UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, ~~2021~~2022

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

Commission File Number: 001-39184

SWK Holdings Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware	77-0435679
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

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

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

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o NO

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

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer x

Smaller Reporting Company x

Emerging Growth Company o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES x NONo

As of November ~~8, 2021,~~1, 2022, there were ~~12,809,438~~12,820,349 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

SWK Holdings Corporation

Form 10-Q

Quarter Ended September 30, ~~2021~~2022

Table of Contents


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	21

	Unaudited Condensed Consolidated Balance Sheets—September 30, ~~2021~~2022 and December 31, ~~2020~~2021	21

	Unaudited Condensed Consolidated Statements of Income—Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	32

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	43

	Unaudited Condensed Consolidated Statements of Cash Flows—Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	54

	Notes to the Unaudited Condensed Consolidated Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2825

Item 4.4	Controls and Procedures	2825

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2926

Item 1A.	Risk Factors	2926

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2926

Item 3.	Defaults Upon Senior Securities	2926

Item 4.	Mine Safety Disclosures	2926

Item 5.	Other Information	2926

Item 6.	~~Exhibits~~	30Exhibits	27

	Signatures	3128

FORWARD-LOOKING STATEMENTS

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

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

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

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

Finance receivables, net 196,141 204,491
Marketable investments 198 241
Cost method investment 3,491 3,491
Deferred tax assets, net 22,649 27,491
Warrant assets 3,650 2,972
Intangible assets, net 10,507 13,617
Goodwill 8,404 8,404
Property and equipment, net 5,791 5,211
Other non-current assets 1,029 1,312
Total assets $ 276,621 $ 273,901

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

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

Commitments and contingencies (Note 7)

Stockholders’ equity:
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 4,431,480 4,430,924
Accumulated deficit (4,170,823 ) (4,190,425 )
Total stockholders’ equity 260,670 240,512
Total liabilities and stockholders’ equity $ 276,621 $ 273,901
September 30,
2022 December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents $ 19,399 $ 42,863
Interest and accounts receivable, net 7,384 1,803
Marketable investments 500 1,034
Other current assets 1,189 1,727
Total current assets 28,472 47,427

Finance receivables, net 212,959 181,553
Marketable investments 88 119
Cost method investment 3,491 3,491
Deferred tax assets, net 17,350 20,539
Warrant assets 5,140 3,419
Intangible assets, net 8,615 9,964
Goodwill 8,404 8,404
Property and equipment, net 5,945 5,779
Other non-current assets 1,802 1,970
Total assets $ 292,266 $ 282,665

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,746 $ 5,087
Revolving credit facility — 8
Total current liabilities 4,746 5,095

Contingent consideration payable 8,530 8,530
Other non-current liabilities 1,544 1,804
Total liabilities 14,820 15,429

Commitments and contingencies (Note 6)

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively — —
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,835,304 and 12,836,133 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 13 13
Additional paid-in capital 4,431,270 4,431,719
Accumulated deficit (4,153,837 ) (4,164,496 )
Total stockholders’ equity 277,446 267,236
Total liabilities and stockholders’ equity $ 292,266 $ 282,665
See accompanying notes to the unaudited condensed consolidated financial statements.
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1
SWK HOLDINGS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
September 30, Nine Months Ended
September 30,
Three Months Ended
September 30,

Nine Months Ended
September 30,
2021 2020 2021 2020 2022 2021 2022 2021
Revenues:
Finance receivables interest income, including fees $ 9,373 $ 7,869 $ 29,857 $ 22,738
Finance receivable interest income, including fees $ 8,502 $ 9,373 $ 25,745 $ 29,857
Pharmaceutical development 187 2,778 10,846 3,076 5,111 187 5,461 10,846
Other — — 496 9 1 — 481 496
Total revenues 9,560 10,647 41,199 25,823 13,614 9,560 31,687 41,199
Costs and expenses:
Impairment expense — — — 163
Interest expense 53 101 292 365 82 53 242 292
Pharmaceutical manufacturing, research and development expense 2,487 1,182 5,577 3,311 1,792 2,487 5,173 5,577
Change in fair value of acquisition-related contingent consideration — 174 (147 ) 1,964 — — — (147 )
Depreciation and amortization expense 812 2,681 3,305 9,629 634 812 1,964 3,305
General and administrative 3,580 2,527 9,825 8,215 4,349 3,580 10,527 9,825
Total costs and expenses 6,932 6,665 18,852 23,647
Income from operations 6,757 2,628 13,781 22,347
Other income (expense), net
Unrealized net (loss) gain on warrants (214 ) 87 678 (1,151 )
Unrealized net gain (loss) on derivatives 1,788 (214 ) 623 678
Unrealized net gain (loss) on equity securities 342 (178 ) 1,557 (666 ) 13 342 (534 ) 1,557
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
Income before income tax expense 8,558 2,756 13,870 24,582
Income tax expense 1,942 513 3,211 4,980
Net income $ 6,616 $ 2,243 $ 10,659 $ 19,602
Net income per share
Basic $ 0.18 $ 0.34 $ 1.53 $ 0.04 $ 0.52 $ 0.18 $ 0.83 $ 1.53
Diluted $ 0.17 $ 0.34 $ 1.53 $ 0.04 $ 0.51 $ 0.17 $ 0.83 $ 1.53
Weighted Average Shares
Weighted average shares outstanding
Basic 12,798 12,905 12,796 12,891 12,832 12,798 12,832 12,796
Diluted 12,859 12,916 12,834 12,898 12,851 12,859 12,871 12,834
See accompanying notes to the unaudited condensed consolidated financial statements.
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2
SWK HOLDINGS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)

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

Nine Months Ended September 30, 2020
Common Stock Additional Accumulated Total
Stockholders’
Shares Amounts Paid-In Capital Deficit Equity
Balances at December 31, 2019 12,917,348 $ 13 $ 4,432,146 $ (4,195,627 ) $ 236,532
Stock-based compensation — — 187 — 187
Issuance of common stock 5,937 — — — —
Repurchases of common stock in open market (5,279 ) — (62 ) — (62 )
Net loss — — — (4,660 ) (4,660 )
Balances at March 31, 2020 12,918,006 13 4,432,271 (4,200,287 ) 231,997
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
Nine Months Ended September 30, 2022
Common Stock Additional Paid-In Accumulated Total Stockholders’
Shares Amount Capital Deficit Equity
Balances at December 31, 2021 12,836,133 13 $ 4,431,719 $ (4,164,496 ) $ 267,236
Stock-based compensation — — 85 — 85
Issuance of common stock upon vesting of restricted stock 5,495 — — — —
Forfeiture of unvested restricted stock (6,815 ) — — — —
Net income — — — 3,478 3,478
Balances at March 31, 2022 12,834,813 13 4,431,804 (4,161,018 ) 270,799
Stock-based compensation — — 166 — 166
Issuance of common stock upon vesting of restricted stock 4,305 — — — —
Net income — — — 565 565
Balances at June 30, 2022 12,839,118 13 4,431,970 (4,160,453 ) 271,530
Stock-based compensation — — 59 — 59
Issuance of common stock upon vesting of restricted stock 7,575 — — — —
Net settlement for employee taxes on restricted stock and options — — (160 ) — (160 )
Stock options exercised, net 23,074 — — — —
Repurchases of common stock in open market (34,463 ) — (599 ) — (599 )
Net income — — — 6,616 6,616
Balances at September 30, 2022 12,835,304 $ 13 $ 4,431,270 $ (4,153,837 ) $ 277,446
Nine Months Ended September 30, 2021
Common Stock Additional Paid-In Accumulated Total Stockholders’
Shares Amount Capital Deficit Equity
Balances at December 31, 2020 12,792,586 $ 13 $ 4,430,924 $ (4,190,425 ) $ 240,512
Stock-based compensation — — 177 — 177
Issuance of common stock upon vesting of restricted stock 3,021 — — — —
Net income — — — 3,389 3,389
Balances at March 31, 2021 12,795,607 13 4,431,101 (4,187,036 ) 244,078
Stock-based compensation — — 187 — 187
Issuance of common stock upon vesting of restricted stock 2,940 — — — —
Net income — — — 13,970 13,970
Balances at June 30, 2021 12,798,547 13 4,431,288 (4,173,066 ) 258,235
Stock-based compensation — — 192 — 192
Issuance of common stock upon vesting of restricted stock 2,766 — — — —
Net income — — — 2,243 2,243
Balances at September 30, 2021 12,801,313 $ 13 $ 4,431,480 $ (4,170,823 ) $ 260,670
See accompanying notes to the unaudited condensed consolidated financial statements.
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3
SWK HOLDINGS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Nine Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2022 2021
Cash flows from operating activities:
Consolidated net income $ 19,602 $ 558
Net income $ 10,659 $ 19,602
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment expense — 163
Amortization of debt issuance costs 35 141 26 35
Deferred income taxes 4,842 (206 ) 3,189 4,842
Change in fair value of warrants (678 ) 1,151 (623 ) (678 )
Change in fair value of equity securities (1,557 ) 666 534 (1,557 )
Change in fair value of acquisition-related contingent consideration (147 ) 1,964 — (147 )
Loan discount amortization and fee accretion (2,016 ) (1,598 ) (1,357 ) (2,016 )
Interest paid-in-kind (698 ) (2,369 )
Interest income paid-in-kind (3,335 ) (698 )
Stock-based compensation 556 549 310 556
Depreciation and amortization expense 3,305 9,629 1,964 3,305
Changes in operating assets and liabilities:
Interest and accounts receivable (343 ) (2,054 ) (5,581 ) (343 )
Other assets (371 ) (819 ) (76 ) (371 )
Accounts payable and other liabilities 542 1,434 (603 ) 542
Net cash provided by operating activities 23,072 9,209 5,107 23,072

Cash flows from investing activities:
Investment in finance receivables (20,100 ) (12,458 ) (71,750 ) (20,100 )
Repayment of finance receivables 31,162 5,928 43,938 31,162
Corporate debt securities principal payment 43 49
Corporate debt securities principal payments 31 43
Purchases of property and equipment (877 ) (2,354 ) (194 ) (877 )
Other 164 (220 ) 171 164
Net cash provided by (used in) investing activities 10,392 (9,055 )
Net cash (used in) provided by investing activities (27,804 ) 10,392

Cash flows from financing activities:
Net (payments on) proceeds from credit facility (11,750 ) —
Net settlement for employee taxes on restricted stock and options (160 ) —
Net payments on credit facility (8 ) (11,750 )
Payment of acquisition-related contingent consideration (6,083 ) — — (6,083 )
Repurchases of common stock, including fees and expenses — (1,998 ) (599 ) —
Net cash used in financing activities (17,833 ) (1,998 ) (767 ) (17,833 )

Net increase in cash and cash equivalents 15,631 (1,844 )
Net (decrease) increase in cash and cash equivalents (23,464 ) 15,631
Cash and cash equivalents at beginning of period 3,008 11,158 42,863 3,008
Cash and cash equivalents at end of period $ 18,639 $ 9,314 $ 19,399 $ 18,639
See accompanying notes to the unaudited condensed consolidated financial statements.
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4
SWK HOLDINGS CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. SWK Holdings Corporation and Summary of Significant Accounting Policies
Nature of Operations

