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

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 ~~YES~~ Yeso 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~~ YesoNO

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). oYES xNO

As of ~~May 10,~~November 8, 2021, there were ~~12,795,554~~12,809,438 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.


~~Item 6.~~	~~Exhibits~~	27

	~~Signatures~~	28

FORWARD-LOOKING STATEMENTS

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

These risks and uncertainties include, but are not limited to, those described in Part II, Item 1A, “Risk ~~Factors”~~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.

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,610		$	3,008		$	18,639		$	3,008
Interest and accounts receivable, net		2,171			1,911			2,254			1,911
Marketable investments		2,142			1,210			2,767			1,210
Other current assets		984			542			1,101			542
Total current assets		6,907			6,671			24,761			6,671

Finance receivables, net		209,903			204,491			196,141			204,491
Marketable investments		223			241			198			241
Investment in TRT		3,491			3,491
Deferred tax asset, net		26,573			27,491
Cost method investment								3,491			3,491
Deferred tax assets, net								22,649			27,491
Warrant assets		3,255			2,972			3,650			2,972
Intangible assets, net		11,853			13,617			10,507			13,617
Goodwill		8,404			8,404			8,404			8,404
Property and equipment, net		5,451			5,211			5,791			5,211
Other non-current assets		1,158			1,312			1,029			1,312
Total assets	$	277,218		$	273,901		$	276,621		$	273,901

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,045		$	3,652		$	4,494		$	3,652
Revolving credit facility		11,159			11,758			8			11,758
Total current liabilities		15,204			15,410			4,502			15,410

Contingent consideration payable		16,900			16,900			10,670			16,900
Other non-current liabilities		1,036			1,079			779			1,079
Total liabilities		33,140			33,389			15,951			33,389

Commitments and contingencies (Note 8)
Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		—			—
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,795,607 and 12,792,586 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		13			13
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively								—			—
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,801,313 and 12,792,586 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively								13			13
Additional paid-in capital		4,431,101			4,430,924			4,431,480			4,430,924
Accumulated deficit	��	(4,187,036	)		(4,190,425	)		(4,170,823	)		(4,190,425	)
Total stockholders’ equity		244,078			240,512			260,670			240,512
Total liabilities and stockholders’ equity	$	277,218		$	273,901		$	276,621		$	273,901

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~

(in thousands, except per share data)


	Three Months Ended March 31,					Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020			2021			2020			2021			2020
Revenues:
Finance receivables interest income, including fees	$	8,679	$	7,136		$	9,373		$	7,869		$	29,857		$	22,738
Pharmaceutical development		198		148			187			2,778			10,846			3,076
Other		496		18			—			—			496			9
Total revenues		9,373		7,302			9,560			10,647			41,199			25,823
Costs and expenses:
Impairment expense		—		163			—			—			—			163
Interest expense		145		101			53			101			292			365
Pharmaceutical manufacturing, research and development expense		1,548		1,150			2,487			1,182			5,577			3,311
Change in fair value of acquisition-related contingent consideration							—			174			(147	)		1,964
Depreciation and amortization expense		1,682		3,505			812			2,681			3,305			9,629
General and administrative		2,885		3,040			3,580			2,527			9,825			8,215
Total costs and expenses		6,260		7,959			6,932			6,665			18,852			23,647
Other income (expense), net
Unrealized net gain (loss) on warrants		283		(1,860	)
Unrealized net (loss) gain on warrants							(214	)		87			678			(1,151	)
Unrealized net gain (loss) on equity securities		932		(890	)		342			(178	)		1,557			(666	)
Income (loss) before provision for income taxes		4,328		(3,407	)
Provision for income taxes		939		1,253
Consolidated net income (loss)	$	3,389	$	(4,660	)
Net income (loss) per share
Income before income tax expense (benefit)							2,756			3,891			24,582			359
Income tax expense (benefit)							513			(451	)		4,980			(199	)
Consolidated net income						$	2,243		$	4,342		$	19,602		$	558
Net income per share
Basic	$	0.26	$	(0.36	)	$	0.18		$	0.34		$	1.53		$	0.04
Diluted	$	0.26	$	(0.36	)	$	0.17		$	0.34		$	1.53		$	0.04
Weighted Average Shares
Basic		12,793		12,913			12,798			12,905			12,796			12,891
Diluted		12,810		12,913			12,859			12,916			12,834			12,898

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Three Months Ended March 31, 2021
	Common Stock											Total			Nine Months Ended September 30, 2021
						Additional Paid-			Accumulated			Stockholders’			Common Stock					Additional			Accumulated			Total Stockholders’
	Shares			Amounts		In Capital			Deficit			Equity			Shares			Amounts		Paid-In Capital			Deficit			Equity
Balances at December 31, 2020		12,792,586		$	13	$	4,430,924		$	(4,190,425	)	$	240,512			12,792,586		$	13	$	4,430,924		$	(4,190,425	)	$	240,512
Stock-based compensation		—			—		177			—			177			—			—		177			—			177
Issuance of common stock		3,021			—		—			—			—			3,021			—		—			—			—
Net income		—			—		—			3,389			3,389			—			—		—			3,389			3,389
Balances at March 31, 2021		12,795,607		$	13	$	4,431,101		$	(4,187,036	)	$	244,078			12,795,607			13		4,431,101			(4,187,036	)		244,078

Stock-based compensation																—			—		187			—			187
Issuance of common 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																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
	Three Months Ended March 31, 2020
	Common Stock											Total			Nine Months Ended September 30, 2020
						Additional Paid-			Accumulated			Stockholders’			Common Stock					Additional			Accumulated			Total Stockholders’
	Shares			Amounts		In Capital			Deficit			Equity			Shares			Amounts		Paid-In Capital			Deficit			Equity
Balances at December 31, 2019		12,917,348		$	13	$	4,432,146		$	(4,195,627	)	$	236,532			12,917,348		$	13	$	4,432,146		$	(4,195,627	)	$	236,532
Stock-based compensation		—			—		187			—			187			—			—		187			—			187
Issuance of common stock		5,937			—		—			—			—			5,937			—		—			—			—
Repurchases of common stock in open market		(5,279	)		—		(62	)		—			(62	)		(5,279	)		—		(62	)		—			(62	)
Net loss		—			—		—			(4,660	)		(4,660	)		—			—		—			(4,660	)		(4,660	)
Balances at March 31, 2020		12,918,006		$	13	$	4,432,271		$	(4,200,287	)	$	231,997			12,918,006			13		4,432,271			(4,200,287	)		231,997
Stock-based compensation																—			—		183			—			183
Issuance of common stock in lieu of payment of employee cash bonuses																5,200			—		60			—			60
Issuance of common stock																4,569			—		—			—			—
Repurchases of common stock in open market																(78,537	)		—		(1,033	)		—			(1,033	)
Net income																—			—		—			876			876
Balances at June 30, 2020																12,849,238		$	13		4,431,481			(4,199,411	)		232,083
Stock-based compensation																—			—		179			—			179
Issuance of common stock																3,089			—		—			—			—
Repurchases of common stock in open market																(70,176	)		—		(903	)		—			(903	)
Net income																—			—		—			4,342			4,342
Balances at September 30, 2020																12,782,151		$	13	$	4,430,757		$	(4,195,069	)	$	235,701

