2022. The $0.3 million increase was primarily due to an increase in manufacturing materials for pipeline projects and clinical trials.

The $1.2 million decrease in depreciation and amortization expense for the six months ended June 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.

Other expense, net for six months ended June 30, 2022 reflected a net aggregate fair market value loss of $1.7 million on our warrant derivatives and Bioventus common stock. Other income, net for six months ended June 30, 2021 reflected a net fair market value gain of $0.9 million on our warrant derivatives and a net fair market value gain of $1.2 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.

During the six months ended June 30, 2022 and 2021, we recognized income tax expense of $1.3 million and $4.5 million, respectively. The $3.2 million decrease in income tax expense is a result of lower taxable income when compared to the same period of 2021.

As of June 30, 2022, we had $55.1 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 $12.3 million increase in our cash balance was $49.0 million of interest, fees, principal and royalty payments received on our finance receivables and $0.6 million of customer payments generated by our Pharmaceutical Development segment. The increase in our cash balance was partially offset by $25.0 million of investment funding, net of deferred fees and origination expenses; $5.9 million of accounts payable, including $1.1 million for Enteris’s internal pipeline projects; payroll and benefits expense of $6.3 million and $0.1 million of credit facility interest and other expenses.

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:

As of June 30, 2022, our finance receivables portfolio contains $174.9 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 LIBOR-based interest rate floor. Changes in interest rates, including LIBOR 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 expect the Pharmaceutical Development segment to generate positive cash flow above its expenses from proceeds received under its license agreements and customer relationships; however, the timing of the receipt of payments under the license agreements is uncertain and dependent upon the success of our technology licensees’ pharmaceutical development candidates.

Though we expect in the aggregate that the Company will generate positive cash flow in excess of our expenses, given the abrupt decline in global economic activity, and the uncertain recovery from such decline, we cannot predict this with certainty.

We entered into a $20.0 million revolving credit facility in June 2018. The credit facility was amended on September 27, 2021 to extend the termination date to September 30, 2022 and to increase the credit facility commitment to $22.0 million. We continue to explore options to either extend our current credit facility or obtain a new credit facility. As of June 30, 2022, $22.0 million was available for borrowing under the credit facility.

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.

During the six months ended June 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 June 30, 2022 approximated its carrying value.

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 LIBOR 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.

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

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.

There have been no changes during the six months ended June 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.

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.

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.

* 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.

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 August 10, 2022.

i Delaware	i 77-0435679

(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

i 14755 Preston Road, i Suite 105
i Dallas, i TX	i 75254
(Address of Principal Executive Offices)	(Zip Code)

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered

i Common Stock, par value $0.001 per share	i SWKH	The i Nasdaq Stock Market LLC
i Preferred Stock Purchase Rights	i SWKH	The i Nasdaq Stock Market LLC

	June 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	i 55,118		$	i 42,863
Interest and accounts receivable, net		i 1,869			i 1,803
Marketable investments		i 487			i 1,034
Other current assets		i 1,366			i 1,727
Total current assets		i 58,840			i 47,427

Finance receivables, net		i 174,859			i 181,553
Marketable investments		i 98			i 119
Cost method investment		i 3,491			i 3,491
Deferred tax assets, net		i 19,281			i 20,539
Warrant assets		i 2,481			i 3,419
Intangible assets, net		i 9,042			i 9,964
Goodwill		i 8,404			i 8,404
Property and equipment, net		i 6,071			i 5,779
Other non-current assets		i 1,858			i 1,970
Total assets	$	i 284,425		$	i 282,665

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	i 2,776		$	i 5,087
Revolving credit facility		—			i 8
Total current liabilities		i 2,776			i 5,095

Contingent consideration payable		i 8,530			i 8,530
Other non-current liabilities		i 1,589			i 1,804
Total liabilities		i 12,895			i 15,429

Commitments and contingencies (Note 6)