SWK Holdings Corporation (the “Company”) was incorporated in July 1996 in California and reincorporated in Delaware in September 1999. In July 2012, the Company commenced its strategy of building a specialty finance and asset management business. In August 2019, the Company commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property licensing business. The Company’s operations comprise two reportable segments: “Finance Receivables” and “Pharmaceutical Development.” The Company allocates capital to each segment in order to generate income through the sales of life science products by third parties. The Company is headquartered in Dallas, Texas, and as of September 30, ~~2021,~~2022, the Company had 3533 full-time employees.
The Company has net operating loss carryforwards (“NOLs”) and believes that the ability to utilize these NOLs is an important and substantial asset. However, at this time, under current law, the Company does not anticipate that the Finance Receivables and/or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior to their respective expiration dates. As such, it is possible that the Company might pursue additional strategies that it believes might result in the ability to utilize more of the NOLs.
As of November ~~8, 2021,~~1, 2022, the Company and its partners have executed transactions with 4248 different parties under its specialty finance strategy, funding an aggregate of ~~$600.0~~$691.0 million in various financial products across the life science sector. The Company’s portfolio includes senior and subordinated debt backed by royalties and synthetic royalties paid by companies in the life science sector, and purchased royalties generated by sales of life science products and related intellectual property.
~~On August 26,~~During 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform. Since its founding in 2013, Enteris has advanced multiple internal and external programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules, in an enteric-coated tablet formulation. Peptelligence® utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability. Peptelligence® is protected by an extensive patent estate that extends until 2036.
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. The Company consolidates a variable interest entity (“VIE”) when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts and transactions.
The Company owns interests in various partnerships and limited liability companies, or LLCs. The Company consolidates its investments in these partnerships or LLCs where the Company, as the general partner or managing member, exercises effective control, even though the Company’s ownership may be less than 50 percent, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company. The Company has reviewed each of the underlying agreements to determine if it has effective control. If circumstances change and it is determined this control does not exist, any such investment would be recorded using the equity method of accounting. Although this would change individual line items within the Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable to the Company.
5
Unaudited Interim Financial Information
The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending December 31, ~~2021.~~2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on March ~~31, 2021.~~
6
25, 2022.
~~Reclassification~~
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.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition; stock-based compensation; valuation of accounts receivable; impairment of finance receivables; long-lived assets; property and equipment; intangible assets; goodwill; valuation of warrants and other investments; contingent consideration; income taxes; and contingencies and litigation, among others. Some of these judgments can be subjective and complex, and consequently, actual results may differ from these estimates. The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable. For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable.
The Company regularly evaluates its estimates and assumptions using historical experience and other factors, including the economic environment. As future events and their effects cannot be determined with precision, the Company’s estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause changes to those estimates and assumptions. Market conditions, such as illiquid credit markets, health crises such as the COVID-19 global pandemic, volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates and assumptions. The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change. Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under the relevant accounting standard. It is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.
Segment Information
The Company earns revenues from its 2two U.S.-based business segments: its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies, and its business offering oral therapeutic formulation solutions built around Enteris’ pharmaceutical Peptelligence® platform, which enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in an enteric-coated tablet formulation.

Revenue Recognition

The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.
Deferred revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue. The Company classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet date and is included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.
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Research and Development

Research and development expenses include the costs associated with internal research and development and research and development conducted for the Company by third parties. These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants, and supplies. All research and development costs discussed above are expensed as incurred. Third-party expenses reimbursed under research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research and development expense in the consolidated statements of income.
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Recent Accounting Pronouncements
In March ~~2020,~~2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2020-04, “Reference Rate Reform~~2022-02, “Financial Instruments - Credit Losses (Topic ~~848),~~326): Troubled Debt Restructurings and Vintage Disclosures,” which ~~provides optional guidance~~updates the requirements for ~~a limited period of time to ease the potential burden in~~ accounting for ~~(or recognizing~~credit losses under Accounting Standards Codification 326, eliminates the ~~effects of) reference rate reform~~accounting guidance on troubled debt restructurings for creditors, and enhances creditors’ disclosure requirements related to loan refinancings and restructurings for borrowers experiencing financial ~~reporting.~~difficulty. The ASU ~~2020-04 provides optional expedients and exceptions for applying GAAP~~also amends the guidance on vintage disclosures to ~~transactions affected~~require disclosure of gross write-offs by ~~reference rate reform if~~year of origination. The amendments are effective in periods beginning after December 15, 2022 using either a prospective or modified retrospective transition. Early adoption of certain ~~criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales~~ or ~~transfers~~all 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~~is permitted. The Company is currently evaluating the provisions 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~~its future consolidated financial ~~condition and results of operations has not yet been determined.~~statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ~~standard~~ASU adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under this guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of losses. This ASU describes the impairment allowance as a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses relating to available-for-sale debt securities should be measured in a manner similar to current GAAP; however, the amendments in this update require that credit losses be presented as an allowance rather than as a write-down, which will allow an entity the ability to record reversals of credit losses in current period net income. On November 15, 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies. Under ASU 2019-10, the effective date for implementation of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model.
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In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity. ASU 2020-04 was effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024. The Company has identified existing loans that reference LIBOR and is in the process of evaluating alternatives in each situation. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04 and does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial statements.
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Note 2. Net Income per Share
Basic net income per share is computed using the ~~weighted average~~weighted-average number of outstanding shares of common stock. Diluted net income per share is computed using the ~~weighted average~~weighted-average number of outstanding shares of common stock, and when dilutive, shares of common stock issuable upon exercise of options and warrants deemed outstanding using the treasury stock method.
The following table shows the computation of basic and diluted net income per share for the following periods (in thousands, except per share amounts):
Schedule ~~of Computation~~ of Basic and Diluted ~~Net Income (Loss)~~Earning per Share

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Numerator:
Net income $ 2,243 $ 4,342 $ 19,602 $ 558

Denominator:
Weighted-average shares outstanding 12,798 12,905 12,796 12,891
Effect of dilutive securities 61 11 38 7
Weighted-average diluted shares 12,859 12,916 12,834 12,898

Basic net income per share $ 0.18 $ 0.34 $ 1.53 $ 0.04
Diluted net income per share $ 0.17 $ 0.34 $ 1.53 $ 0.04

Three Months Ended
September 30,

Nine Months Ended
September 30,
2022 2021 2022 2021
Numerator:
Net income $ 6,616 $ 2,243 $ 10,659 $ 19,602

Denominator:
Weighted-average shares outstanding 12,832 12,798 12,832 12,796
Effect of dilutive securities 19 61 39 38
Weighted-average diluted shares 12,851 12,859 12,871 12,834

Basic net income per share $ 0.52 $ 0.18 $ 0.83 $ 1.53
Diluted net income per share $ 0.51 $ 0.17 $ 0.83 $ 1.53
For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately ~~367,000~~186,000 and ~~409,000~~367,000, respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately ~~390,000~~268,000 and ~~455,000~~390,000, respectively, have been excluded from the calculation of diluted net income per share, as all such securities were anti-dilutive.
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Note 3. Finance Receivables, Net
Finance receivables are reported at their determined principal balances net of any unearned income, cumulative charge-offs and unamortized deferred fees and costs. Unearned income and deferred fees and costs are amortized to interest income based on all cash flows expected using the effective interest method.
As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had a credit loss allowance of $8.4 million. Of the total $8.4 million, $1.2 million and $0.6 million are associated with the Company’s Cambia® and Besivance® royalties, respectively. The remaining $~~6.6~~$6.6 million is related to the ABT Molecular Imaging, Inc., now known as Best ABT, Inc. (“Best”), second lien term loan that was recognized in order to reflect the Best royalty at its estimated fair value. Approximately $21,000 of cash receipts received from the Company’s Besivance® royalty during the nine months ended September 30, 2022 were applied toward the allowance for credit losses.
The carrying values of finance receivables are as follows (in thousands):
Schedule of carrying value of finance receivables
Portfolio September 30,
2021 December 31,
2020
September 30, 2022 December 31, 2021
Term loans $ 149,874 $ 164,032 $ 180,537 $ 136,312
Royalty purchases 54,655 48,847 40,779 53,629
Total before allowance for credit losses 204,529 212,879 221,316 189,941
Allowance for credit losses (8,388 ) (8,388 ) (8,357 ) (8,388 )
Total carrying value $ 196,141 $ 204,491 $ 212,959 $ 181,553

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

Schedule of analysis of nonaccrual and performing loans by portfolio segment

September 30, 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
September 30, 2022 December 31, 2021
Nonaccrual Performing Total Nonaccrual Performing Total
Term loans $ 9,789 $ 170,748 $ 180,537 $ 18,288 $ 118,024 $ 136,312
Royalty purchases, net of credit loss allowance 3,037 29,385 32,422 3,362 41,879 45,241
Total carrying value $ 12,826 $ 200,133 $ 212,959 $ 21,650 $ 159,903 $ 181,553
As of September 30, ~~2021,~~2022, the Company had two finance receivables in nonaccrual status: (1) the term loan to ~~B&D Dental Corporation~~Flowonix Medical, Inc. (“~~B&D”~~Flowonix”), with a net carrying value of $~~8.3~~9.8 million and (2) the Best royalty, with a net carrying value of $~~3.5~~3.0 million. As of December 31, 2021, the Company had three finance receivables in nonaccrual status: (1) the term loan to Flowonix, with a net carrying value of $10.0 million, (2) the term loan with B&D Dental Corporation (“B&D”), with a carrying amount of $8.3 million, and (3) the Best royalty, with a carrying amount of $3.4 million. Although in nonaccrual status, the Flowonix and B&D term ~~loan was~~loans were not considered impaired as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company collected ~~$0.4~~$11.4 million on ~~the Best royalty~~its nonaccrual finance receivables during the nine months ended September 30, ~~2021,~~2022, which ~~was credited toward~~includes $10.7 million to settle the ~~royalty’s carrying value.~~term loan with B&D.
Note 4. Marketable Investments
Investments in available-for-sale corporate debt securities and equity securities as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 consist of the following (in thousands):

Schedule of marketable investments
September 30,
2021 December 31,
2020 September 30, 2022 December 31, 2021
Corporate debt securities $ 198 $ 241 $ 88 $ 119
Equity securities 2,767 1,210 500 1,034
Total marketable investments $ 2,965 $ 1,451 $ 588 $ 1,153
The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale corporate debt securities as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, are as follows (in thousands):
Schedule of ~~available-for-sale securities reconciliation~~marketable investments
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Loss Fair Value
September 30, 2021 $ 198 $ — $ — $ 198

December 31, 2020 $ 241 $ — $ — $ 241

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Loss
Fair Value
September 30, 2022 $ 88 $ — $ — $ 88
December 31, 2021 $ 119 $ — $ — $ 119
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The following table presents unrealized net ~~income~~gain (loss) on equity securities during the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):
Schedule of Proceeds from sales, gross unrealized gains and gross unrealized losses for available-for-sale securities