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Months Ended March 31,						Nine Months Ended September 30,
	2021			2020			2021			2020
Cash flows from operating activities:
Consolidated net income (loss)	$	3,389		$	(4,660	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Consolidated net income							$	19,602		$	558
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment expense		—			163			—			163
Amortization of debt issuance costs		46			47			35			141
Deferred income taxes		918			1,253			4,842			(206	)
Change in fair value of warrants		(283	)		1,860			(678	)		1,151
Change in fair value of equity securities		(699	)		890			(1,557	)		666
Change in fair value of acquisition-related contingent consideration								(147	)		1,964
Loan discount amortization and fee accretion		(628	)		(536	)		(2,016	)		(1,598	)
Interest paid-in-kind		(13	)		(467	)		(698	)		(2,369	)
Stock-based compensation		177			187			556			549
Depreciation and amortization expense		1,682			3,505			3,305			9,629
Changes in operating assets and liabilities:
Interest and accounts receivable		(260	)		543			(343	)		(2,054	)
Other assets		(308	)		(462	)		(371	)		(819	)
Accounts payable and other liabilities		350			994			542			1,434
Net cash provided by operating activities		4,371			3,317			23,072			9,209

Cash flows from investing activities:
Investment in equity securities		(233	)		—
Investment in finance receivables		(7,100	)		(5,500	)		(20,100	)		(12,458	)
Repayment of finance receivables		2,304			1,348			31,162			5,928
Corporate debt securities principal payment		18			18			43			49
Purchases of property and equipment		(321	)		—			(877	)		(2,354	)
Other		163			(249	)		164			(220	)
Net cash used in investing activities		(5,169	)		(4,383	)
Net cash provided by (used in) investing activities								10,392			(9,055	)

Cash flows from financing activities:
Net (payments) proceeds from credit facility		(600	)		14,288
Net (payments on) proceeds from credit facility								(11,750	)		—
Payment of acquisition-related contingent consideration								(6,083	)		—
Repurchases of common stock, including fees and expenses		—			(62	)		—			(1,998	)
Net cash (used in) provided by financing activities		(600	)		14,226
Net cash used in financing activities								(17,833	)		(1,998	)

Net (decrease) increase in cash and cash equivalents		(1,398	)		13,160
Net increase in cash and cash equivalents								15,631			(1,844	)
Cash and cash equivalents at beginning of period		3,008			11,158			3,008			11,158
Cash and cash equivalents at end of period	$	1,610		$	24,318		$	18,639		$	9,314

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~

~~SWK HOLDINGS CORPORATION~~5

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

SWK Holdings Corporation (the “Company”) was incorporated in July 1996 in California and reincorporated in Delaware in September 1999. In July 2012, the Company commenced its strategy of building a specialty finance and asset management business. In August 2019, the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property licensing business. The Company’s operations comprise two reportable segments: “Finance Receivables” and “Pharmaceutical Development.” The Company allocates capital to each segment in order to generate income through the sales of life science products by third parties. The Company is headquartered in Dallas, Texas, and as of ~~March 31,~~September 30, 2021, the Company had 3435 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 ~~May 10,~~November 8, 2021, the Company and its partners have executed transactions with 42 different parties under its specialty finance strategy, funding an aggregate ~~$587~~of $600.0 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.

On August 26, 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. Since its founding in 2013, Enteris has advanced multiple internal and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation. Peptelligence® utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability. Peptelligence® is protected by an extensive patent estate that extends until 2036.

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United ~~States.~~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.

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, 2021. 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, 2020, filed with the SEC on March 31, 2021.

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

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.

The Company earns revenues from its ~~two~~2 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.

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.

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.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 is effective from March 12, 2020 through December 31, 2022. An entity may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. An entity may elect to apply the amendments in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. The one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made at any time after March 12, 2020 but no later than December 31, 2022. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04; however, the Company is still evaluating the guidance, and therefore, the impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This standard adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under 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.

Basic net income ~~(loss)~~ per share is computed using the weighted average number of outstanding shares of common stock. Diluted net income ~~(loss)~~ 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 ~~(loss)~~ per share for the following periods (in thousands, except per share amounts):

For the three months ended ~~March 31,~~September 30, 2021 and 2020, outstanding ~~stock~~ options ~~and restricted stock units~~ to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately ~~411,000~~367,000 and ~~460,000,~~409,000, respectively, have been excluded from the calculation of diluted net income ~~(loss)~~ per share as ~~all~~ such securities were anti-dilutive. For the nine months ended September 30, 2021 and 2020, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 390,000 and 455,000, respectively, have been excluded from the calculation of diluted net income per share as such securities were anti-dilutive.

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

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had a credit loss allowance of $8.4 million. Of the total $8.4 million, ~~$1.2~~$1.2 million and ~~$0.6~~$0.6 million are associated with the Company’s Cambia® and Besivance® royalties, respectively. The remaining ~~$6.6~~$6.6 million is related to the ABT Molecular Imaging, Inc. ~~(“ABT”)~~, now known as Best ABT, Inc. (“Best”), second lien term loan that was recognized in order to reflect the Best royalty at its estimated fair ~~value of $3.7 million.~~ value.

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

As of ~~March 31,~~September 30, 2021, the Company had two finance receivables in nonaccrual status: (1) the term loan to B&D Dental Corporation (“B&D”), with a net carrying value of ~~$8.3~~$8.3 million and (2) the Best royalty, with a net carrying value of ~~$3.7 million.~~$3.5 million. Although in nonaccrual status, the B&D term loan was not considered impaired as of ~~March 31,~~September 30, 2021 and December 31, 2020. The Company collected ~~$0.2~~$0.4 million on the Best royalty during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, which was credited toward the royalty’s carrying value. The Company did not collect any cash on its nonaccrual royalties during the three months ended March 31, 2020. (Please see B&D, Best and Besivance below for further details regarding nonaccrual and impaired finance receivables).