Stockholders’ equity:
Preferred stock, $ i i 0.001 / par value; i i 5,000,000 / shares authorized; i i i i no / / / shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		—			—
Common stock, $ i i 0.001 / par value; i i 250,000,000 / shares authorized; i i 12,839,118 / and i i 12,836,133 / shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		i 13			i 13
Additional paid-in capital		i 4,431,970			i 4,431,719
Accumulated deficit		( i 4,160,453	)		( i 4,164,496	)
Total stockholders’ equity		i 271,530			i 267,236
Total liabilities and stockholders’ equity	$	i 284,425		$	i 282,665


	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net income	$	i 4,043		$	i 17,359
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance costs		i 29			i 93
Deferred income taxes		i 1,257			i 4,369
Change in fair value of warrants		i 1,165			( i 892	)
Change in fair value of equity securities		i 547			( i 1,215	)
Change in fair value of acquisition-related contingent consideration		—			( i 147	)
Loan discount amortization and fee accretion		( i 780	)		( i 1,130	)
Interest income paid-in-kind		( i 1,599	)		( i 26	)
Stock-based compensation		i 251			i 364
Depreciation and amortization expense		i 1,330			i 2,493
Changes in operating assets and liabilities:
Interest and accounts receivable		( i 66	)		( i 728	)
Other assets		( i 256	)		( i 477	)
Accounts payable and other liabilities		( i 2,526	)		( i 813	)
Net cash provided by operating activities		i 3,395			i 19,250

Cash flows from investing activities:
Investment in finance receivables		( i 25,350	)		( i 20,100	)
Repayment of finance receivables		i 34,195			i 22,779
Corporate debt securities principal payments		i 21			i 31
Purchases of property and equipment		( i 111	)		( i 671	)
Other		i 113			i 163
Net cash provided by investing activities		i 8,868			i 2,202

Cash flows from financing activities:
Net payments on credit facility		( i 8	)		( i 11,758	)
Payment of acquisition-related contingent consideration		—			( i 6,083	)
Net cash used in financing activities		( i 8	)		( i 17,841	)

Net increase in cash and cash equivalents		i 12,255			i 3,611
Cash and cash equivalents at beginning of period		i 42,863			i 3,008
Cash and cash equivalents at end of period	$	i 55,118		$	i 6,619

	June 30, 2022			December 31, 2021
Term loans	$	i 133,004		$	i 136,312
Royalty purchases		i 50,220			i 53,629
Total before allowance for credit losses		i 183,224			i 189,941
Allowance for credit losses		( i 8,365	)		( i 8,388	)
Total carrying value	$	i 174,859		$	i 181,553

SWK Holdings Corp. – ‘10-Q’ for 6/30/22

On: Wednesday, 8/10/22, at 4:09pm ET · For: 6/30/22 · Accession #: 1552781-22-529 · File #: 1-39184

Previous ‘10-Q’: ‘10-Q’ on 5/10/22 for 3/31/22 · Next: ‘10-Q’ on 11/9/22 for 9/30/22 · Latest: ‘10-Q’ on 11/8/23 for 9/30/23

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Unaudited Condensed Consolidated Balance Sheets—June 30, 2022 and December 31, 2021	1

	Unaudited Condensed Consolidated Statements of Income —Three and Six Months Ended June 30, 2022 and 2021	2

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three and Six Months Ended June 30, 2022 and 2021	3

	Unaudited Condensed Consolidated Statements of Cash Flows—Six Months Ended June 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	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4	Controls and Procedures	26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

	Signatures	29

	June 30, 2022		December 31, 2021
Corporate debt securities	$	i 98	$	i 119
Equity securities		i 487		i 1,034
Total marketable investments	$	i 585	$	i 1,153

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
June 30, 2022	$	i 98	$	—	$	—	$	i 98
December 31, 2021	$	i 119	$	—	$	—	$	119

	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022			2021
Unrealized net (loss) gain on equity securities reflected in the unaudited condensed consolidated statements of income	$	( i 519	)	$	i 283	$	( i 547	)	$	i 1,215

Fiscal Year	Amount
Remainder of 2022	$	i 851
2023		i 1,703
2024		i 1,546
2025		i 1,076
2026		i 1,076
Thereafter		i 2,790
Total	$	i 9,042


Trio Healthcare Ltd. Loan	$	i 1.4
Total unfunded commitments	$	i 1.4

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.