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Unrealized net income (loss) on equity securities reflected in the unaudited condensed consolidated statements of income $ 342 $ (178 ) $ 1,557 $ (666 )

Three Months Ended
September 30,
Nine Months Ended September 30,
2022 2021 2022 2021
Unrealized net gain (loss) on equity securities reflected in the unaudited condensed consolidated statements of income $ 13 $ 342 $ (534 ) $ 1,557
Note 5. ~~Goodwill and~~ Intangible Assets
~~Goodwill~~

There was no change in the carrying amount of goodwill from December 31, 2020 to 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.
~~Intangible Assets~~
The following table summarizes the gross book value, accumulated amortization and net book value balances of intangible assets as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):
Schedule of Intangible Assets
September 30, 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 $ 19,249 $ 10,151 $ 29,400 $ 16,336 $ 13,064
Patents — — — 198 153 45
Trade names and trademarks 210 44 166 210 29 181
Customer relationships 240 50 190 240 32 208
29,850 19,343 10,507 30,048 16,550 13,498
Deferred patent costs — — — 119 — 119
Total intangible assets $ 29,850 $ 19,343 $ 10,507 $ 30,167 $ 16,550 $ 13,617
September 30, 2022 December 31, 2021
Gross Book Value Accumulated Amortization Net Book Value Gross Book Value Accumulated Amortization Net Book Value
Licensing Agreement⁽¹⁾ $ 29,400 $ 21,096 $ 8,304 $ 29,400 $ 19,780 $ 9,620
Trade names and trademarks 210 65 145 210 50 160
Customer relationships 240 74 166 240 56 184
Total intangible assets $ 29,850 $ 21,235 $ 8,615 $ 29,850 $ 19,886 $ 9,964
⁽¹⁾ (1) Prior to the acquisition, Enteris entered into a non-exclusive commercial license agreement (the “License Agreement”) with Cara Therapeutics, Inc. (“Cara”), for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize Oral KORSUVA^TM in any indication worldwide, excluding South Korea and Japan. Cara is obligated to pay Enteris certain development, regulatory and tiered commercial milestone payments, as well as low single-digit royalties based on net sales in the licensed territory.
Amortization expense related to intangible assets was $~~0.6~~0.4 million and $~~2.6~~0.6 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Amortization expense related to intangible assets was $~~2.9~~1.3 million and $~~9.4~~2.9 million for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.
The estimated future amortization expense related to intangible assets as of September 30, ~~2021~~2022 is as follows (in thousands):
Schedule of Intangible Asset Amortization Expense
Fiscal Year Amount Amount
Remainder of 2021 $ 548
2022 1,828
Remainder of 2022 $ 426
2023 1,757 1,703
2024 1,413 1,546
2025 1,069 1,076
2026 and thereafter 3,892
2026 1,076
Thereafter 2,788
Total $ 10,507 $ 8,615
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~~Note 6.~~ ~~Revolving Credit Facility~~
On September 27, 2021, the Company entered into the Third Amendment to Loan and Security Agreement (the “Third Amendment”) with Cadence Bank, N.A. as a lender and the administrative agent. Pursuant to the Third Amendment, the Loan and Security Agreement dated as of June 29, 2018 (“Loan Agreement”) was amended to 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 aggregate interest and unused line fees paid during the immediately preceding quarter. Unused line fees and 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. In connection with the Third Amendment, the Company paid a $50,000 amendment fee, which was capitalized as deferred financing costs and 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 the nine months ended September 30, 2021 and 2020, the Company recognized $0.3 million~~ ~~and $0.4 million, respectively, of interest expense. As of September 30, 2021, approximately $8,000~~ ~~was outstanding under the revolving credit facility, and approximately $22.0 million~~ ~~was available for borrowing.~~
Note 7.6. Commitments and Contingencies

Contingent Consideration

The Company recorded contingent consideration related to the ~~August~~ 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement. 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 September 30, 2021 and December 31, 2020, the~~The estimated fair value of contingent consideration as of September 30, 2022 and December 31, 2021 was $~~10.7~~8.5 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 ~~also recognized~~did not recognize a ~~$0.1 million~~ change in the estimated fair value of its contingent consideration during the nine months ended September 30, 2022. The Company recognized a $0.1 million gain on the change in fair value of its contingent consideration during the nine months ended September 30, 2021.

Unfunded Commitments
As of September 30, ~~2021,~~2022, the Company’s unfunded commitments were as follows (in millions):
Schedule of Unfunded Commitments

Aziyo Biologics, Inc. $ 4.0
Exeevo, Inc. 2.5
MedMinder Systems, Inc. 5.0
Trio Healthcare Ltd. Loan $ 4.4 1.4
Ideal Implant, Inc. 2.0
Total unfunded commitments $ 6.4 $ 12.9
~~Unfunded~~Per the terms of the royalty purchase or credit agreements, unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified date or period of time, ~~per the terms of the royalty purchase or credit agreements,~~ and in the case of loan transactions, are ~~only~~ subject to being advanced as long as an event of default does not exist.
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Note 8.7. Fair Value Measurements
The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.
Level 3 Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.
Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the nine months ended September 30, ~~2021.~~ 2022.
The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in affiliates.
Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized.
Cash and cash equivalents
The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.
Marketable Investments
Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).
Finance Receivables
The fair values of finance receivables are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the finance receivables. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. These receivables are classified as Level 3. Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below.
Contingent Consideration
The Company recorded contingent consideration related to the ~~August~~ 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement.
The fair value measurements of contingent consideration obligations arising from business combinations are classified as Level 3 estimates under the fair value hierarchy as these items have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.
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Marketable Investments and Derivative Securities
Marketable Investments
If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities would be classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly these securities would be classified as Level 2. If market prices are not available and there are no observable inputs, then fair value would be estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes. Such securities would be classified as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company checks the validity of received prices based on comparison to prices of other similar assets and market data such as relevant bench mark indices. Available-for-sale securities are measured at fair value on a recurring basis, while securities with no readily available fair market value are not, but estimates of fair value are reflected below.
Derivative Securities
For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3.
The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2021~~2022 (in thousands):
Schedule of fair value assets measured on recurring basis
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:
Financial Assets
Warrant assets $ 3,650 $ — $ — $ 3,650 $ 5,140 $ — $ — $ 5,140
Marketable investments 2,965 2,767 — 198 588 500 — 88

Financial Liabilities:
Financial Liabilities
Contingent consideration payable $ 10,670 $ — $ — $ 10,670 $ 8,530 $ — $ — $ 8,530
The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2020~~2021 (in thousands):

Total
Carrying
Value in
Consolidated
Balance
Sheets Quoted Prices
in Active
Markets for
Identical
Assets
or Liabilities
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
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:
Financial Assets
Warrant assets $ 2,972 $ — $ — $ 2,972 $ 3,419 $ — $ — $ 3,419
Marketable investments 1,451 1,210 — 241 1,153 1,034 — 119

Financial Liabilities:
Financial Liabilities
Contingent consideration payable $ 16,900 $ — $ — $ 16,900 $ 8,530 $ — $ — $ 8,530
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The changes in fair value of the warrant assets during the nine months ended September 30, 2022 and 2021 were as follows (in thousands):
Schedule of fair value assets measured on recurring basis unobservable input reconciliation
Fair value – December 31, 2020 $ 2,972
September 30, 2022 September 30, 2022 September 30, 2021
Fair value - December 31, 2021 $ 3,419 Fair value - December 31, 2020 $ 2,972
Issued — 1,098 Issued —
Canceled — — Canceled —
Change in fair value 678 623 Change in fair value 678
Fair value – September 30, 2021 $ 3,650
Fair value - September 30, 2022 $ 5,140 Fair value - September 30, 2021 $ 3,650
The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the unaudited condensed consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value:
Schedule of weighted average assumptions
September 30,
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%
September 30, 2022 December 31, 2021
Dividend rate range — —
Risk-free rate range 4.0% to 4.3% 0.97% to 1.44%
Expected life (years) range 1.8 to 6.9 2.6 to 7.0
Expected volatility range 54.8% to 139.4% 60.2% to 142.0%

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~three~~two 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 September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):
Schedule of fair value assets and liabilities measured on nonrecurring basis
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)
September 30, 2021 $ 6,109 $ — $ — $ 6,109

December 31, 2020 $ 7,937 $ — $ — $ 7,937

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)
September 30, 2022 $ 4,071 $ — $ — $ 4,071

December 31, 2021 $ 5,612 $ — $ — $ 5,612
There were no liabilities measured at fair value on a nonrecurring basis as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.
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The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments measured at fair value on a recurring and non-recurring basis.

Schedule of fair value by balance sheet grouping
As of September 30, ~~2021~~2022 (in thousands):

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 $ 18,639 $ 18,639 $ 18,639 $ — $ — $ 19,399 $ 19,399 $ 19,399 $ — $ —
Finance receivables 196,141 196,141 — — 196,141 212,959 212,959 — — 212,959
Marketable investments 2,965 2,965 2,767 — 198 588 588 500 — 88
Warrant assets 3,650 3,650 — — 3,650 5,140 5,140 — — 5,140

Financial Liabilities
Contingent consideration payable $ 10,670 $ 10,670 $ — $ — $ 10,670 $ 8,530 $ 8,530 $ — $ — $ 8,530
As of December 31, ~~2020~~2021 (in thousands):

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 $ 3,008 $ 3,008 $ 3,008 $ — $ — $ 42,863 $ 42,863 $ 42,863 $ — $ —
Finance receivables 204,491 204,491 — — 204,491 181,553 181,553 — — 181,553
Marketable investments 1,451 1,451 1,210 — 241 1,153 1,153 1,034 — 119
Warrant assets 2,972 2,972 — — 2,972 3,419 3,419 — — 3,419

Financial Liabilities
Contingent consideration payable $ 16,900 $ 16,900 $ — $ — $ 16,900 $ 8,530 $ 8,530 $ — $ — $ 8,530
Note 9.8. Revenue Recognition
The Company’s Pharmaceutical Development segment recognizes revenues received from contracts with its customers by revenue source, as the Company believes it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow. The Company’s Finance Receivables segment does not have any revenues received from contracts with customers.
The following table provides the contract revenue recognized by revenue source for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Schedule of Revenue Recognized by Revenue Source
Three Months Ended
September 30, Nine Months Ended
September 30,
Three Months Ended
September 30,