On December 10, 2013, the Company entered into a five-year credit agreement to provide B&D a senior secured term loan with a principal amount of $6.0 million funded upon close, net of an arrangement fee of $60,000. The loan was scheduled to mature on December 10, 2018. Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D. As of March 31, 2021, the total amount funded was $8.3 million. B&D is currently evaluating strategic options, including a potential sale of the business.

B&D is currently in default under the terms of the credit agreement, and as a result, the Company classified the loan to nonaccrual status as of September 30, 2015. During 2016 and 2018, the Company executed three additional amendments to the loan to advance an additional $0.7 million in order to directly pay critical vendors and protect the value of the collateral. The Company periodically obtains third-party valuations of B&D. As a result of the third-party valuations and facts and circumstances regarding B&D’s operations, including its intellectual property position, improved profitability and working capital position, the Company believes its collateral position is greater than the unpaid balance; thus, accrued interest has not been reversed nor has an allowance been recorded as of March 31, 2021.

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

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

During the year ended December 31, 2019, the Company re-evaluated the value of the Best royalty based on 2019 business trends, and as a result, the Company recognized a provision for credit losses of $1.6 million. The estimated fair value as of March 31, 2021 is $3.7 million.

On June 13, 2013, the Company purchased royalties from Tissue Regeneration Therapeutics, Inc. (“TRT”) related to its technology licenses in the family cord banking services sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon the achievement of royalty receipts-based milestones. During the quarter ended March 31, 2016, royalty payments from the primary U.S. licensee ended as a result of the licensee terminating a technology license. SWK and TRT continue to evaluate both options in regard to enforcing TRT’s intellectual property rights against this licensee, as well as seeking additional U.S. licensees.

On August 21, 2020, the Company and TRT agreed to terminate the royalty purchase agreement in exchange for TRT issuing the Company TRT common equity and a convertible note. The convertible note carries no interest, can be redeemed in cash without penalty at any time by TRT, and converts into common equity of TRT at decreasing valuations over time to induce repayment in cash. The convertible feature is at the option of TRT.

As of March 31, 2021, the Company does not believe there is an impairment of the carrying value of the investment in TRT. The Company evaluated several factors in this determination, including input from intellectual property counsel regarding the strength of the related intellectual property, advancements with TRT’s intellectual property estate and technology license agreements generally, continued receipt of Canadian licensee royalty payments and a third party valuation of the Company’s investment in TRT. As of March 31, 2021, there were no adjustments to the carrying amount of $3.5 million.

Investments in available-for-sale corporate debt securities and equity securities as of ~~March 31,~~September 30, 2021 and December 31, 2020 consist of the following (in thousands):

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 ~~March 31,~~September 30, 2021 and December 31, 2020, are as follows (in thousands):

The following table presents unrealized net income (loss) on equity securities during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):

There was no change in the carrying amount of goodwill from December 31, 2020 to ~~March 31,~~September 30, 2021, and net book value remains at $8.4 million. The net book value of goodwill is solely related to the Enteris acquisition in 2019. ~~As of March 31, 2021, the Company concluded that it is more likely than not that fair value of the reporting unit is greater than its carrying value, and goodwill is not considered to be impaired.~~

The following table summarizes the ~~components of~~ gross ~~intangible assets,~~book value, accumulated amortization and net book value balances of intangible ~~asset balances~~assets as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):

Amortization expense related to intangible assets was ~~$1.6~~$0.6 million and ~~$3.4~~$2.6 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Amortization expense related to intangible assets was $2.9 million and $9.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The estimated future amortization expense related to intangible assets as of ~~March 31,~~September 30, 2021 is as follows (in thousands):

On ~~June 29, 2018,~~September 27, 2021, the Company entered into athe Third Amendment to Loan and Security Agreement (the ~~“Loan Agreement”~~“Third Amendment”) with ~~State~~Cadence Bank, ~~and Trust Company~~N.A. as a lender and the administrative ~~agent~~agent. Pursuant to the Third Amendment, the Loan and Security Agreement dated as of June 29, 2018 (“~~State Bank”~~Loan Agreement”) ~~pursuant~~was amended to ~~which State Bank~~extend the Loan Agreement Termination Date to September 30, 2022 and increase the Loan Agreement Commitment to $22.0 million. The Loan Agreement requires the payment of an unused line fee of 0.50 percent and also provides for quarterly minimum fee income of $60,000 less the ~~Company with up to a $20.0 million revolving senior secured credit facility, which~~aggregate interest and unused line fees paid during the ~~Company can draw down~~immediately preceding quarter. Unused line fees and ~~repay until maturity, subject to borrowing base eligibility.~~minimum fee income are recorded as interest expense.

The Loan Agreement accrues interest at the Daily LIBOR Rate, with a floor of 1.00 percent, plus a 3.25 percent margin and principal is repayable in full at maturity. Interest is generally required to be paid monthly in arrears. ~~The Loan Agreement requires~~In connection with the ~~payment of an unused line fee of 0.50 percent, which is recorded as interest expense. The~~Third Amendment, the Company paid ~~$0.5 million in fees at closing,~~a $50,000 amendment fee, which ~~have been~~was capitalized as deferred financing costs and ~~are~~is being amortized on a straight-line basis over the remaining term of the Loan Agreement.

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

During ~~both~~ the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, the Company recognized ~~$0.1~~$0.3 million and $0.4 million, respectively, of interest expense. As of ~~March 31,~~September 30, 2021, ~~$11.2 million~~approximately $8,000 was outstanding under the revolving credit facility, and ~~$8.8~~approximately $22.0 million was available for borrowing. The credit facility was paid off subsequent to quarter ended March 31, 2021, and $20.0 was available for borrowing as of May 10, 2021. The Loan Agreement matures on June 30, 2021; however, the Company has the option to extend the maturity date by 90 days. The Company continues to explore other options with respect to a new credit facility.

The Company recorded contingent consideration related to the August 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License ~~Agreement (please refer to Note 6 for further details on the License Agreement).~~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. As of ~~March~~September 30, 2021 and December 31, ~~2021,~~2020, the ~~estimated~~ fair value of ~~the~~ contingent consideration was ~~$16.9 million.~~$10.7 million and $16.9 million, respectively. During the nine months ended September 30, 2021, the Company recognized $10.0 million of revenue related to the completion of a milestone under the License Agreement with Cara. During the nine months ended September 30, 2021, the Company paid $6.1 million of such amount to the seller of Enteris, pursuant to the earnout provisions of the merger agreement. The Company ~~did not recognize~~also recognized a $0.1 million change in the estimated fair value of its contingent consideration ~~for~~during the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

As of ~~March 31,~~September 30, 2021, the Company’s unfunded commitments were as follows (in millions):

AsSchedule of May 10, 2021, aggregate unfunded commitments increased to $3.9 million due to SWK Funding entering into a synthetic royalty agreement with Ideal Implant, Inc. (“Ideal”) on April 27, 2021 (please refer to Note 12 for further details on SWK Funding’s royalty agreement with Ideal). Unfunded Commitments

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

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.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

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.