June 30, 2022				June 30, 2021
Fair value - December 31, 2021	$	i 3,419		Fair value - December 31, 2020	$	i 2,972
Issued		i 227		Issued		—
Canceled		—		Canceled		—
Change in fair value		( i 1,165	)	Change in fair value		i 892
Fair value - June 30, 2022	$	i 2,481		Fair value - June 30, 2021	$	i 3,864

	June 30, 2022		December 31, 2021
Dividend rate range		i —		—
Risk-free rate range		i 2.9% to i 3.0%		i 0.97% to i 1.44%
Expected life (years) range		2.1 to 6.7		2.6 to 7.0
Expected volatility range		i 52.6% to i 147.5%		i 60.2% to i 142.0%

	June 30, 2022		December 31, 2021
Pharmaceutical Development Segment
Deferred revenue	$	i 56	$	i 185
Total contract liabilities	$	i 56	$	i 185

									Revenue Recognized
Royalty Purchases	Licensed Technology		Footnote		Funded Amount		GAAP Balance		Q2			YTD
Beleodaq®		Oncology treatment		(1)	$	7,600	$	4,242	$	470		$	772
Besivance®		Ophthalmic antibiotic		(2)		6,000		—		3			13
Best ABT, Inc.		Oncology diagnosis		(3), (4)		5,784		3,127		—			—
Coflex®/Kybella®/Zalviso®		Spinal stenosis/submental fullness				4,350		4,001		167			292
Cambia®		NSAID migraine treatment		(3)		8,500		1,477		(44	)		(59	)
Forfivo XL®		Depressive disorder treatment				6,000		1,416		224			672
Ideal Implant, Inc.		Aesthetics				3,000		3,259		134			268
Iluvien®		Diabetic macular edema				16,501		15,916		536			1,121
Narcan®		Opioid overdose treatment				17,500		497		236			1,660
Ostomy Products Royalty		Ostomy products		(1)		3,900		3,961		18			181
Veru, Inc.		Women’s health				10,000		3,959		237			525

														Revenue Recognized
Term Loans	Type		Footnote		Maturity Date		Principal		GAAP Balance		Rate			Q2		YTD
4Web, Inc.		First lien				06/03/23	$	27,797	$	29,876		15.8	%	$	1,088	$	2,144
AOTI, Inc.		First lien				03/21/27		12,000		11,919		11.0	%		375		414
Acer Therapeutics, Inc.		First lien				03/04/24		6,500		6,488		12.0	%		416		546
Acerus Pharmaceuticals Corporation		First lien		(5)		10/11/23		—		—		12.0	%		—		538
B&D Dental Corporation		First lien		(5)		12/10/18		—		—		14.0	%		—		2,401
BIOLASE, Inc.		First lien				05/31/25		13,300		13,633		10.5	%		461		906
Biotricity, Inc.		First lien				12/26/26		12,000		11,823		11.5	%		400		786
Epica International, Inc.		First lien				07/23/24		12,000		12,291		9.5	%		359		712
eTon Pharmaceuticals, Inc.		First lien				11/13/24		6,615		6,615		10.0	%		202		445
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	%		440		888
MolecuLight, Inc.		First lien				12/29/26		10,000		9,951		12.5	%		349		623
Sincerus Pharmaceuticals, Inc.		First lien				03/19/26		12,300		12,504		13.0	%		491		903
Trio Healthcare Ltd.		First lien				07/01/26		8,150		8,115		12.5	%		266		492

