Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 09, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SWK Holdings Corporation | |
Entity Central Index Key | 0001089907 | |
Document Type | 10-Q | |
Trading Symbol | SWKH | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Common Stock, Shares Outstanding | 12,897,646 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Ex Transition Period | false |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
ASSETS | ||
Cash and cash equivalents | $ 39,183 | $ 20,227 |
Accounts receivable | 1,930 | 2,195 |
Finance receivables, net | 154,410 | 166,610 |
Marketable investments | 511 | 532 |
Deferred tax asset | 21,573 | 22,684 |
Warrant assets | 3,057 | 2,777 |
Other assets | 645 | 637 |
Total assets | 221,309 | 215,662 |
Commitments and contingencies | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Accounts payable and accrued liabilities | 2,301 | 2,592 |
Warrant liability | 35 | 13 |
Total liabilities | 2,336 | 2,605 |
Stockholders' equity: | ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | ||
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,898,599 and 12,933,674 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 13 | 13 |
Additional paid-in capital | 4,431,856 | 4,432,499 |
Accumulated deficit | (4,212,896) | (4,219,455) |
Total SWK Holdings Corporation stockholders' equity | 218,973 | 213,057 |
Total liabilities and stockholders' equity | $ 221,309 | $ 215,662 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 250,000,000 | 250,000,000 |
Common stock, issued | 12,898,599 | 12,933,674 |
Common stock, outstanding | 12,898,599 | 12,933,674 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenues | ||
Finance receivable interest income, including fees | $ 9,391 | $ 6,817 |
Other | 1 | 5 |
Revenues | 9,392 | 6,822 |
Costs and expenses: | ||
Provision for loan credit losses | 609 | 1,179 |
Interest expense | 102 | |
General and administrative | 1,269 | 1,221 |
Total costs and expenses | 1,980 | 2,400 |
Other income (expense), net | ||
Unrealized net gain on warrants | 258 | 300 |
Unrealized net loss on equity securities | (124) | |
Income before provision for income taxes | 7,670 | 4,598 |
Provision (benefit) for income taxes | 1,111 | 954 |
Consolidated net income | $ 6,559 | $ 3,644 |
Net income (loss) per share attributable to SWK Holdings Corporation Stockholders | ||
Basic (in dollars per share) | $ .51 | $ 0.28 |
Diluted (in dollars per share) | $ .51 | $ 0.28 |
Weighted Average Shares | ||
Basic (in shares) | 12,906,000 | 13,053,000 |
Diluted (in shares) | 12,909,000 | 13,057,000 |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Statement of Comprehensive Income [Abstract] | ||
Consolidated net income (loss) | $ 6,559 | $ 3,644 |
Other comprehensive income (loss), net of tax | ||
Other comprehensive income, net of tax | ||
Comprehensive income | $ 6,559 | $ 3,644 |
UNAUDITED CONDENSED CONSOLIDA_5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Beginning Balance at Dec. 31, 2017 | $ 13 | $ 4,433,589 | $ (4,225,863) | $ 213 | $ 207,952 |
Beginning Balance, in Shares at Dec. 31, 2017 | 13,053,422 | ||||
Stock-based compensation | 79 | 79 | |||
Issuance of common stock | |||||
Issuance of common stock, in Shares | 5,768 | ||||
Repurchases of common stock in open market | |||||
Repurchases of common stock in open market (in shares) | |||||
Cumulative effect of adoption of New Accounting Principles | 213 | (213) | |||
Net income (loss) | 3,644 | 3,644 | |||
Ending Balance at Mar. 31, 2018 | $ 13 | 4,433,668 | (4,222,006) | 211,675 | |
Ending Balance, in Shares at Mar. 31, 2018 | 13,059,190 | ||||
Beginning Balance at Dec. 31, 2018 | $ 13 | 4,432,499 | (4,219,455) | 213,057 | |
Beginning Balance, in Shares at Dec. 31, 2018 | 12,933,674 | ||||
Stock-based compensation | 102 | 102 | |||
Issuance of common stock | |||||
Issuance of common stock, in Shares | 42,225 | ||||
Repurchases of common stock in open market | (745) | (745) | |||
Repurchases of common stock in open market (in shares) | (77,300) | ||||
Net income (loss) | 6,559 | 6,559 | |||
Ending Balance at Mar. 31, 2019 | $ 13 | $ 4,431,856 | $ (4,212,896) | $ 218,973 | |
Ending Balance, in Shares at Mar. 31, 2019 | 12,898,599 |
UNAUDITED CONDENSED CONSOLIDA_6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | ||
Consolidated net income | $ 6,559 | $ 3,644 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Provision for loan credit losses | 609 | 1,179 |
Deferred income taxes | 1,111 | 954 |
Change in fair value of warrants | (258) | (300) |
Change in fair value of equity securities | 124 | |
Loan discount amortization and fee accretion | (600) | (837) |
Interest paid-in-kind | (406) | (47) |
Stock-based compensation | 102 | 79 |
Interest income in excess of cash collected | (81) | (70) |
Other | (1) | 4 |
Changes in operating assets and liabilities: | ||
Interest receivable | 265 | 58 |
Other assets | (9) | (189) |
Accounts payable and other liabilities | (291) | 610 |
Net cash provided by operating activities | 7,000 | 5,209 |