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

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

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.

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.

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.

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

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of ~~March 31,~~September 30, 2021 (in thousands):

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 (in thousands):

The changes in fair value of the warrant assets during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 were as follows (in thousands):

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

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:

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had three royalties, Besivance®, Best, and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):

There were no liabilities measured at fair value on a nonrecurring basis as of ~~March 31,~~September 30, 2021 and December 31, 2020.

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 ~~March 31,~~September 30, 2021 and 2020 (in thousands):

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):

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Company recognized ~~$0.3~~$0.3 million of 2020 deferred revenue from satisfaction of performance obligations. ~~Please refer to Note 6 for further details on the Company’s License Agreement.~~ The Company did not have any contract assets nor did it have any contract liabilities related to the License Agreement as of ~~March 31,~~September 30, 2021 or December 31, 2020.

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.

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

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.

On ~~April 1,~~October 22, 2021, SWK Funding received ~~$6.5~~$0.5 million for the payoff of the ~~Tenex Health, Inc.~~Thermedx LLC term ~~loan in connection with its sale.~~loan. The proceeds included accrued interest ~~proceeds from the termination~~and interest paid-in-kind.

On October 29, 2021, Misonix, Inc. (“Misonix”) was acquired by Bioventus, Inc. (“Bioventus”). Upon closing of the ~~warrant, and exit fees.~~

On April 27, 2021, SWK Funding closed a synthetic royalty purchase agreement with Ideal. SWK Funding paid $3.0 million at closing with another $2.0 available for borrowing should Ideal achieve certain milestones. In exchange, SWK Funding will receive royalties based on sales of implants.

~~On April 30, 2021, Harrow Health, Inc. repaid its term loan.~~transaction, SWK Funding received ~~approximately $9.4~~$31.6 million at for the payoff ~~for its portion~~ of the Misonix term ~~loan, which~~loan. The proceeds included accrued interest, prepayment and exit fees. The Company also tendered its Misonix common stock and received $1.9 million in cash and 71,361 shares of Bioventus common stock valued at $1.2 million at the date of transaction.

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, 2020 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.

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

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

On May 17, 2021, we issued a press release announcing the formation by our Board of Directors (“Board”) of a Strategic Review Committee (“SRC”) to identify, review and explore strategic alternatives with a view to enhancing stockholder value. With its advisors, the SRC completed a comprehensive review of strategic alternatives for each segment of the Company. On November 1, 2021, we issued a press release announcing that the Board approved a streamlined go-forward business plan and has begun implementing several new measures in light of our current governance structure. The goal of these measures is to improve our strategic focus, growth profile, and capital allocation. The Board believes these measures will allow us to generate long-term value for stockholders.

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.

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 it business performance and manages its operations. Please refer to Item 1. Financial Statements, Note 1110 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment information.

In our Finance Receivables segment, we evaluate and invest in a broad range of healthcare related companies and products with innovative intellectual property, including the biotechnology, medical device, medical diagnostics and related tools, animal health and pharmaceutical industries (together “life science”) by tailoring financial solutions to the needs of our business partners.

Our investment objective is to maximize our portfolio total return and thus increase our net income and book value by generating income from three sources: (1) primarily owning or financing through debt investments, royalties or revenue interests generated by the sales of life science products and related intellectual property, (2) receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector, and (3) to a lesser extent, realizing capital appreciation from equity-related investments in the life science sector.

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

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

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

The table below provides an overview of our outstanding finance receivables transactions as of, and for the three and nine months ended ~~March 31,~~September 30, 2021 (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 ~~three~~nine months ended ~~March 31,~~September 30, 2021, 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.

Comparison of the Three Months Ended ~~March 31,~~September 30, 2021 and 2020 (in millions)

~~We generated revenues of $9.4 million and $7.3~~Revenues decreased to $9.6 million for the three months ended ~~March 31,~~September 30, 2021 ~~and 2020, respectively, which consisted~~from $10.6 million for the three months ended September 30, 2020. The decrease was primarily the result of a $2.6 million decrease in revenues from our Pharmaceutical Development segment, partially offset by a $1.5 million increase in interest and fees earned on our finance ~~receivables and a $0.5 million increase~~receivables. The decrease in ~~revenues from our~~ Pharmaceutical Development ~~segment.~~segment revenue was primarily the result of $2.5 million of non-recurring milestone revenue received in 2020 related to Enteris’ license agreement with Cara. The $1.5 million increase in revenue attributable to our Finance Receivables segment primarily consists of a ~~$1.0~~$1.4 million net increase in royalty income and a ~~$0.9~~$1.1 million increase in fees and interest earned on our finance receivables due to funding new and existing loans. The increase in revenue was partially offset by a ~~$0.4~~$1.0 million decrease in interest and fees earned on finance receivables that were paid off or paid down since the ~~second~~third quarter of 2020.

We did not recognize any credit loss provision or impairment expense during the three months ended March 31, 2021. We recognized impairment expense of $0.2 million on our available-for-sale debt security during the three months ended March 31, 2020.

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 ~~March 31,~~September 30, 2021 and 2020 was $0.1 ~~million.~~million, respectively.

Pharmaceutical manufacturing, research and development expense increased from $1.2 million for the three months ended ~~March 31,~~ 2020 to ~~$1.5~~$2.5 million for the three months ended ~~March 31,~~September 30, 2021. The ~~$0.3~~$1.3 million increase was primarily due to an increase in ~~purchases~~manufacturing materials for pipeline projects and clinical trials.

Change in Fair Value of ~~manufacturing materials.~~Acquisition-Related Contingent Consideration

We did not recognize any change in fair value of acquisition-related contingent consideration during the three months ended September 30, 2021, and a $0.2 million remeasurement adjustment was made during the three months ended September 30, 2020. Please refer to Part I, Item I, Financial Statements, Note 7 of the notes to the unaudited condensed consolidated financial statements for further information regarding acquisition-related contingent consideration.