Nine Months Ended
September 30,
2021 2020 2021 2020 2022 2021 2022 2021
Pharmaceutical Development Segment
License Agreement(1) $ 176 $ 2,768 $ 10,786 $ 2,992 $ 5,103 $ 176 $ 5,235 $ 10,786
Pharmaceutical Development and other 11 10 556 84 8 11 706 556
Total contract revenue $ 187 $ 2,778 $ 11,342 $ 3,076 $ 5,111 $ 187 $ 5,941 $ 11,342
(1) $5.0 million of milestone revenue related to Enteris’s License Agreement with Cara was received during the nine months ended September 30, 2022.
The Company’s contract liabilities represent advance consideration received from customers and are recognized as revenue when the related performance obligation is satisfied.
The Company’s contract liabilities are presented as deferred revenues and are included in accounts payable and accrued liabilities in the consolidated balance sheets (in thousands):
Schedule of Company's Contract Liabilities
September 30,
2021 December 31,
2020 September 30,
2022 December 31, 2021
Pharmaceutical Development Segment
Deferred revenue $ 226 $ 350 $ 8 $ 185
Total contract liabilities $ 226 $ 350 $ 8 $ 185
During the nine months ended September 30, ~~2021,~~2022, the Company recognized $~~0.3~~0.2 million of ~~2020~~2021 deferred revenue from satisfaction of performance obligations. The Company did not have any contract assets nor did it have any contract liabilities related to the License Agreement as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.
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Note ~~10.~~9. Segment Information
Selected financial and descriptive information is required to be provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the Company’s internal organization, focusing on financial information that the Company’s chief executive officer uses to make decisions about the Company’s operating matters.
As described in Note 1, the Company has determined it has two reportable segments: Finance Receivables and Pharmaceutical Development, and each are individually managed and provide separate services. Revenues by segment represent revenues earned on the services offered within each segment. The Company does not report assets by reportable segment, nor does the Company report results by geographic region, as these metrics are not used by the Company’s chief executive officer in assessing performance or allocating resources to the segments.
Segment performance is evaluated based on several factors, including income (loss) from continuing operations before ~~income.~~income taxes. Management uses this measure of net income (loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.
The following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):
Schedule of Reportable Segments
Three Months Ended September 30, 2021 Three Months Ended September 30, 2022
Finance
Receivables Pharmaceutical
Development and
Other Holding
Company and
Other Consolidated Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated
Revenue $ 9,373 $ 187 $ — $ 9,560 $ 8,502 $ 5,111 $ — $ 13,613
Other revenue — — 1 1
Interest expense 53 — — 53 82 — — 82
Manufacturing, research and development — 2,487 — 2,487 — 1,792 — 1,792
Depreciation and amortization — 810 2 812
Depreciation and amortization expense — 632 2 634
General and administrative 90 999 2,491 3,580 115 843 3,391 4,349
Other income, net 128 — — 128 1,801 — — 1,801
Income tax expense — — 513 513 — — 1,942 1,942
Consolidated net income (loss) 9,358 (4,109 ) (3,006 ) 2,243
Net income (loss) 10,106 1,844 (5,334 ) 6,616

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
Nine Months Ended September 30, 2021
Finance
Receivables Pharmaceutical
Development and
Other Holding
Company and
Other Consolidated
Revenue $ 29,857 $ 10,846 $ — $ 40,703
Other revenue — 496 — 496
Interest expense 292 — — 292
Manufacturing, research and development — 5,577 — 5,577
Depreciation and amortization — 3,300 5 3,305
Change in fair value of acquisition-related contingent consideration — (147 ) — (147 )
General and administrative 2,034 3,088 4,703 9,825
Other income, net 2,235 — — 2,235
Income tax expense — — 4,980 4,980
Consolidated net income (loss) 29,766 (476 ) (9,688 ) 19,602
Three Months Ended September 30, 2021
Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated
Revenue $ 9,373 $ 187 $ — $ 9,560
Interest expense 53 — — 53
Manufacturing, research and development — 2,487 — 2,487
Depreciation and amortization expense — 810 2 812
General and administrative 90 999 2,491 3,580
Other income, net 128 — — 128
Income tax expense — — 513 513
Net income (loss) 9,358 (4,109 ) (3,006 ) 2,243

Nine Months Ended September 30, 2020
Finance
Receivables Pharmaceutical
Development and
Other Holding
Company and
Other Consolidated
Revenue $ 22,737 $ 3,076 $ 1 $ 25,814
Other revenue 9 — — 9
Provision for credit losses and impairment 163 — — 163
Interest expense 365 — — 365
Manufacturing, research and development — 3,311 — 3,311
Depreciation and amortization — 9,621 8 9,629
Change in fair value of acquisition-related contingent consideration — 1,964 — 1,964
General and administrative 1,429 3,167 3,619 8,215
Other (expense) income, net (1,893 ) — 76 (1,817 )
Income tax benefit — — (199 ) (199 )
Consolidated net income (loss) 18,897 (14,987 ) (3,351 ) 558
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Nine Months Ended September 30, 2022
Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated
Revenue $ 25,745 $ 5,461 $ — $ 31,206
Other revenue — 480 1 481
Interest expense 242 — — 242
Manufacturing, research and development — 5,173 — 5,173
Depreciation and amortization expense — 1,961 3 1,964
General and administrative 219 2,783 7,525 10,527
Other income, net 89 — — 89
Income tax expense — — 3,211 3,211
Net income (loss) 25,373 (3,976 ) (10,738 ) 10,659
Nine Months Ended September 30, 2021
Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated
Revenue $ 29,857 $ 10,846 $ — $ 40,703
Other revenue — 496 — 496
Interest expense 292 — — 292
Manufacturing, research and development — 5,577 — 5,577
Depreciation and amortization expense — 3,300 5 3,305
Change in fair value of acquisition-related contingent consideration — (147 ) — (147 )
General and administrative 2,034 3,088 4,703 9,825
Other income, net 2,235 — — 2,235
Income tax expense — — 4,980 4,980
Net income (loss) 29,766 (476 ) (9,688 ) 19,602
Included in Holding Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, including public company costs and non-Enteris corporate employees, which have been included for purposes of reconciling to the consolidated amounts.
~~Note 11.~~ ~~Subsequent Events~~
~~Thermedx LLC~~
~~On October 22, 2021, SWK Funding received $0.5 million~~ ~~for the payoff of the Thermedx LLC term loan. The proceeds included accrued interest and interest paid-in-kind.~~
~~Misonix, Inc.~~
~~On October 29, 2021, Misonix, Inc. (“Misonix”) was acquired by Bioventus, Inc. (“Bioventus”). Upon closing of the transaction, SWK Funding received $31.6 million~~ ~~for the payoff of the Misonix term 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.~~
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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.
~~COVID-19 Considerations~~
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.
~~Strategic Plan to Focus on Core Specialty Finance Business~~
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.
Environmental, Social and Governance
As overseers of risk and stewards of long-term enterprise value, our management and Board play a vital role in assessing, identifying and understanding the potential impact and related risks of environmental, social and governance (“ESG”) issues on the organization’s operating model. Our Board and management are committed to identifying those ESG issues most likely to impact business operations and growth by focusing our investment strategy around supporting innovative, growth-oriented companies in the life sciences industry that maximize both social and investment value.
Among the ESG issues we support within the Company, we are committed to recruiting, motivating and developing a diversity of talent. We promote and foster a company culture where every voice is welcome, heard and respected, regardless of age, gender, race, religion, sexual orientation, physical conditions, cultural background or country of origin. Our commitment to ESG initiatives is an endeavor both the Board and management undertake for the general betterment of those both inside and outside the Company.
The nature of our business supports environmental sustainability by being mindful of products we and our partners use in our businesses. We promote recycling to reduce landfill, and we offer our employees a hybrid work model, which allows employees the flexibility to work remotely, thereby reducing the carbon output from commuting in cars or buses.
Overview
We have organized our operations into two segments: Finance Receivables and Pharmaceutical Development. These segments reflect the way the Company evaluates itits business performance and manages its operations. Please refer to Item 1. Financial Statements, Note 109 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment information.
~~Finance Receivables Segment~~
In our Finance Receivables segment, we evaluate and invest in a broad range of healthcare related companies and products with innovative intellectual property, including the biotechnology, medical device, medical diagnostics and related tools, animal health and pharmaceutical industries (together “life science”) by tailoring financial solutions to the needs of our business partners.
Our investment objective is to maximize our portfolio total return and thus increase our net income and book value by generating income from three sources: (1) primarily owning or financing through debt investments, royalties or revenue interests generated by the sales of life science products and related intellectual property, (2) receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector, and (3) to a lesser extent, realizing capital appreciation from equity-related investments in the life science sector.
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We primarily provide capital in exchange for an interest in an existing revenue stream, which can take several forms, but is most commonly either a royalty derived from the sales of a life science product from the marketing efforts of a third party or from the marketing efforts of a partner company. Our structured debt investments may include warrants or other features, giving us the potential to realize enhanced returns on a portion of our portfolio.
~~Pharmaceutical Development Segment~~
On August 26, 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris, 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.
2018

Finance Receivables Portfolio Overview
The table below provides an overview of our outstanding finance receivables transactions as of, and for the three and nine months ended September 30, ~~2021~~2022 (in thousands, except rate, share and per share data).
Royalty Purchases and Other Financings Licensed
Technology Footnote Funded
Amount GAAP
Balance Contract
Rate Revenue
Recognized
YTD Q3
Revenue Recognized
Royalty Purchases Licensed Technology Footnote Funded Amount GAAP Balance Q3 YTD
Beleodaq® Oncology treatment $ 7,600 $ 5,059 N/A $ 1,274 $ 456 Oncology treatment (1) $ 7,600 $ — $ 27 $ 799
Besivance® Ophthalmic antibiotic (3) 6,000 — N/A (26 ) (25 ) Ophthalmic antibiotic (2) 6,000 — 8 21
Best ABT, Inc. Oncology diagnosis (1), (2) 5,784 3,472 N/A — — Oncology diagnosis (3), (4) 5,784 3,037 — —
Coflex®/Kybella®/Zalviso® Spinal stenosis/Submental fullness 4,350 4,160 N/A 465 155
Coflex®/Kybella® Spinal stenosis/submental fullness 4,350 3,929 105 397
Cambia® NSAID migraine treatment (1) 8,500 2,637 N/A (9 ) (56 ) NSAID migraine treatment (3) 8,500 1,034 (94 ) (153 )
Forfivo XL® Depressive disorder treatment 6,000 1,490 N/A 982 307 Depressive disorder treatment 6,000 1,408 185 857
Ideal Implant, Inc. Aesthetics 3,000 3,097 N/A 203 203 Aesthetics 3,000 3,289 134 402
Iluvien® Diabetic macular edema 16,501 16,205 N/A 1,813 641 Diabetic macular edema 16,501 15,729 570 1,691
Narcan® Opioid overdose treatment 17,500 539 N/A 2,423 1,030 Opioid overdose treatment 17,500 487 248 1,908
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 — —
Ostomy Products Royalty Ostomy products (1) 3,900 — 1,746 1,927
Veru, Inc. Synthetic Royalty (4) 5,166 5,165 N/A 5,914 1,411 Women’s health 10,000 3,509 30 555