Cash flows from investing activities: | ||
Investment in finance receivables | (11,186) | (29,250) |
Repayment of finance receivables | 23,866 | 14,918 |
Corporate debt security principal payment | 21 | 19 |
Other | (2) | |
Net cash provided by (used in) investing activities | 12,701 | (14,315) |
Cash flows from financing activities: | ||
Repurchases of common stock, including fees and expenses | (745) | |
Net cash used in financing activities | (745) | |
Net decrease in cash and cash equivalents | 18,956 | (9,106) |
Cash and cash equivalents at beginning of period | 20,227 | 30,557 |
Cash and cash equivalents at end of period | $ 39,183 | $ 21,451 |
SWK Holdings Corporation and Su
SWK Holdings Corporation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
SWK Holdings Corporation and Summary of Significant Accounting Policies | Note 1. SWK Holdings Corporation and Summary of Significant Accounting Policies Nature of Operations SWK Holdings Corporation (the “Company”) was incorporated in July 1996 in California and reincorporated in Delaware in September 1999. In July 2012, the Company commenced its strategy of building a specialty finance and asset management business. The Company’s strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions to a broad range of life science companies, institutions and inventors. The Company is primarily focused on monetizing cash flow streams derived from commercial-stage products and related intellectual property through royalty purchases and financings, as well as through the creation of synthetic revenue interests in commercialized products. The Company has been deploying its assets to earn interest, fees, and other income pursuant to this strategy, and the Company continues to identify and review financing and similar opportunities on an ongoing basis. In addition, through the Company’s wholly-owned subsidiary, SWK Advisors LLC, the Company provides non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board. The Company intends to fund transactions through its own working capital, and its revolving credit facility, as well as by building its asset management business by raising additional third-party capital to be invested alongside the Company’s capital. The Company fills a niche that it believes is underserved in the sub-$50 million transaction size. Since many of its competitors that provide longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than the Company, they tend to not focus on transaction sizes below $50 million as it is generally inefficient for them to do so. In addition, the Company does not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market. As such, the Company believes it faces less competition from such investors in transactions that are less than $50 million. 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, we do not anticipate that our life science business strategy will generate sufficient income to permit us to utilize all of our NOLs prior to their respective expiration dates. As such, it is possible that we might pursue additional strategies that we believe might result in our ability to utilize more of our NOLs. As of May 9, 2019, the Company and its partners have executed transactions with 34 different parties under its specialty finance strategy, funding an aggregate $499 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. The Company is headquartered in Dallas, Texas. Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. The Company consolidates a variable interest entity (“VIE”) when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts and transactions. The Company owns interests in various partnerships and limited liability companies, or LLCs. The Company consolidates its investments in these partnerships or LLCs, where the Company, as the general partner or managing member, exercises effective control, even though the Company’s ownership may be less than 50 percent, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company. The Company has reviewed each of the underlying agreements to determine if it has effective control. If circumstances change and it is determined this control does not exist, any such investment would be recorded using the equity method of accounting. Although this would change individual line items within the Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable to the Company. Unaudited Interim Financial Information The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending December 31, 2019. 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, 2018, filed with the SEC on March 28, 2019. 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, impairment of financing receivables and long-lived assets, valuation of warrants, 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, 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. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 updates the fair value measurement disclosure requirements by (i) eliminating certain requirements, including disclosure of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements, (ii) modifying certain requirements, including clarifying that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and (iii) adding certain requirements, including disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted for any eliminated or modified disclosures. The Company is currently evaluating the new guidance but believes it will not have a material impact on its consolidated financial statements, as the Company has had no historical transfers between hierarchies. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The new standard adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of losses. The ASU describes the impairment allowance as a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses relating to available-for-sale debt securities should be measured in a manner similar to current GAAP; however, the amendments in this update require that credit losses be presented as an allowance rather than as a write-down, which will allow an entity the ability to record reversals of credit losses in current period net income. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model. In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs (Topic 842). ASU 2016-02 supersedes guidance related to accounting for leases and provides for the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The objective of the ASU is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. ASU 2016-02 does not fundamentally change lessor accounting; however, some changes have been made to lessor accounting to conform and align that guidance with the lessee guidance and other areas within GAAP. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company elected to adopt ASU 2016-02 on January 1, 2019 using the modified retrospective transition method, which permits application of the new standard on the adoption date as opposed to the earliest comparative period presented in the financial statements. In addition, the Company elected to use the available practical expedient package, and therefore did not reassess classification of its existing leases. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. |
Net Income per Share
Net Income per Share | 3 Months Ended |
Mar. 31, 2019 | |
Net Income Per Share | |
Net Income per Share | Note 2. Net Income per Share Basic net income per share is computed using the weighted-average number of outstanding shares of common stock. Diluted net income per share is computed using the weighted-average number of outstanding shares of common stock, and when dilutive, shares of common stock issuable upon exercise of options and warrants deemed outstanding using the treasury stock method. The following table shows the computation of basic and diluted net income per share for the following periods (in thousands, except per share amounts): Three Months Ended 2019 2018 Numerator: Net income $ 6,559 $ 3,644 Denominator: Weighted-average shares outstanding 12,906 13,053 Effect of dilutive securities 3 4 Weighted-average diluted shares 12,909 13,057 Basic net income per share $ 0.51 $ 0.28 Diluted net income per share $ 0.51 $ 0.28 For the three months ended March 31, 2019 and 2018, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 400,000 and 286,000, respectively, have been excluded from the calculation of diluted net income per share as all such securities were anti-dilutive. |
Finance Receivables
Finance Receivables | 3 Months Ended |
Mar. 31, 2019 | |
Receivables [Abstract] | |
Finance Receivables | 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 March 31, 2019, the Company had a provision for credit loss allowance of $6.8 million. Of the total $6.8 million, $1.2 million and $0.6 million are associated with the Company’s Cambia® and Besivance® royalties, respectively. The remaining $5.0 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 of $5.8 million. The carrying value of finance receivables are as follows (in thousands): Portfolio March 31, December 31, Term loans $ 127,689 $ 136,379 Royalty purchases 33,509 36,410 Total before allowance for credit losses 161,198 172,789 Allowance for credit losses (6,788 ) (6,179 ) Total carrying value $ 154,410 $ 166,610 The following table presents nonaccrual and performing finance receivables by portfolio segment, net of credit loss allowance (in thousands): March 31, 2019 December 31, 2018 Nonaccrual Performing Total Nonaccrual Performing Total Term loans $ 8,337 $ 119,352 $ 127,689 $ 8,337 $ 128,042 $ 136,379 Royalty purchases, net of credit loss allowance 5,784 20,937 26,721 5,784 24,447 30,231 Total carrying value $ 14,121 $ 140,289 $ 154,410 $ 14,121 $ 152,489 $ 166,610 As of March 31, 2019 and December 31, 2018, the Company had two finance receivables in nonaccrual status: (a) the term loan to B&D Dental Corporation (“B&D”), with a net carrying value of $8.3 million at each date, and (b) the Best royalty, with a net carrying value of $5.8 million at each date. Although in nonaccrual status, neither the term loan nor royalty were considered impaired