The ~~$1.8~~$1.9 million decrease in depreciation and amortization expense for the three months ended ~~March 31,~~September 30, 2021 primarily consists of a decrease in amortization expense related to the intangible assets of Enteris.

General and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff and Board, ~~of Directors,~~ legal and audit expenses, and corporate ~~governance.~~governance expenses. General and administrative expenses ~~decreased~~increased to ~~$2.9~~$3.6 million for the three months ended ~~March 31,~~September 30, 2021 from ~~$3.0~~$2.5 million for the three months ended ~~March 31, 2020, which~~2020. The $1.1 million increase was primarily due to a ~~$0.2 million decrease in professional fees, office and rent expense, partially offset by a $0.1~~$1.0 million increase in ~~salaries, wages~~expenses incurred in connection with the SRC’s efforts to identify, review and ~~benefits.~~explore strategic alternatives for the Company; such expenses primarily consist of legal and financial consulting fees, as well as Board compensation.

Other income (expense), net for three months ended ~~March 31,~~September 30, 2021 reflected a net fair market value ~~gain~~loss of ~~$0.3~~$0.2 million on our warrant derivatives and a net fair market value gain of ~~$0.9~~$0.3 million on our Misonix common stock. Other ~~expense,~~income (expense), net for the three months ended ~~March 31,~~September 30, 2020 reflected a net fair market value ~~loss~~gain of ~~$1.9~~$0.1 million on our warrant derivatives and a net fair market value loss of ~~$0.9~~$0.2 million on our Misonix common stock.

During the three months ended ~~March 31,~~September 30, 2021 and 2020, we recognized income tax expense of ~~$0.9~~$0.5 million and ~~$1.3~~income tax benefit of $0.5 million, ~~respectively, which represented effective tax rates of 21 percent and negative 37 percent,~~ respectively. The provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to ordinary income or loss for the interim reporting period. The annual effective tax rate is adjusted for nondeductible expenses and other permanent differences, including changes in fair value on our warrant derivatives and equity securities, which resulted in a $0.4$1.0 million ~~decrease~~increase in income tax expense ~~during~~is a result of higher taxable income for the three months ended ~~March 31,~~September 30, 2021 when compared to the same period of the prior year.

We generated revenues of $41.2 million and $25.8 million for the nine months ended September 30, 2021 and 2020, respectively. The $15.4 million increase consisted primarily of a $6.9 million increase in interest and fees earned on our finance receivables and a $8.2 million increase in revenues from our Pharmaceutical Development segment. The increase in Pharmaceutical Development segment revenue included milestone revenue related to Enteris’ license agreement with Cara. The $6.9 million increase in revenue attributable to our Finance Receivables segment was the result of a $5.1 million net increase in royalty income and a $2.8 million increase in fees and interest earned on our finance receivables due to funding new and existing loans. The increase in revenue was partially offset by a $1.0 million decrease in interest and fees earned on finance receivables that were paid off or paid down since the third quarter of 2020.

We did not recognize any credit loss provision or impairment expense during the nine months ended September 30, 2021. We recognized impairment expense of $0.2 million on our available-for-sale debt security during the nine months ended September 30, 2020.

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, 2021 and 2020 was $0.3 million and $0.4 million, respectively.

Pharmaceutical manufacturing, research and development expense increased from $3.3 million for the nine months ended September 30, 2020 to $5.6 million for nine months ended September 30, 2021. The $2.3 million increase was primarily due to an increase in manufacturing materials for pipeline projects and clinical trials.

We recognized a $0.1 million change in fair value of acquisition-related contingent consideration during the nine months ended September 30, 2021, and a $2.0 million remeasurement adjustment was made during the three months ended September 30, 2020. Please refer to Part I, Item I, Financial Statements, Note 7 of the notes to the unaudited condensed consolidated financial statements for further information regarding acquisition-related contingent consideration.

The $6.3 million decrease in depreciation and amortization expense for the nine months ended September 30, 2021 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 increased to $9.8 million for the nine months ended September 30, 2021 from $8.2 million for the nine months ended September 30, 2020. The $1.6 million increase was primarily due to a $1.4 million increase in expenses incurred in connection with the SRC’s efforts to identify, review and explore strategic alternatives for the Company; such expenses primarily consist of legal and financial consulting fees, as well as Board compensation. The increase also included a $0.2 million increase in salaries and benefits expense, as well as a $0.3 million increase in overall office, insurance and rent expense. The increase was partially offset by a $0.2 million decrease in other professional fees.

Other income, net for 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. Other expense, net for the nine months ended September 30, 2020 reflected a net fair market value loss of $1.2 million on our warrant derivatives and a net fair market value loss of $0.7 million on our Misonix common stock.

During the nine months ended September 30, 2021 and 2020, we recognized income tax expense of $5.0 million and tax benefit of $0.2 million, respectively. The $5.2 million increase in income tax expense is a result of higher taxable income for the nine months ended September 30, 2021 when compared to the same period of the prior year.

As of ~~March 31,~~September 30, 2021, we had ~~$1.6~~$18.6 million in cash and cash equivalents, compared to $3.0 million in cash and cash equivalents as of December 31, 2020. The primary driver of the ~~$1.4~~$15.6 million ~~decrease~~increase in our cash balance was $7.1 million of investment funding, net of deferred fees and origination expenses; $3.9 million of payments of accounts payable, payroll and benefits expense, including $0.3 million to purchase property and equipment for the expansion of the Enteris manufacturing facility; and $0.6 million of net borrowings and repayments on our credit facility. The decrease was partially offset by $10.4$58.3 million of interest, fees, principal and royalty payments received on our finance ~~receivables.~~receivables and a net $5.0 million of payments generated by our Pharmaceutical Development segment (the net $5.0 million includes a $10.0 million payment related to the completion of a milestone under the License Agreement less $6.1 million paid to the seller of Enteris, pursuant to the provisions of the merger agreement). The increase was partially offset by $19.8 million of investment funding, net of deferred fees and origination expenses; $16.0 million of accounts payable, payroll and benefits expense, including $3.2 million for Enteris’ internal pipeline projects; and $11.8 million of net borrowings and repayments on our credit facility.

Subsequent to September 30, 2021, we received $35.7 million of interest, fees and principal payments on our finance receivables, including $32.1 million for the payoff of two term loans (please refer to Part I. Financial Information, Item 1. Financial Statements, Note 11 of the notes to the unaudited condensed consolidated financial statements for further details). As of November 8, 2021, we had $56.8 million in cash and cash equivalents.