Revenue Recognized
Term Loans Type Footnote Maturity Date Principal GAAP Balance Rate Q3 YTD
4Web, Inc. First lien 06/03/23 $ 28,808 $ 31,060 15.8 % $ 1,185 $ 3,329
AOTI, Inc. First lien 03/21/27 12,000 11,970 11.0 % 426 840
Acer Therapeutics, Inc. First lien 03/04/24 6,704 6,849 12.0 % 457 1,003
Acerus Pharmaceuticals Corporation First lien (5) 10/11/23 — — 12.0 % — 538
Aziyo Biologics, Inc. First lien 10/08/27 21,000 20,294 11.5 % 265 265
B&D Dental Corporation First lien (5) 12/10/18 — — 14.0 % — 2,401
BIOLASE, Inc. First lien 05/31/25 13,300 13,734 10.5 % 484 1,390
Biotricity, Inc. First lien 12/26/26 12,000 11,845 11.5 % 407 1,193
Epica International, Inc. First lien 07/23/24 12,000 12,374 9.5 % 385 1,097
eTon Pharmaceuticals, Inc. First lien 11/13/24 6,615 6,659 10.0 % 221 666
Exeevo, Inc. First lien 07/01/27 5,010 4,969 12.5 % 187 187
Flowonix Medical, Inc. First lien (4), (6) 12/23/25 10,428 9,789 14.0 % — —
Keystone Dental Group First lien (5) 08/01/23 — — 11.5 % — 888
MedMinder Systems, Inc. First lien 07/22/27 20,000 19,831 10.9 % 291 291
MolecuLight, Inc. First lien 12/29/26 10,000 10,007 12.5 % 413 1,036
Sincerus Pharmaceuticals, Inc. First lien 03/19/26 12,820 13,039 13.0 % 534 1,437
Trio Healthcare Ltd. First lien 07/01/26 8,150 8,117 12.5 % 288 780
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Maturity
Date GAAP
Balance Contract
Rate
Revenue
Recognized

Term Loans Type Footnote Principal YTD Q3
4Web, Inc. First Lien 06/03/23 $ 24,929 $ 25,358 12.8 % $ 2,700 $ 983
Acerus Pharmaceuticals, Inc. First Lien 10/11/23 6,550 6,519 12.0 % 968 298
B&D Dental Corporation First Lien (2), (5) 12/10/18 8,365 8,334 14.0 % — —
BIOLASE, Inc. First Lien 11/09/23 14,300 14,428 12.3 % 1,645 558
CeloNova BioSciences, Inc. First Lien (6) 12/31/21 2,054 2,058 12.5 % 360 93
DxTerity Diagnostics, Inc. First Lien (7) 11/30/21 2,474 3,217 13.3 % 1,624 340
Epica International, Inc. First Lien 07/23/23 12,000 12,336 13.5 % 1,202 403
eTon Pharmaceuticals, Inc. First Lien 11/13/24 7,000 6,862 12.0 % 761 257
Flowonix Medical, Inc. First Lien 12/23/25 10,000 9,954 11.0 % 961 331
Harrow Health, Inc. First Lien (3) 07/19/23 — — 9.0% - 12.0 % 1,112 —
Keystone Dental, Inc. First Lien 11/14/22 15,000 15,455 11.5 % 1,401 473
Misonix, Inc. First Lien (8) 06/30/23 30,096 30,089 10.0% - 12.3 % 2,384 805
Sincerus Pharmaceuticals, Inc. First Lien 03/19/26 9,750 9,765 13.0 % 681 360
Tenex Health, Inc. First Lien (3) 06/30/21 — — 13.0 % 349 —
Thermedx, LLC Sub Note (9) 05/20/29 466 466 11.8 % 40 14
Trio Healthcare Ltd. First Lien 07/01/26 5,100 5,033 12.5 % 180 180
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)
Revenue Recognized
Cost Method Investment Licensed Technology Footnote Maturity Date Principal GAAP Balance Rate Q3 YTD
Tissue Regeneration Therapeutics, Inc. Umbilical cord banking (4) N/A $ 3,491 $ 3,491 N/A $ — $ —
Income 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
Income (Loss) Recognized
Marketable Investments Number of Shares Footnote Funded Amount GAAP Balance Q3 YTD
Secured Royalty Financing (Marketable Investment) N/A (4) $ 3,000 $ 88 $ — $ —
Bioventus, Inc. Common Stock 71,361 N/A 500 13 (534 )
Epica International, Inc. 25,000 N/A — — —
Sincerus Pharmaceuticals, Inc. 26,575 N/A — — —
Income (Loss) Recognized
Warrants to Purchase Stock Number of Shares Footnote Exercise Price per Share ($) GAAP Balance Q3 YTD
4Web, Inc. TBD $ — $ — $ — $ —
AOTI, Inc. 92,490 — — — —
Acer Therapeutics, Inc. 150,000 2.46 116 17 (110 )
Acer Therapeutics, Inc. 100,000 1.51 90 (2 ) (2 )
Acerus Pharmaceuticals Corporation 7,764,004 0.053 CAD 20 (33 ) (82 )
Aziyo Biologics 157,895 6.65 895 116 116
BIOLASE, Inc. 22,039 0.39 26 (37 ) (158 )
Biotricity, Inc. 57,536 6.26 21 (39 ) (155 )
CeloNova BioSciences, Inc. TBD (7) — — — —
DxTerity Diagnostics, Inc. 2,019,231 (7) — — — —
Epica International, Inc. TBD — — — —
eTon Pharmaceuticals, Inc. 51,238 5.86 21 (15 ) (74 )
eTon Pharmaceuticals, Inc. 18,141 6.62 8 (5 ) (26 )
Exeevo, Inc. 930 — — — —
EyePoint Pharmaceuticals, Inc. 40,910 11.00 129 (4 ) (147 )
EyePoint Pharmaceuticals, Inc. 7,773 19.30 17 (1 ) (24 )
Flowonix Medical, Inc. 155,561 (4), (6) — — — —
Harrow Health, Inc. 373,847 (7) 2.08 3,797 1,791 1,285
Total Revenue
Assets Q3 YTD
Total finance receivables $ 212,959 $ 8,502 $ 25,745
Total marketable investments 588 N/A N/A
Cost method investment 3,491 N/A N/A
Fair value of warrant assets 5,140 N/A N/A
Total assets/revenues $ 222,178 $ 8,502 $ 25,745
(1) Royalty was paid off during the third quarter of 2022.
(2) US royalty was paid off during the year ended December 31, 2021. SWK continues to receive insignificant royalties on international sales.
(3) Investment considered impaired.
~~(2)~~(4) Investment on nonaccrual.
~~(3)~~(5) ~~The loan/royalty~~Loan was paid off during ~~2021.~~the nine months ended September 30, 2022.
~~(4)~~(6) ~~The return premium pursuant to the credit agreement was reached, and the residual royalty agreement commenced during the third quarter.~~
~~(5)~~ ~~B&D~~Flowonix is evaluating strategic alternatives for the business. ~~The first lien loan is currently in default.~~
~~(6)~~ ~~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~~Loan was paid off ~~on October 22,~~during the year ended December 31, 2021.
Unless otherwise specified, our senior secured debt assets generally are repaid by a revenue interest that is charged on a company’s quarterly net sales and royalties.
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Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the nine months ended September 30, ~~2021,~~2022, compared to those discussed in our Annual Report.

Recent Accounting Pronouncements
Refer to Part I. Financial Information, Item 1. Financial Statements, Note 1 of the notes to the unaudited condensed consolidated financial statements for a listing of recent accounting pronouncements and their potential impact to our consolidated financial statements.
Comparison of the Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (in millions)
Three Months Ended
September 30,
2021 2020 Change
Revenues $ 9.6 $ 10.6 $ (1.0 )
Interest expense 0.1 0.1 —
Pharmaceutical manufacturing, research and development expense 2.5 1.2 1.3
Change in fair value of acquisition-related contingent consideration — 0.2 (0.2 )
Depreciation and amortization expense 0.8 2.7 (1.9 )
General and administrative expense 3.6 2.5 1.1
Other income (expense), net 0.1 (0.1 ) 0.2
Income tax expense (benefit) 0.5 (0.5 ) 1.0
Consolidated net income 2.2 4.3 (2.1 )

Three Months Ended
September 30,

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

Revenues
Revenues ~~decreased~~increased to $13.6 million for the three months ended September 30, 2022 from $9.6 million for the three months ended September 30, ~~2021 from $10.6~~2021. The $4.0 million ~~for~~increase in revenue was due to $5.0 million of milestone revenue related to Enteris’ License Agreement with Cara received during the three months ended September 30, ~~2020. The decrease was primarily~~2022, which did not occur during 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. The decrease in Pharmaceutical Development 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 $1.4 million net increase in royalty income and a $1.1 million increase in fees and interest earned on our finance receivables due to funding new and existing loans.three months ended September 30, 2021. The increase in revenue was partially offset by a ~~$1.0~~$0.9 million net decrease in Finance Receivables segment revenues. The decrease in Finance Receivables segment revenue was due to a $1.3 million net decrease in royalty income primarily due to the achievement of return premiums that caused a step down in royalty rates, which was partially offset by a net increase of $0.4 million in interest and fees earned on finance ~~receivables that were paid off or paid down since the third quarter of 2020.~~receivables.
Interest Expense
Interest expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense for both the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 was $0.1 million, respectively.

Pharmaceutical Manufacturing, Research and Development Expense

Pharmaceutical manufacturing, research and development expense ~~increased~~decreased from ~~$1.2 million for the three months ended 2020 to~~ $2.5 million for the three months ended September 30, ~~2021.~~2021 to $1.8 million for the three months ended September 30, 2022. The ~~$1.3~~$0.7 million ~~increase~~decrease was primarily due to ~~an increase~~a decrease in manufacturing materials for pipeline projects and clinical trials.

~~Change in Fair Value of 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.~~
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Depreciation and Amortization

The ~~$1.9~~$0.2 million decrease in depreciation and amortization expense for the three months ended September 30, ~~2021~~2022 primarily consists of a decrease in amortization expense related to the intangible assets of Enteris. Amortization expense is aligned with the expected future cash flows of the intangible assets.