									Income (Loss) Recognized
Marketable Investments	Number of Shares		Footnote		Funded Amount		GAAP Balance		Q2			YTD
Secured Royalty Financing (Marketable Investment)		N/A		(4)	$	3,000	$	98	$	—		$	—
Bioventus, Inc. Common Stock		71,361				N/A		487		(519	)		(547	)
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		Q2			YTD
4Web, Inc.		TBD			$	—	$	—	$	—		$	—
AOTI, Inc.		92,490				—		—		—			—
Acer Therapeutics, Inc.		150,000				2.46		99		(131	)		(127	)
Acerus Pharmaceuticals Corporation		7,764,004				0.053 CAD		52		(178	)		(49	)
BIOLASE, Inc.		22,039				0.39		63		(67	)		(121	)
Biotricity, Inc.		57,536				6.26		61		(16	)		(116	)
CeloNova BioSciences, Inc.		TBD		(7)		—		—		—			—
DxTerity Diagnostics, Inc.		2,019,231		(7)		—		—		—			—
Epica International, Inc.		TBD				—		—		—			—
eTon Pharmaceuticals, Inc.		51,238				5.86		36		(62	)		(59	)
eTon Pharmaceuticals, Inc.		18,141				6.62		13		(22	)		(21	)
EyePoint Pharmaceuticals, Inc.		40,910				11.00		134		(137	)		(143	)
EyePoint Pharmaceuticals, Inc.		7,773				19.30		18		(22	)		(23	)
Flowonix Medical, Inc.		155,561		(4), (6)		—		—		—			—
Harrow Health, Inc.		373,847		(2)		2.08		2,005		163			(506	)

			Total Revenue
	Assets		Q2		YTD
Total finance receivables	$	174,859	$	6,828	$	17,243
Total marketable investments		585		N/A		N/A
Cost method investment		3,491		N/A		N/A
Fair value of warrant assets		2,481		N/A		N/A
Total assets/revenues	$	181,416	$	6,828	$	17,243

(1)	Royalty was paid off during the third quarter of 2022.
(2)	US royalty was paid off during the year ended December 31, 2021. SWK continues to receive insignificant royalties on international sales.
(3)	Investment considered impaired.
(4)	Investment on nonaccrual.
(5)	Loan was paid off during the six months ended June 30, 2022.
(6)	Flowonix is evaluating strategic alternatives for the business.
(7)	Loan was paid off during the year ended December 31, 2021.

Number	Exhibit Description			Filing	Filed
		Form	Exhibit	Date	Herewith

31.01	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

31.02	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

32.01	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*				X

32.02	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*				X

101.INS+	XBRL Instance				X

101.SCH+	XBRL Taxonomy Extension Schema				X

101.CAL+	XBRL Taxonomy Extension Calculation				X

101.DEF+	XBRL Taxonomy Extension Definition				X

101.LAB+	XBRL Taxonomy Extension Labels				X

101.PRE+	XBRL Taxonomy Extension Presentation				X

	SWK Holdings Corporation

	By:	/s/ Winston L. Black
		Winston L. Black
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Charles M. Jacobson
		Charles M. Jacobson
		Chief Financial Officer
		(Principal Financial Officer)

This ‘10-Q’ Filing	Date	Other Filings

	7/1/27
	12/31/24
	12/31/22
	12/15/22
	9/30/22
Filed on:	8/10/22	8-K, DEF 14A, PRE 14A
	8/3/22
	7/25/22
	7/1/22
For Period end:	6/30/22	4, 8-K
	3/31/22	10-Q, 4, 8-K
	3/25/22	10-K
	12/31/21	10-K, 10-K/A, 4, 8-K
	9/27/21	8-K
	6/30/21	10-Q, 4
	3/31/21	10-K, 10-Q, 4, 8-K
	12/31/20	10-K, 10-K/A, 4
	1/1/20
	11/15/19
		List all Filings