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 ~~March 31,~~September 30, 2021, our finance receivables portfolio contains ~~$209.9~~$196.1 million of finance receivables, ~~$2.4~~$3.0 million of marketable investments, and $3.5 million related to our ~~investment in Tissue Regeneration Therapeutics, Inc. We~~cost method investment. In the aggregate, we expect these assets to generate positive cash flows in 2021. However, the COVID-19 pandemic has created substantial uncertainty in the global markets and economy; therefore, we will continue to monitor the short and long-term impact this may have on our finance receivables portfolio. 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.

~~As of March 31, 2021, our Pharmaceutical Development segment did not have a material impact on our cash flow.~~ We expect the Pharmaceutical Development segment to generate positive cash flow above its expenses from proceeds received under its license agreements and customer relationships; however, the timing of the receipt of payments under the license agreements is uncertain and dependent upon the success of our technology licensees’ pharmaceutical development candidates. Also, the COVID-19 pandemic has resulted in disruption and delays to pharmaceutical clinical trials in general and may impact the expected timing of our technology licensees’ ability to achieve milestones upon which we receive income pursuant to our license agreements.

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, caused by COVID-19, we cannot predict this with certainty.

We entered into a $20.0 million revolving credit facility in June 2018. ~~As of March 31, 2021, $11.2 million was outstanding under the revolving credit facility, and $8.8 million was available for borrowing.~~ The credit facility was ~~paid off subsequent to quarter ended March 31,~~amended on September 27, 2021 ~~and $20.0 was available for borrowing as of May 10, 2021. The Loan Agreement matures on June 30, 2021; however, the Company has the option~~ to extend the ~~maturity~~termination date ~~by 90 days.~~to September 30, 2022 and to increase the credit facility commitment to $22.0 million. We continue to explore other options with respect to a new credit facility. As of September 30, 2021, approximately $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 87 of the notes to the unaudited condensed consolidated financial statements.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at ~~March 31,~~September 30, 2021 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.

During 2018, we entered into a revolving credit facility. As we borrow funds to make additional investments, our income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we are subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our income, especially to the extent we continue to hold fixed rate investments. 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 ~~three~~nine months ended ~~March 31,~~September 30, 2021 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, 2020, filed with the SEC on March 31, 2021. ~~Below~~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, 2020.

~~Our board of directors intends to form a strategic review committee to explore strategic alternatives.~~

On May 17, 2021, we issued a press release announcing the intention of our board of directors to form a strategic review committee to identify, review and explore strategic alternatives with a view to enhancing stockholder value. We also announced the withdrawal of the previously-announced proposal submitted by funds affiliated with Carlson Capital, L.P. to acquire our loan and royalty assets.

Our board of directors has not made any decision to enter into any transaction at this time, and there can be no assurance that the exploration of strategic alternatives will result in any transaction being announced or agreed upon. We have not set a timetable for the exploration of strategic alternatives, and we do not intend to comment on the strategic process any further until our board of directors and the strategic committee have approved a specific transaction or as we otherwise determine to be appropriate or required by law.

* 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 ~~May 17,~~November 12, 2021.

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)

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

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

~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~PART I. FINANCIAL INFORMATION		~~Financial Statements~~	1

Item 1.	Financial Statements	2

	Unaudited Condensed Consolidated Balance Sheets—~~March 31,~~September 30, 2021 and December 31, 2020	12

	Unaudited Condensed Consolidated Statements of ~~Income (Loss)—~~Income—Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020	23

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020	34

	Unaudited Condensed Consolidated Statements of Cash Flows—~~Three~~Nine Months Ended ~~March~~September 30, 2021 and 2020	45

	Notes to the Unaudited Condensed Consolidated Financial Statements	56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2528

Item 44.	Controls and Procedures	2528

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2629

Item 1A.	Risk Factors	2629

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2629

Item 3.	Defaults Upon Senior Securities	2629

Item 4.	Mine Safety Disclosures	2629

Item 5.	Other Information	29

Item 6.	Exhibits	30

	Signatures	31

Portfolio	March 31, 2021			December 31, 2020
Term loans	$	170,456		$	164,032
Royalty purchases		47,835			48,847
Total before allowance for credit losses		218,291			212,879
Allowance for credit losses		(8,388	)		(8,388	)
Total carrying value	$	209,903		$	204,491

	March 31, 2021						December 31, 2020
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,334	$	162,122	$	170,456	$	8,334	$	155,698	$	164,032
Royalty purchases, net of credit loss allowance		3,683		35,764		39,447		3,863		36,596		40,459
Total carrying value	$	12,017	$	197,886	$	209,903	$	12,197	$	192,294	$	204,491


	September 30, 2021						December 31, 2020
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,334	$	141,540	$	149,874	$	8,334	$	155,698	$	164,032
Royalty purchases, net of credit loss allowance		3,472		42,795		46,267		3,863		36,596		40,459
Total carrying value	$	11,806	$	184,335	$	196,141	$	12,197	$	192,294	$	204,491

	March 31, 2021		December 31, 2020
Corporate debt securities	$	223	$	241
Equity securities		2,142		1,210
Total marketable investments	$	2,365	$	1,451

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
March 31, 2021	$	223	$	—	$	—	$	223

December 31, 2020	$	241	$	—	$	—	$	241

	March 31, 2021							December 31, 2020
	Gross Book Value		Accumulated Amortization			Net Book Value		Gross Book Value		Accumulated Amortization			Net Book Value
Licensing Agreement⁽¹⁾	$	29,400	$	(17,925	)	$	11,475	$	29,400	$	(16,336	)	$	13,064
Patents		—		—			—		198		(153	)		45
Trade names and trademarks		210		(34	)		176		210		(29	)		181
Customer relationships		240		(38	)		202		240		(32	)		208
		29,850		(17,997	)		11,853		30,048		(16,550	)		13,498
Deferred patent costs		—		—			—		119		—			119
Total intangible assets	$	29,850	$	(17,997	)	$	11,853	$	30,167	$	(16,550	)	$	13,617

Fiscal Year	Amount
Remainder of 2021	$	1,965
2022		1,757
2023		1,757
2024		1,413
2025		1,069
2026 and thereafter		3,892
Total	$	11,853

Sincerus Pharmaceuticals, Inc.		$	1.9
Total unfunded commitments		$	1.9


Trio Healthcare Ltd. Loan	$	4.4
Ideal Implant, Inc.		2.0
Total unfunded commitments	$	6.4

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.