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General and Administrative
General and administrative expenses consist primarily of ~~compensation,~~compensation; stock-based compensation and related costs for management, staff and ~~Board,~~Board; legal and audit ~~expenses,~~expenses; and corporate governance expenses. General and administrative expenses increased to $4.3 million for the three months ended September 30, 2022 from $3.6 million for the three months ended September 30, ~~2021 from $2.5 million for the three months ended 2020.~~2021. The ~~$1.1~~$0.7 million increase was primarily due to a ~~$1.0~~$1.3 million increase in ~~expenses incurred~~salaries and benefits expense, of which $1.1 million is related to the former CEO’s severance pay pursuant to the Separation and Release Agreement dated August 31, 2022, and a $0.2 million increase in ~~connection with~~salaries and benefits expense due to an increase in personnel and the ~~SRC’s efforts~~performance-based bonus accrual. The increase in general and administrative expense also included a $0.7 million increase in audit and legal fees related to ~~identify, review~~amending the Company’s Articles of Incorporation and ~~explore~~Bylaws and other corporate governance, financing and strategic ~~alternatives for the Company; such expenses primarily consist of legal~~matters. The increase was partially offset by a $0.9 million decrease in corporate strategic planning and ~~financial consulting~~related special committee board fees, as well as ~~Board compensation.~~a $0.1 million decrease in stock-based compensation expense related to the forfeiture of stock-options held by the former CEO upon his departure on September 30, 2022.
Other (Expense) Income, ~~(expense),~~ Net
Other expense, net for three months ended September 30, 2022 reflected a net aggregate fair market value gain of $1.8 million on our warrant derivatives and Bioventus common stock. Other income, ~~(expense),~~ net for three months ended September 30, 2021 reflected a net fair market value loss of $0.2 million on our warrant derivatives and a net fair market value gain of $0.3 million on our Misonix common ~~stock. Other income (expense), net~~stock, which was tendered in October 2021 in exchange for ~~the three months ended September 30, 2020 reflected a net fair market value gain~~$1.9 million in cash and 71,361 shares of ~~$0.1 million on our warrant derivatives and a net fair market value loss of $0.2 million on our Misonix~~Bioventus common stock.
Income Tax Expense ~~(Benefit)~~
During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recognized income tax expense of ~~$0.5~~$1.9 million and ~~income tax benefit of~~ $0.5 million, respectively. The ~~$1.0~~$1.4 million increase in income tax expense is athe result of ~~higher~~an increase in taxable income for the three months ended September 30, ~~2021~~2022 when compared to the same period of the ~~prior~~previous year.
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Comparison of the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (in millions)
Nine Months Ended
September 30, Nine Months Ended September 30,
2021 2020 Change 2022 2021 Change
Revenues $ 41.2 $ 25.8 $ 15.4 $ 31.7 $ 41.2 $ (9.5 )
Provision for credit losses and impairment expenses — 0.2 (0.2 )
Interest expense 0.3 0.4 (0.1 ) 0.2 0.3 (0.1 )
Pharmaceutical manufacturing, research and development expense 5.6 3.3 2.3 5.2 5.6 (0.4 )
Change in fair value of acquisition-related contingent consideration (0.1 ) 2.0 (2.1 ) — (0.1 ) 0.1
Depreciation and amortization expense 3.3 9.6 (6.3 ) 2.0 3.3 (1.3 )
General and administrative expense 9.8 8.2 1.6
Other income (expense), net 2.2 (1.8 ) 4.0
Income tax expense (benefit) 5.0 (0.2 ) 5.2
Consolidated net income 19.6 0.6 19.0
General and administrative 10.5 9.8 0.7
Other income, net 0.1 2.2 (2.1 )
Income tax expense 3.2 5.0 (1.8 )
Net income 10.7 19.6 (8.9 )

22
Revenues
~~We generated revenues of $41.2 million and $25.8~~Revenues decreased to $31.7 million for the nine months ended September 30, ~~2021 and 2020, respectively.~~2022 from $41.2 million for the nine months ended September 30, 2021. The ~~$15.4~~$9.5 million ~~increase~~decrease in revenue consisted ~~primarily~~ of a ~~$6.9~~$5.4 million ~~increase~~decrease in ~~interest and fees earned on our finance receivables~~Pharmaceutical Development segment revenue and a ~~$8.2~~$4.1 million ~~increase~~decrease in ~~revenues from our Pharmaceutical Development segment.~~Finance Receivables segment revenue. The ~~increase~~decrease in Pharmaceutical Development segment revenue included $5.0 million of milestone revenue related to Enteris’ ~~license agreement~~License Agreement with ~~Cara.~~Cara received during the nine months ended September 30, 2022, compared to $10.0 million of milestone revenue for the same period of 2021. The ~~$6.9 million increase~~decrease in ~~revenue attributable to our~~ Finance Receivables segment revenue was ~~the result of~~due to a $5.1 million net ~~increase~~decrease in royalty income ~~and a $2.8 million increase in fees and interest earned on our finance receivables~~primarily due to ~~funding new and existing loans. The increase~~the achievement of return premiums that caused a step down in ~~revenue~~royalty rates, which was partially offset by a net increase of $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.~~receivables.
~~Provision for Credit Losses and Impairment Expense~~
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
Interest expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense for the nine months ended September 30, 2022 and 2021 was $0.2 million and ~~2020 was~~ $0.3 million, ~~and $0.4 million,~~ respectively.
Pharmaceutical Manufacturing, Research and Development Expense

Pharmaceutical manufacturing, research and development expense ~~increased~~decreased from ~~$3.3~~$5.6 million for the nine months ended September 30, ~~2020~~2021 to ~~$5.6~~$5.2 million for the nine months ended September 30, ~~2021.~~2022. The ~~$2.3~~$0.4 million ~~increase~~decrease was primarily due to ~~an increase~~a decrease in manufacturing materials for pipeline projects and clinical trials.

~~Change in Fair Value of Acquisition-Related Contingent Consideration~~
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.~~
Depreciation and Amortization

The ~~$6.3~~$1.3 million decrease in depreciation and amortization expense for the nine months ended September 30, ~~2021~~2022 primarily consists of a decrease in amortization expense related to the intangible assets of Enteris. Amortization expense is aligned with the expected future cash flows of the intangible assets.
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General and Administrative
General and administrative expenses consist primarily of ~~compensation,~~compensation; stock-based compensation and related costs for management, staff and ~~Board,~~Board; legal and audit ~~expenses,~~expenses; and corporate governance expenses. General and administrative expenses increased to $10.5 million for the nine months ended September 30, 2022 from $9.8 million for the nine months ended September 30, ~~2021 from $8.2~~2021. The $0.7 million increase was primarily due to a $1.1 million increase in salaries and benefits expense related to the former CEO’s severance pay pursuant to the Separation and Release Agreement dated August 31, 2022. The increase in general and administrative expense also included a $0.9 million increase in audit and legal fees related to amending the Company’s Articles of Incorporation and Bylaws and other corporate governance, financing and strategic matters. The increase was partially offset by a $1.4 million decrease in corporate strategic planning and related special committee board fees, as well as a $0.1 million decrease in stock-based compensation expense related to the forfeiture of stock-options held by the former CEO upon his departure on September 30, 2022.
Other Income, Net
Other income, net for the nine months ended September 30, ~~2020. The $1.6~~2022 reflected a net aggregate fair market value gain of $0.1 million ~~increase was primarily due to a $1.4 million increase in expenses incurred in connection with the SRC’s efforts to identify, review~~on our warrant derivatives 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 (Expense), Net~~
Bioventus common stock. Other income, net for the nine months ended September 30, 2021 reflected a net fair market value gain of $0.7 million on our warrant derivatives and a net fair market value gain of $1.6 million on our Misonix common ~~stock. Other expense, net~~stock, which was tendered in October 2021 in exchange for ~~the nine months ended September 30, 2020 reflected a net fair market value loss~~$1.9 million in cash and 71,361 shares of ~~$1.2 million on our warrant derivatives and a net fair market value loss of $0.7 million on our Misonix~~Bioventus common stock.
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Income Tax Expense
During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recognized income tax expense of ~~$5.0~~$3.2 million and ~~tax benefit of $0.2~~$5.0 million, respectively. The ~~$5.2~~$1.8 million ~~increase~~decrease in income tax expense is athe result of ~~higher~~a decrease in taxable income for the nine months ended September 30, ~~2021~~2022 when compared to the same period of the ~~prior~~previous year.
Liquidity and Capital Resources
As of September 30, ~~2021,~~2022, we had ~~$18.6~~$19.4 million in cash and cash equivalents, compared to ~~$3.0~~$42.9 million in cash and cash equivalents as of December 31, ~~2020.~~2021. The primary driver of the ~~$15.6~~$23.5 million ~~increase~~decrease in our cash balance was ~~$58.3~~$71.2 million of investment funding, net of deferred fees and origination expenses; $8.2 million for payments of accounts payable, including $1.9 million for Enteris’s internal pipeline and business development projects; payroll and benefits expense of $8.3 million; $0.6 million to repurchase shares of the Company’s common stock on the open market; and $0.3 million of credit facility interest and other expenses. The decrease in cash and cash equivalents was partially offset by $64.4 million of interest, fees, principal and royalty payments received on our finance receivables and ~~a net $5.0~~$0.7 million of customer 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.segment.
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:
1. Primarily owning or financing through debt investments, royalties generated by the sales of life science products and related intellectual property;
2. Receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector;
3. Pharmaceutical development, manufacturing, and licensing activities utilizing the Peptelligence® platform; and
4. To a lesser extent, realizing capital appreciation from equity-related investments in the life science sector.

As of September 30, ~~2021,~~2022, our finance receivables portfolio contains ~~$196.1~~$213.0 million of finance receivables, ~~$3.0~~$0.6 million of marketable investments, and $3.5 million related to our cost method investment. In the aggregate, we expect these assets to generate positive cash flows in 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.2022. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates with a ~~LIBOR-based~~reference rate-based interest rate floor. Changes in interest rates, including ~~LIBOR~~the underlying reference rates, may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future.
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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. The credit facility was amended on September ~~27, 2021~~26, 2022 to extend the termination date to ~~September 30, 2022 and to increase the credit facility commitment to $22.0 million.~~November 29, 2022. We continue to ~~explore other options~~work with ~~respect~~our current lender to ~~a new~~extend our credit facility. As of September 30, ~~2021, approximately~~2022, $22.0 million was available for borrowing under the credit facility.
Off-Balance Sheet Arrangements
In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in our consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage partner companies’ requests for funding and take the form of loan commitments and lines of credit.
The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the partner company defaults, and the value of any existing collateral becomes worthless. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Please refer to Item 1. Financial Statements, Note 76 of the notes to the unaudited condensed consolidated financial ~~statements.~~statements
27
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ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
During the nine months ended September 30, ~~2021,~~2022, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at September 30, ~~2021~~2022 approximated its carrying value.
Investment and Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flow.
As we seek to provide capital to a broad range of life science companies, institutions and investors with the majority of our finance receivables portfolio paying interest based on floating interest rates with a ~~LIBOR~~reference rate floor, our net investment income is dependent, in part, upon the difference between the rate at which we earn on our cash and cash equivalents and the rate at which we lend those funds to third parties. As a result, we are subject to risks relating to changes in market interest rates. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations by providing capital at variable interest rates. We do not currently engage in any interest rate hedging activities. We constantly monitor our portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any of our investments.
~~During 2018, we~~We have entered into a revolving credit facility. As we borrow funds to make additional investments, our income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we are subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our income, especially to the extent we continue to hold fixed rate investments. We generally seek to mitigate this risk by pricing our debt investments with floating interest rates to maintain the spread of our portfolio over the cost of leverage. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations, which we have not done. Adverse developments resulting from changes in interest rates or hedging transactions could have a materially adverse effect on our business, financial condition and results of operations. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our investment income, net of borrowing expenses.
Inflation

We do not believe that inflation has had a significant impact on our revenues or operations.
ITEM 4.      CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There have been no changes during the nine months ended September 30, ~~2021~~2022 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1.      LEGAL PROCEEDINGS
We are involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material negative impact on our results of operations, balance sheets and cash flows due to defense costs, and divert management resources. Currently, we are not involved in any arbitration and/or other legal proceeding that we expect to have a material effect on our business, financial condition, results of operations and cash flows.
ITEM 1A.    RISK FACTORS
Information regarding the Company’s risk factors appears in “Part I. – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, filed with the SEC on March ~~31, 2021.~~25, 2022. There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

~~None.~~On May 31, 2022, the Board authorized a share repurchase program under which the Company was authorized to repurchase up to $10.0 million of the Company’s outstanding shares of common stock, or approximately 714,286 common shares, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act. The purchase period is July 1, 2022 through May 15, 2023.
As of September 30, 2022, the Company has repurchased 34,463 shares under the share repurchase programs at a total cost of $0.6 million, or $17.49 per share. As of September 30, 2022, the maximum number of shares that may yet be purchased under the plan is 679,823 shares.
The table below summarizes information about our purchases of common stock during the three months ended September 30, 2022:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares That May Yet Be Purchased Under the Plan
July 1, 2022 - July 31, 2022 10,361 $ 17.84 10,361 703,925
August 1, 2022 - August 31, 2022 7,524 18.12 7,524 696,401
September 1, 2022 - September 30, 2022 16,578 16.72 16,578 679,823
34,463 $ 17.49 34,463
ITEM 3.      DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.      MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5.      OTHER INFORMATION.
None.
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ITEM 6.       EXHIBITS
~~Filing~~ ~~Filed~~
~~Number~~ ~~Exhibit Description~~ ~~Form~~ ~~Exhibit~~ ~~Date~~ ~~Herewith~~
~~31.01~~ ~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~ X
~~31.02~~ ~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~ X
~~32.01~~ Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* X
~~32.02~~ Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* X
~~101.INS+~~ ~~XBRL Instance~~ X
~~101.SCH+~~ ~~XBRL Taxonomy Extension Schema~~ X
~~101.CAL+~~ ~~XBRL Taxonomy Extension Calculation~~ X
~~101.DEF+~~ ~~XBRL Taxonomy Extension Definition~~ X
~~101.LAB+~~ ~~XBRL Taxonomy Extension Labels~~ X
~~101.PRE+~~ ~~XBRL Taxonomy Extension Presentation~~ X
Number Exhibit Description Filing Filed
Form Exhibit Date Herewith

3.1 Third Amended and Restated Certificate of Incorporation. 8-K 3.1 08/10/22

3.2 Amended and Restated Bylaws as of August 12, 2022. 8-K 3.2 08/10/22

10.1 Offer Letter, dated September 19, 2022, by and between the Company and Jody Staggs. X

10.2 Separation and Release Agreement, dated August 31, 2022, by and between the Company and Winston L. Black III. X

10.3 Fourth Amendment to Loan and Security Agreement, dated September 26, 2022, by and among SWK Holdings Corporation, SWK Funding LLC and Cadence Bank, N.A. 8-K 10.1 09/28/22

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

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

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

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

101.INS+ XBRL Instance X

101.SCH+ XBRL Taxonomy Extension Schema X

101.CAL+ XBRL Taxonomy Extension Calculation X

101.DEF+ XBRL Taxonomy Extension Definition X

101.LAB+ XBRL Taxonomy Extension Labels X

101.PRE+ XBRL Taxonomy Extension Presentation X

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

+ XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November ~~12, 2021.~~ 9, 2022.
SWK Holdings Corporation
By:   /s/ ~~Winston L. Black~~Joe D. Staggs
~~Winston L. Black~~Joe D. Staggs
President and Interim Chief Executive Officer
(Principal Executive Officer)
By: /s/ ~~Charles~~Yvette M. ~~Jacobson~~Heinrichson
~~Charles~~Yvette M. ~~Jacobson~~Heinrichson
Chief Financial Officer
(Principal Financial Officer)
31 28

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

Finance receivables, net		196,141			204,491
Marketable investments		198			241
Cost method investment		3,491			3,491
Deferred tax assets, net		22,649			27,491
Warrant assets		3,650			2,972
Intangible assets, net		10,507			13,617
Goodwill		8,404			8,404
Property and equipment, net		5,791			5,211
Other non-current assets		1,029			1,312
Total assets	$	276,621		$	273,901

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

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

Commitments and contingencies (Note 7)

Stockholders’ equity:
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		4,431,480			4,430,924
Accumulated deficit		(4,170,823	)		(4,190,425	)
Total stockholders’ equity		260,670			240,512
Total liabilities and stockholders’ equity	$	276,621		$	273,901

	September 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	19,399		$	42,863
Interest and accounts receivable, net		7,384			1,803
Marketable investments		500			1,034
Other current assets		1,189			1,727
Total current assets		28,472			47,427

Finance receivables, net		212,959			181,553
Marketable investments		88			119
Cost method investment		3,491			3,491
Deferred tax assets, net		17,350			20,539
Warrant assets		5,140			3,419
Intangible assets, net		8,615			9,964
Goodwill		8,404			8,404
Property and equipment, net		5,945			5,779
Other non-current assets		1,802			1,970
Total assets	$	292,266		$	282,665

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	4,746		$	5,087
Revolving credit facility		—			8
Total current liabilities		4,746			5,095

Contingent consideration payable		8,530			8,530
Other non-current liabilities		1,544			1,804
Total liabilities		14,820			15,429

Commitments and contingencies (Note 6)

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,835,304 and 12,836,133 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		13			13
Additional paid-in capital		4,431,270			4,431,719
Accumulated deficit		(4,153,837	)		(4,164,496	)
Total stockholders’ equity		277,446			267,236
Total liabilities and stockholders’ equity	$	292,266		$	282,665


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020			2021			2020			2022		2021			2022			2021
Revenues:
Finance receivables interest income, including fees	$	9,373		$	7,869		$	29,857		$	22,738
Finance receivable interest income, including fees													$	8,502	$	9,373		$	25,745		$	29,857
Pharmaceutical development		187			2,778			10,846			3,076			5,111		187			5,461			10,846
Other		—			—			496			9			1		—			481			496
Total revenues		9,560			10,647			41,199			25,823			13,614		9,560			31,687			41,199
Costs and expenses:
Impairment expense		—			—			—			163
Interest expense		53			101			292			365			82		53			242			292
Pharmaceutical manufacturing, research and development expense		2,487			1,182			5,577			3,311			1,792		2,487			5,173			5,577
Change in fair value of acquisition-related contingent consideration		—			174			(147	)		1,964			—		—			—			(147	)
Depreciation and amortization expense		812			2,681			3,305			9,629			634		812			1,964			3,305
General and administrative		3,580			2,527			9,825			8,215			4,349		3,580			10,527			9,825
Total costs and expenses		6,932			6,665			18,852			23,647
Income from operations														6,757		2,628			13,781			22,347
Other income (expense), net
Unrealized net (loss) gain on warrants		(214	)		87			678			(1,151	)
Unrealized net gain (loss) on derivatives														1,788		(214	)		623			678
Unrealized net gain (loss) on equity securities		342			(178	)		1,557			(666	)		13		342			(534	)		1,557
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
Income before income tax expense														8,558		2,756			13,870			24,582
Income tax expense														1,942		513			3,211			4,980
Net income													$	6,616	$	2,243		$	10,659		$	19,602
Net income per share
Basic	$	0.18		$	0.34		$	1.53		$	0.04		$	0.52	$	0.18		$	0.83		$	1.53
Diluted	$	0.17		$	0.34		$	1.53		$	0.04		$	0.51	$	0.17		$	0.83		$	1.53
Weighted Average Shares
Weighted average shares outstanding
Basic		12,798			12,905			12,796			12,891			12,832		12,798			12,832			12,796
Diluted		12,859			12,916			12,834			12,898			12,851		12,859			12,871			12,834


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

	Nine Months Ended September 30, 2020
	Common Stock					Additional			Accumulated			Total Stockholders’
	Shares			Amounts		Paid-In Capital			Deficit			Equity
Balances at December 31, 2019		12,917,348		$	13	$	4,432,146		$	(4,195,627	)	$	236,532
Stock-based compensation		—			—		187			—			187
Issuance of common stock		5,937			—		—			—			—
Repurchases of common stock in open market		(5,279	)		—		(62	)		—			(62	)
Net loss		—			—		—			(4,660	)		(4,660	)
Balances at March 31, 2020		12,918,006			13		4,432,271			(4,200,287	)		231,997
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


	Nine Months Ended September 30, 2022
	Common Stock					Additional Paid-In			Accumulated			Total Stockholders’
	Shares			Amount		Capital			Deficit			Equity
Balances at December 31, 2021		12,836,133			13	$	4,431,719		$	(4,164,496	)	$	267,236
Stock-based compensation		—			—		85			—			85
Issuance of common stock upon vesting of restricted stock		5,495			—		—			—			—
Forfeiture of unvested restricted stock		(6,815	)		—		—			—			—
Net income		—			—		—			3,478			3,478
Balances at March 31, 2022		12,834,813			13		4,431,804			(4,161,018	)		270,799
Stock-based compensation		—			—		166			—			166
Issuance of common stock upon vesting of restricted stock		4,305			—		—			—			—
Net income		—			—		—			565			565
Balances at June 30, 2022		12,839,118			13		4,431,970			(4,160,453	)		271,530
Stock-based compensation		—			—		59			—			59
Issuance of common stock upon vesting of restricted stock		7,575			—		—			—			—
Net settlement for employee taxes on restricted stock and options		—			—		(160	)		—			(160	)
Stock options exercised, net		23,074			—		—			—			—
Repurchases of common stock in open market		(34,463	)		—		(599	)		—			(599	)
Net income		—			—		—			6,616			6,616
Balances at September 30, 2022		12,835,304		$	13	$	4,431,270		$	(4,153,837	)	$	277,446

Portfolio	September 30, 2021			December 31, 2020
							September 30, 2022			December 31, 2021
Term loans	$	149,874		$	164,032		$	180,537		$	136,312
Royalty purchases		54,655			48,847			40,779			53,629
Total before allowance for credit losses		204,529			212,879			221,316			189,941
Allowance for credit losses		(8,388	)		(8,388	)		(8,357	)		(8,388	)
Total carrying value	$	196,141		$	204,491		$	212,959		$	181,553


	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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
September 30, 2021	$	198	$	—	$	—	$	198

December 31, 2020	$	241	$	—	$	—	$	241

	September 30, 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	$	19,249	$	10,151	$	29,400	$	16,336	$	13,064
Patents		—		—		—		198		153		45
Trade names and trademarks		210		44		166		210		29		181
Customer relationships		240		50		190		240		32		208
		29,850		19,343		10,507		30,048		16,550		13,498
Deferred patent costs		—		—		—		119		—		119
Total intangible assets	$	29,850	$	19,343	$	10,507	$	30,167	$	16,550	$	13,617

	September 30, 2022						December 31, 2021
	Gross Book Value		Accumulated Amortization		Net Book Value		Gross Book Value		Accumulated Amortization		Net Book Value
Licensing Agreement⁽¹⁾	$	29,400	$	21,096	$	8,304	$	29,400	$	19,780	$	9,620
Trade names and trademarks		210		65		145		210		50		160
Customer relationships		240		74		166		240		56		184
Total intangible assets	$	29,850	$	21,235	$	8,615	$	29,850	$	19,886	$	9,964

Fiscal Year	Amount		Amount
Remainder of 2021	$	548
2022		1,828
Remainder of 2022			$	426
2023		1,757		1,703
2024		1,413		1,546
2025		1,069		1,076
2026 and thereafter		3,892
2026				1,076
Thereafter				2,788
Total	$	10,507	$	8,615


Aziyo Biologics, Inc.			$	4.0
Exeevo, Inc.				2.5
MedMinder Systems, Inc.				5.0
Trio Healthcare Ltd. Loan	$	4.4		1.4
Ideal Implant, Inc.		2.0
Total unfunded commitments	$	6.4	$	12.9