	Total Carrying Value in Consolidated Balance Sheets		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Carrying Value in Consolidated Balance Sheets		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	3,255	$	—	$	—	$	3,255	$	3,650	$	—	$	—	$	3,650
Marketable investments		2,365		2,142		—		223		2,965		2,767		—		198

Financial Liabilities:
Contingent consideration payable	$	16,900	$	—	$	—	$	16,900	$	10,670	$	—	$	—	$	10,670

Fair value – December 31, 2020	$	2,972
Issued		—
Canceled		—
Change in fair value		283
Fair value – March 31, 2021	$	3,255

	September 30, 2021		December 31, 2020
Dividend rate range		0		0
Risk-free rate range		0.53% to 1.32%		0.17% to 0.65%
Expected life (years) range		2.8 to 6.6		3.6 to 7.4
Expected volatility range		61.3% to 157.9%		74.3% to 174.7%

	~~March 31, 2021~~	~~December 31, 2020~~
~~Dividend rate range~~	—	—
~~Risk-free rate range~~	~~0.35% - 1.40%~~	~~0.17% to 0.65%~~
~~Expected life (years) range~~	~~3.3 - 7.1~~	~~3.6 to 7.4~~
~~Expected volatility range~~	~~64.3% - 187.9%~~	~~74.3% to 174.7%~~

	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	1,610	$	1,610	$	1,610	$	—	$	—	$	18,639	$	18,639	$	18,639	$	—	$	—
Finance receivables		209,903		209,903		—		—		209,903		196,141		196,141		—		—		196,141
Marketable investments		2,365		2,365		2,142		—		223		2,965		2,965		2,767		—		198
Warrant assets		3,255		3,255		—		—		3,255		3,650		3,650		—		—		3,650

Financial Liabilities
Contingent consideration payable	$	16,900	$	16,900	$	—	$	—	$	16,900	$	10,670	$	10,670	$	—	$	—	$	10,670

	Three Months Ended March 31,
	2021		2020
Pharmaceutical Development Segment
License Agreement	$	179	$	98
Pharmaceutical Development and other		515		50
Total contract revenue	$	694	$	148

	Three Months Ended March 31, 2021
Three Months Ended March 31, 2021	Finance Receivables			Pharmaceutical Development			Holding Company and Other			Consolidated
													Three Months Ended September 30, 2021
													Finance Receivables		Pharmaceutical Development and Other			Holding Company and Other			Consolidated
Revenue	$	8,679		$	198		$	—		$	8,877		$	9,373	$	187		$	—		$	9,560
Other revenue		—			496			—			496
Interest expense		145			—			—			145			53		—			—			53
Manufacturing, research and development		—			1,548			—			1,548			—		2,487			—			2,487
Depreciation and amortization expense		—			1,680			2			1,682
Depreciation and amortization														—		810			2			812
General and administrative		184			1,106			1,595			2,885			90		999			2,491			3,580
Other income, net		1,215			—			—			1,215			128		—			—			128
Provision for income taxes		—			—			939			939
Income tax expense														—		—			513			513
Consolidated net income (loss)		9,565			(3,640	)		(2,536	)		3,389			9,358		(4,109	)		(3,006	)		2,243

	Three Months Ended March 31, 2020
Three Months Ended March 31, 2020	Finance Receivables			Pharmaceutical Development			Holding Company and Other			Consolidated
Revenue	$	7,136		$	148		$	—		$	7,284
Other revenue		—			18			—			18
Provision for credit losses and impairment		163			—			—			163
Interest expense		101			—			—			101
Manufacturing, research and development		—			1,150			—			1,150
Depreciation and amortization expense		—			3,502			3			3,505
General and administrative		512			1,047			1,481			3,040
Other expense, net		(2,697	)		—			(53	)		(2,750	)
Provision for income taxes		—			—			1,253			1,253
Consolidated net income (loss)		3,663			(5,533	)		(2,790	)		(4,660	)


	Three Months Ended September 30, 2020
	Finance Receivables			Pharmaceutical Development and Other			Holding Company and Other			Consolidated
Revenue	$	7,869		$	2,778		$	—		$	10,647
Interest expense		101			—			—			101
Manufacturing, research and development		—			1,182			—			1,182
Depreciation and amortization		—			2,678			3			2,681
Change in fair value of acquisition-related contingent consideration		—			174			—			174
General and administrative		127			1,044			1,356			2,527
Other (expense) income, net		(192	)		—			101			(91	)
Income tax benefit		—			—			(451	)		(451	)
Consolidated net income (loss)		7,449			(2,300	)		(807	)		4,342

Royalty Purchases and Other Financings	Licensed Technology	Footnote	Funded Amount		GAAP Balance		Contract Rate	Revenue Recognized
Royalty Purchases and Other Financings	Licensed Technology	Footnote	Funded Amount		GAAP Balance		Contract Rate	YTD			Q3
Beleodaq®	Oncology treatment		$	7,600	$	5,059	N/A	$	1,274		$	456
Besivance®	Ophthalmic antibiotic	(3)	6,000		—		N/A	(26		)	(25		)
Best ABT, Inc.	Oncology diagnosis	(1), (2)	5,784		3,472		N/A	—			—
Coflex®/Kybella®/Zalviso®	Spinal stenosis/Submental fullness		4,350		4,160		N/A	465			155
Cambia®	NSAID migraine treatment	(1)	8,500		2,637		N/A	(9		)	(56		)
Forfivo XL®	Depressive disorder treatment		6,000		1,490		N/A	982			307
Ideal Implant, Inc.	Aesthetics		3,000		3,097		N/A	203			203
Iluvien®	Diabetic macular edema		16,501		16,205		N/A	1,813			641
Narcan®	Opioid overdose treatment		17,500		539		N/A	2,423			1,030
Ostomy products royalty	Ostomy products		3,900		4,443		N/A	450			156
Secured Royalty Financing (Marketable Investment)	Women’s health	(1), (2)	3,000		198		11.5%	—			—
Tissue Regeneration Therapeutics	Umbilical cord banking	(2)	3,250		3,491		N/A	—			—
Veru, Inc.	Synthetic Royalty	(4)	5,166		5,165		N/A	5,914			1,411

Royalty Purchases and Other Financings	Licensed Technology	Footnote	Funded Amount		GAAP Balance		Contract Rate	Revenue Recognized
Beleodaq®	Oncology treatment		$	7,600	$	5,173	N/A	$	465
Besivance®	Ophthalmic antibiotic	(1)		6,000		245	N/A		16
Best ABT, Inc.	Oncology diagnosis	(1), (2)		5,784		3,683	N/A		—
Coflex®/Kybella®/Zalviso®	Spinal stenosis/Submental fullness			4,350		4,345	N/A		155
Cambia®	NSAID migraine treatment	(1)		8,500		3,340	N/A		—
Forfivo XL®	Depressive disorder treatment			6,000		1,537	N/A		358
Iluvien®	Diabetic macular edema			16,501		16,588	N/A		589
Narcan®	Opioid overdose treatment			17,500		544	N/A		912
Secured Royalty Financing (Marketable Investment)	Women’s health	(1), (2)		3,000		223	11.5%		—
Tissue Regeneration Therapeutics	Umbilical cord banking	(2)		3,250		3,491	N/A		—
Ostomy products royalty	Ostomy products			3,900		3,992	N/A		—

Term Loans	Type	Footnote	Maturity Date	Principal		GAAP Balance		Contract Rate			Revenue Recognized
4Web, Inc.	First Lien		06/03/23	$	21,112	$	22,021		14.9	%	$	843
Acerus Pharmaceuticals, Inc.	First Lien		10/11/23		8,250		8,038		12.0	%		343
B&D Dental Corporation	First Lien	(2), (3)	12/10/18		8,365		8,334		14.0	%		—
BIOLASE, Inc.	First Lien		11/09/23		14,300		14,213		12.3	%		539
CeloNova BioSciences, Inc.	First Lien		07/31/21		3,812		4,009		12.5	%		131
DxTerity Diagnostics, Inc.	First Lien		12/31/21		10,474		10,888		16.3	%		509
Epica International, Inc.	First Lien		07/23/23		12,000		12,178		13.5	%		403
eTon Pharmaceuticals, Inc.	First Lien		11/13/24		7,000		6,740		12.0	%		252
Flowonix Medical, Inc.	First Lien		12/23/25		10,000		9,940		11.0	%		312
Harrow Health, Inc.	First Lien	(4)	07/19/23		8,724		8,540		9.0% - 12.0	%		293
Keystone Dental, Inc.	First Lien		11/14/22		15,000		15,392		11.5	%		461
Misonix, Inc.	First Lien		06/30/23		30,096		29,981		10.0% - 12.3	%		785
Sincerus Pharmaceuticals, Inc.	First Lien		03/19/26		7,100		7,058		13.0	%		33
Tenex Health, Inc.	First Lien	(5)	06/30/21		6,042		6,397		13.0	%		240
Thermedx, LLC	Sub Note		05/20/29		440		439		11.8	%		12
Veru, Inc.	Synthetic Royalty		03/05/25		6,288		6,288		N/A			1,028

Common Stock		Footnote				No of Shares				GAAP Balance				Change in Fair Value
Misonix, Inc. Common Stock							109,353			$	2,142			$	932

			No of		GAAP		Change in Fair Value
Common Stock	Footnote		Shares		Balance		YTD		Q3
Misonix, Inc. Common Stock		(8)		109,353	$	2,767	$	1,557	$	342
Sincerus Pharmaceuticals, Inc.				26,575		—		—		—

	Number of	Exercise Price	GAAP		Change in Fair Value
Warrants to Purchase Stock	Shares	per Share	Balance		YTD		Q3
4Web, Inc.	TBD	TBD	$	—	$	—	$	—
Acerus Pharmaceuticals, Inc.	7,764,004	0.05 CAD	196		(18)		(62)
B&D Dental Corporation	225	0.01	—		—		—
BIOLASE, Inc.	550,977	0.39	322		94		(35)
CeloNova BioSciences, Inc.	TBD	0.01	—		—		—
DxTerity Diagnostics, Inc.	2,019,231	2.08	—		—		—
Epica International, Inc.	TBD	TBD	—		—		—
eTon Pharmaceuticals, Inc.	51,239	5.86	126		(175)		(55)
eTon Pharmaceuticals, Inc.	18,141	6.62	45		(63)		(19)
EyePoint Pharmaceuticals, Inc.	40,910	11.00	224		99		35
EyePoint Pharmaceuticals, Inc.	7,773	19.30	34		15		5
Flowonix Medical, Inc.	155,561	3.86	—		—		—
Harrow Health, Inc.	373,847	2.08	2,703		726		(83)

Warrants to Purchase Stock	Footnote	Number of Shares	Exercise Price per Share	GAAP Balance		Change in Fair Value
4Web, Inc.		TBD	TBD	$	—	$	—
Acerus Pharmaceuticals, Inc.		7,764,004	0.053 CAD		324		110
B&D Dental Corporation	(2), (3)	225	0.01		—		—
BIOLASE, Inc.		550,977	0.39		459		231
CeloNova BioSciences, Inc.		TBD	0.01		—		—
DxTerity Diagnostics, Inc.		1,201,923	2.08		—		—
Epica International, Inc.		TBD	TBD		—		—
eTon Pharmaceuticals, Inc.		51,239	5.86		230		(70	)
eTon Pharmaceuticals, Inc.		18,141	6.62		83		(25	)
EyePoint Pharmaceuticals, Inc.		40,910	11.00		234		108
EyePoint Pharmaceuticals, Inc.		7,773	19.30		37		18
Flowonix Medical, Inc.		155,561	3.86		—		—
Harrow Health, Inc.	(4)	373,847	2.08		1,888		(89	)
Tenex Health, Inc.	(5)	2,693,878	0.37		—		—

			Income Recognized
	Assets		YTD		Q3 2021
Total finance receivables	$	196,141	$	29,857	$	9,373
Total marketable investments		2,965		N/A		N/A
Cost method investment		3,491		N/A		N/A
Fair value of warrant assets		3,650		N/A		N/A
Total assets/revenues	$	206,247	$	29,857	$	9,373

(3)	~~(3)~~The loan/royalty was paid off during 2021.
(4)	The return premium pursuant to the credit agreement was reached, and the residual royalty agreement commenced during the third quarter.
(5)	B&D is evaluating strategic alternatives for the business. The first lien loan is currently in default.

(6)	~~(4)~~Maturity date was amended to December 31, 2021 in July 2021.
(7)	Maturity date was amended to November 30, 2021 in June 2021.
(8)	On October 29, 2021, Misonix was acquired by Bioventus. Upon closing of the transaction, the Misonix term loan was paid off. We also tendered our Misonix common stock and received $1.9 million in cash and 71,361 shares of Bioventus common stock.
(9)	The loan was paid off on ~~April 30,~~October 22, 2021. ~~Please see Part 1, Item 1, Financial Statements, Note 12 of the notes to the unaudited condensed consolidated financial statements for further details).~~

~~Number~~	~~Exhibit Description~~			~~Filing~~	Filing	Filed
Number	��	~~Form~~Exhibit Description	~~Exhibit~~Form	~~Date~~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)