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:
Financial Assets
Warrant assets	$	3,650	$	—	$	—	$	3,650	$	5,140	$	—	$	—	$	5,140
Marketable investments		2,965		2,767		—		198		588		500		—		88

Financial Liabilities:
Financial Liabilities
Contingent consideration payable	$	10,670	$	—	$	—	$	10,670	$	8,530	$	—	$	—	$	8,530


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

	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%

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

	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	$	18,639	$	18,639	$	18,639	$	—	$	—	$	19,399	$	19,399	$	19,399	$	—	$	—
Finance receivables		196,141		196,141		—		—		196,141		212,959		212,959		—		—		212,959
Marketable investments		2,965		2,965		2,767		—		198		588		588		500		—		88
Warrant assets		3,650		3,650		—		—		3,650		5,140		5,140		—		—		5,140

Financial Liabilities
Contingent consideration payable	$	10,670	$	10,670	$	—	$	—	$	10,670	$	8,530	$	8,530	$	—	$	—	$	8,530


	Three Months Ended September 30, 2021										Three Months Ended September 30, 2022
	Finance Receivables		Pharmaceutical Development and Other			Holding Company and Other			Consolidated		Finance Receivables		Pharmaceutical Development and Other		Holding Company and Other			Consolidated
Revenue	$	9,373	$	187		$	—		$	9,560	$	8,502	$	5,111	$	—		$	13,613
Other revenue												—		—		1			1
Interest expense		53		—			—			53		82		—		—			82
Manufacturing, research and development		—		2,487			—			2,487		—		1,792		—			1,792
Depreciation and amortization		—		810			2			812
Depreciation and amortization expense												—		632		2			634
General and administrative		90		999			2,491			3,580		115		843		3,391			4,349
Other income, net		128		—			—			128		1,801		—		—			1,801
Income tax expense		—		—			513			513		—		—		1,942			1,942
Consolidated net income (loss)		9,358		(4,109	)		(3,006	)		2,243
Net income (loss)												10,106		1,844		(5,334	)		6,616


	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
																					Revenue Recognized
Royalty Purchases														Licensed Technology	Footnote		Funded Amount		GAAP Balance		Q3			YTD
Beleodaq®	Oncology treatment		$	7,600	$	5,059	N/A	$	1,274		$	456		Oncology treatment		(1)	$	7,600	$	—	$	27		$	799
Besivance®	Ophthalmic antibiotic	(3)	6,000		—		N/A	(26		)	(25		)	Ophthalmic antibiotic		(2)		6,000		—		8			21
Best ABT, Inc.	Oncology diagnosis	(1), (2)	5,784		3,472		N/A	—			—			Oncology diagnosis		(3), (4)		5,784		3,037		—			—
Coflex®/Kybella®/Zalviso®	Spinal stenosis/Submental fullness		4,350		4,160		N/A	465			155
Coflex®/Kybella®														Spinal stenosis/submental fullness				4,350		3,929		105			397
Cambia®	NSAID migraine treatment	(1)	8,500		2,637		N/A	(9		)	(56		)	NSAID migraine treatment		(3)		8,500		1,034		(94	)		(153	)
Forfivo XL®	Depressive disorder treatment		6,000		1,490		N/A	982			307			Depressive disorder treatment				6,000		1,408		185			857
Ideal Implant, Inc.	Aesthetics		3,000		3,097		N/A	203			203			Aesthetics				3,000		3,289		134			402
Iluvien®	Diabetic macular edema		16,501		16,205		N/A	1,813			641			Diabetic macular edema				16,501		15,729		570			1,691
Narcan®	Opioid overdose treatment		17,500		539		N/A	2,423			1,030			Opioid overdose treatment				17,500		487		248			1,908
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	—			—
Ostomy Products Royalty														Ostomy products		(1)		3,900		—		1,746			1,927
Veru, Inc.	Synthetic Royalty	(4)	5,166		5,165		N/A	5,914			1,411			Women’s health				10,000		3,509		30			555

												Revenue Recognized
Term Loans	Type	Footnote		Maturity Date	Principal		GAAP Balance		Rate			Q3		YTD
4Web, Inc.	First lien			06/03/23	$	28,808	$	31,060		15.8	%	$	1,185	$	3,329
AOTI, Inc.	First lien			03/21/27		12,000		11,970		11.0	%		426		840
Acer Therapeutics, Inc.	First lien			03/04/24		6,704		6,849		12.0	%		457		1,003
Acerus Pharmaceuticals Corporation	First lien		(5)	10/11/23		—		—		12.0	%		—		538
Aziyo Biologics, Inc.	First lien			10/08/27		21,000		20,294		11.5	%		265		265
B&D Dental Corporation	First lien		(5)	12/10/18		—		—		14.0	%		—		2,401
BIOLASE, Inc.	First lien			05/31/25		13,300		13,734		10.5	%		484		1,390
Biotricity, Inc.	First lien			12/26/26		12,000		11,845		11.5	%		407		1,193
Epica International, Inc.	First lien			07/23/24		12,000		12,374		9.5	%		385		1,097
eTon Pharmaceuticals, Inc.	First lien			11/13/24		6,615		6,659		10.0	%		221		666
Exeevo, Inc.	First lien			07/01/27		5,010		4,969		12.5	%		187		187
Flowonix Medical, Inc.	First lien		(4), (6)	12/23/25		10,428		9,789		14.0	%		—		—
Keystone Dental Group	First lien		(5)	08/01/23		—		—		11.5	%		—		888
MedMinder Systems, Inc.	First lien			07/22/27		20,000		19,831		10.9	%		291		291
MolecuLight, Inc.	First lien			12/29/26		10,000		10,007		12.5	%		413		1,036
Sincerus Pharmaceuticals, Inc.	First lien			03/19/26		12,820		13,039		13.0	%		534		1,437
Trio Healthcare Ltd.	First lien			07/01/26		8,150		8,117		12.5	%		288		780

			Maturity Date			GAAP Balance		Contract Rate		Revenue Recognized
Term Loans	Type	Footnote	Maturity Date	Principal		GAAP Balance		Contract Rate		YTD		Q3
4Web, Inc.	First Lien		06/03/23	$	24,929	$	25,358	12.8	%	$	2,700	$	983
Acerus Pharmaceuticals, Inc.	First Lien		10/11/23	6,550		6,519		12.0	%	968		298
B&D Dental Corporation	First Lien	(2), (5)	12/10/18	8,365		8,334		14.0	%	—		—
BIOLASE, Inc.	First Lien		11/09/23	14,300		14,428		12.3	%	1,645		558
CeloNova BioSciences, Inc.	First Lien	(6)	12/31/21	2,054		2,058		12.5	%	360		93
DxTerity Diagnostics, Inc.	First Lien	(7)	11/30/21	2,474		3,217		13.3	%	1,624		340
Epica International, Inc.	First Lien		07/23/23	12,000		12,336		13.5	%	1,202		403
eTon Pharmaceuticals, Inc.	First Lien		11/13/24	7,000		6,862		12.0	%	761		257
Flowonix Medical, Inc.	First Lien		12/23/25	10,000		9,954		11.0	%	961		331
Harrow Health, Inc.	First Lien	(3)	07/19/23	—		—		9.0% - 12.0	%	1,112		—
Keystone Dental, Inc.	First Lien		11/14/22	15,000		15,455		11.5	%	1,401		473
Misonix, Inc.	First Lien	(8)	06/30/23	30,096		30,089		10.0% - 12.3	%	2,384		805
Sincerus Pharmaceuticals, Inc.	First Lien		03/19/26	9,750		9,765		13.0	%	681		360
Tenex Health, Inc.	First Lien	(3)	06/30/21	—		—		13.0	%	349		—
Thermedx, LLC	Sub Note	(9)	05/20/29	466		466		11.8	%	40		14
Trio Healthcare Ltd.	First Lien		07/01/26	5,100		5,033		12.5	%	180		180

			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)

			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

									Income (Loss) Recognized
Marketable Investments	Number of Shares		Footnote		Funded Amount		GAAP Balance		Q3		YTD
Secured Royalty Financing (Marketable Investment)		N/A		(4)	$	3,000	$	88	$	—	$	—
Bioventus, Inc. Common Stock		71,361				N/A		500		13		(534	)
Epica International, Inc.		25,000				N/A		—		—		—
Sincerus Pharmaceuticals, Inc.		26,575				N/A		—		—		—

									Income (Loss) Recognized
Warrants to Purchase Stock	Number of Shares		Footnote		Exercise Price per Share ($)		GAAP Balance		Q3			YTD
4Web, Inc.		TBD			$	—	$	—	$	—		$	—
AOTI, Inc.		92,490				—		—		—			—
Acer Therapeutics, Inc.		150,000				2.46		116		17			(110	)
Acer Therapeutics, Inc.		100,000				1.51		90		(2	)		(2	)
Acerus Pharmaceuticals Corporation		7,764,004				0.053 CAD		20		(33	)		(82	)
Aziyo Biologics		157,895				6.65		895		116			116
BIOLASE, Inc.		22,039				0.39		26		(37	)		(158	)
Biotricity, Inc.		57,536				6.26		21		(39	)		(155	)
CeloNova BioSciences, Inc.		TBD		(7)		—		—		—			—
DxTerity Diagnostics, Inc.		2,019,231		(7)		—		—		—			—
Epica International, Inc.		TBD				—		—		—			—
eTon Pharmaceuticals, Inc.		51,238				5.86		21		(15	)		(74	)
eTon Pharmaceuticals, Inc.		18,141				6.62		8		(5	)		(26	)
Exeevo, Inc.		930				—		—		—			—
EyePoint Pharmaceuticals, Inc.		40,910				11.00		129		(4	)		(147	)
EyePoint Pharmaceuticals, Inc.		7,773				19.30		17		(1	)		(24	)
Flowonix Medical, Inc.		155,561		(4), (6)		—		—		—			—
Harrow Health, Inc.		373,847		(7)		2.08		3,797		1,791			1,285

			Total Revenue
	Assets		Q3		YTD
Total finance receivables	$	212,959	$	8,502	$	25,745
Total marketable investments		588		N/A		N/A
Cost method investment		3,491		N/A		N/A
Fair value of warrant assets		5,140		N/A		N/A
Total assets/revenues	$	222,178	$	8,502	$	25,745

(1)	Royalty was paid off during the third quarter of 2022.
(2)	US royalty was paid off during the year ended December 31, 2021. SWK continues to receive insignificant royalties on international sales.
(3)	Investment considered impaired.
~~(2)~~(4)	Investment on nonaccrual.
~~(3)~~(5)	~~The loan/royalty~~Loan was paid off during ~~2021.~~the nine months ended September 30, 2022.
~~(4)~~(6)	~~The return premium pursuant to the credit agreement was reached, and the residual royalty agreement commenced during the third quarter.~~
~~(5)~~	~~B&D~~Flowonix is evaluating strategic alternatives for the business. ~~The first lien loan is currently in default.~~
~~(6)~~	~~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~~Loan was paid off ~~on October 22,~~during the year ended December 31, 2021.