as of March 31, 2019. The Company did not collect any cash on nonaccrual items during the three months ended March 31, 2019. Besivance On April 2, 2013, the Company purchased an effective 2.4 percent royalty on sales of Besivance® from InSite Vision for $6.0 million. Besivance is marketed by Bausch & Lomb, formerly known as Valeant Pharmaceuticals. Recently the sales performance of Besivance® has weakened primarily due to substantial declines in prescription volumes, which in conjunction with elevated sales chargebacks and various rebates (gross sales to net sales deductions), has resulted in material reductions in the product’s net sales and associated royalties payable to the Company. During the three months ended March 31, 2019, the Company reduced its expectations for future royalty receipts and recognized an allowance for credit loss on the royalty purchase of $0.6 million. |
Marketable Investments
Marketable Investments | 3 Months Ended |
Mar. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Marketable Investments | Note 4. Marketable Investments Investments in marketable securities at March 31, 2019 and December 31, 2018 consist of the following (in thousands): March 31, December 31, Corporate debt securities $ 511 $ 532 The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities as of March 31, 2019 and December 31, 2018, are as follows (in thousands): March 31, 2019 Amortized Gross Gross Fair Value Corporate debt securities $ 511 $ — $ — $ 511 December 31, 2018 Amortized Gross Gross Fair Value Corporate debt securities $ 532 $ — $ — $ 532 The following table presents unrealized net losses on equity securities as prescribed by ASC 321, “Investment - Equity Securities.” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” was adopted on January 1, 2018, at which time a cumulative effect adjustment of $213,000 was recorded to reclassify the amount of accumulated unrealized gains related to equity securities from accumulated other comprehensive income to retained earnings (in thousands): Three Months Ended 2019 2018 Unrealized net loss on equity securities reflected in the Unaudited Condensed Consolidated Statements of Income $ — $ (124 ) Equity Securities The Company did not have any investments in equity securities as of March 31, 2019. As of March 31, 2018, the Company’s equity securities included 661,076 shares of Cancer Genetics and Hooper Holmes common stock, which were sold and written off, respectively, during the year ended December 31, 2018. Debt Securities On July 9, 2013, the Company entered into a note purchase agreement to purchase, at par, $3.0 million of a total of $100.0 million aggregate principal amount of senior secured notes due in November 2026. The agreement allows the first interest payment date to include paid-in-kind notes for any cash shortfall, of which the Company received $0.1 million on November 15, 2013. The notes are secured only by certain royalty and milestone payments associated with the sales of pharmaceutical products. The senior secured notes have been placed on non-accrual status as of June 30, 2016. Total cash collected during the three months ended March 31, 2019 was $21,000 which was credited to the notes’ carrying value. As of March 31, 2019, the notes are reflected at their estimated fair value of $0.5 million. |
Revolving Credit Facility
Revolving Credit Facility | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Revolving Credit Facility | Note 5. Revolving Credit Facility On June 29, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with State Bank and Trust Company as a lender and the administrative agent (“State Bank”) pursuant to which State Bank will provide the Company with up to a $20 million revolving senior secured credit facility, which the Company can draw down and repay until maturity, subject to borrowing base eligibility. The Loan Agreement matures on June 29, 2021. The Loan Agreement accrues interest at the Daily LIBOR Rate, with a floor of 1.00 percent, plus a 3.25 percent margin and principal is repayable in full at maturity. Interest is generally required to be paid monthly in arrears. The Loan Agreement requires the payment of an unused line fee of 0.50 percent, which will be recorded as interest expense. The Company paid $0.5 million in fees at closing, which have been capitalized as deferred financing costs and will be amortized on a straight-line basis over the term of the Loan Agreement. The Loan Agreement has an advance rate against the Company’s finance receivables portfolio, including 85 percent against senior first lien loans, 70 percent against second lien loans and 50 percent against royalty receivables, subject to certain eligibility requirements as defined in the Loan Agreement. The Loan Agreement contains certain affirmative and negative covenants including minimum asset coverage and minimum interest coverage ratios. During the three months ended March 31, 2019, the Company recognized $0.1 million of interest expense. As of March 31, 2019, no amount was outstanding under the Loan Agreement, and $20 million was available for borrowing. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 6. Related Party Transactions On September 6, 2013, in connection with entering into a credit facility, the Company issued warrants to an affiliate of a stockholder, Carlson Capital, L.P. (the “Stockholder”), for 100,000 shares of the Company’s common stock at a strike price of $13.88 per share. The warrants have a price anti-dilution mechanism that was triggered by the price that shares were sold by the Company in a rights offering in 2014, and as a result, the strike price of the warrants was reduced to $13.48 per share. Due to certain provisions within the warrant agreement, the warrants meet the definition of a derivative and do not qualify for a scope exception, as it is not considered indexed to the Company’s stock. As such, the warrants are reflected as a warrant liability in the unaudited condensed consolidated balance sheets. The Company recorded a nominal gain for the three months ended March 31, 2019. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: March 31, December 31, Dividend rate — — Risk-free rate 2.4 % 2.5 % Expected life (years) 1.4 1.7 Expected volatility 23.7 % 18.6 % The changes on the value of the warrant liability during the three months ended March 31, 2019 were as follows (in thousands): Fair value – December 31, 2018 $ 13 Issuances — Changes in fair value 22 Fair value – March 31, 2019 $ 35 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7. Commitments and Contingencies As of March 31, 2019, the Company’s unfunded commitments were as follows (in millions): Aimmune Therapeutics, Inc. $ 3.8 Veru, Inc. 2.0 Total unfunded commitments $ 5.8 All unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified date or period of time per the terms of the royalty purchase or credit agreements, and in the case of loan transactions, are only subject to being advanced as long as an event of default does not exist. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Note 8. Stockholders’ Equity Stock Compensation Plans During the three months ended March 31, 2019 and 2018, the Company’s Board of Directors (the “Board”) approved compensation for Board services by granting 4,725 and 5,768 shares, respectively, of common stock as compensation for the non-employee directors. During both the three months ended March 31, 2019 and 2018, the Company recorded approximately $47,000 and $62,000 in Board stock-based compensation expense. The aggregate stock-based compensation expense, including the quarterly Board grants, recognized by the Company for both of the three months ended March 31, 2019 and 2018 was $0.1 million. The Company’s Chief Executive Officer, (“CEO”) received a grant of options to acquire up to 75,000 shares of the Company’s common stock, effective as of January 28, 2019. The options have a per-share exercise price of $12.50. The options are subject to vesting in equal annual installments over a three-year period based on the CEO’s continued employment with the Company. The options are subject to accelerated vesting upon a termination of the CEO’s employment if the CEO’s employment is terminated by the CEO for “Good Reason” as defined in the CEO’s employment agreement effective as of January 1, 2019. Furthermore, the 2012 and 2014 options received by the CEO were amended to extend the expiration dates to December 31, 2021. The options are forfeited and of no force and effect to the extent the options have not vested or become exercisable on or before December 31, 2021. The CEO also received a restricted stock award of 37,500 shares of restricted stock, subject to terms and conditions of the award agreement and the 2010 Stock Incentive Plan. The restricted stock is subject to vesting in equal annual installments over a three-year period but only to the extent the CEO is employed by or performing services for the Company. However, the restricted stock shall vest upon the CEO’s death, “Disability” and “Good Reason,” as defined in the Employment Agreement between the Company and the CEO effective January 1, 2019. On December 21, 2018, the Board of Directors of the Company authorized a stock repurchase program, which is fully described in Part II, Item 2 under Unregistered Sales of Equity Securities and Use of Proceeds |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 9. Fair Value Measurements The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels. Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets. Level 3 Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources. Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the three months ended March 31, 2019. The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, 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. Equity Securities 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. Marketable Investments and Derivative Securities Marketable Investments If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities would be classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly these securities would be classified as Level 2. If market prices are not available and there are no observable inputs, then fair value would be estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes. Such securities would be classified as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company checks the validity of received prices based on comparison to prices of other similar assets and market data such as relevant bench mark indices. Available-for-sale securities are measured at fair value on a recurring basis, while securities with no readily available fair market value are not, but estimates of fair value are reflected below. Derivative Securities For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3. The following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 (in thousands): Total Quoted Significant Significant Financial Assets: Warrant assets $ 3,057 $ — $ — $ 3,057 Corporate debt securities 511 — — 511 Financial Liabilities: Warrant liability $ 35 $ — $ — $ 35 The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 (in thousands): Total Quoted Significant Significant Financial Assets: Warrant assets $ 2,777 $ — $ — $ 2,777 Corporate debt securities 532 — — 532 Financial Liabilities: Warrant liability $ 13 $ — $ — $ 13 The changes on the value of the warrant assets during the three months ended March 31, 2019 were as follows (in thousands): Fair value – December 31, 2018 $ 2,777 Issued — Canceled — Change in fair value 280 Fair value – March 31, 2019 $ 3,057 The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the unaudited condensed consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value: March 31, December 31, Dividend rate range — — Risk-free rate range 2.2% to 2.3% 2.5% to 2.6% Expected life (years) range 4.5 to 7.6 4.8 to 7.9 Expected volatility range 68.8% to 84.6% 67.6% to 101.8% As of March 31, 2019 and December 31, 2018, the Company had two royalties, Besivance® and Cambia®, that were deemed to be impaired. The following table presents these royalties measured at fair value on a nonrecurring basis as of March 31, 2019 and December 31, 2018 (in thousands): Total Quoted Significant Significant March 31, 2019 Impaired royalties $ 7,160 $ — $ — $ 7,160 December 31, 2018 Impaired royalties $ 8,227 $ — $ — $ 8,227 There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2019 and December 31, 2018. The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments. As of March 31, 2019 (in thousands): Carry Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 39,183 $ 39,183 $ 39,183 $ — $ — Finance receivables 154,410 154,410 — — 154,410 Marketable investments 511 511 — — 511 Warrant assets 3,057 3,057 — — 3,057 Financial Liabilities Warrant liability $ 35 $ 35 $ — $ — $ 35 As of December 31, 2018 (in thousands): Carry Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 20,227 $ 20,227 $ 20,227 $ — $ — Finance receivables 166,610 166,610 — — 166,610 Marketable investments 532 532 — — 532 Warrant assets 2,777 2,777 — — 2,777 Financial Liabilities Warrant liability $ 13 $ 13 $ — $ — $ 13 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 10. Subsequent Events Solsys Medical LLC On May 2, 2019, Misonix, Inc. (“Misonix”) announced it had entered into a definitive agreement with one of our partner companies, Solsys Medical LLC (“Solsys”), to acquire Solsys in an all-stock transaction valued at approximately $97 million. Concurrent with the announcement, SWK Funding LLC (“SWK Funding”) executed (i) an amendment with Solsys to provide up to $5 million of additional capital under the credit agreement, with $2.5 million funded at closing of the amendment, and $2.5 million eligible to be drawn upon Solsys raising at least $4 million of additional equity capital prior to the merger, and (ii) a Commitment Letter with Misonix that allows Misonix to assume the Solsys credit facity whereby SWK Funding would become the senior secured lender to the surviving parent entity upon consummation of the merger. Pursuant to the Commitment Letter, SWK Funding agreed to extend the credit facility’s maturity date and interest only period, and to decrease the interest rate from Libor plus 10.5 percent to a range of Libor plus 7 to 9 percent, dependent upon certain financial metrics. SWK Funding also agreed to provide an additional $5 million of add-on term loan funding, drawable at Misonix’s option until the first anniversary of the consummation of the merger with Solsys. Misonix’s merger with SolSys is subject to the approval of both companies’ shareholders and is expected to be completed in the third quarter of calendar year 2019. BIOLASE, Inc. On May 7, 2019, SWK Funding executed an amendment with BIOLASE, Inc. (“BIOLASE”) whereby SWK Funding agreed to fund an additional $2.5 million under the credit agreement to support the company’s growth initiatives. Veru, Inc. On May 13, 2019, SWK Funding executed an amendment with Veru, Inc. (“Veru”), whereby the royalty rates applicable to sales of FC2 Female Condom (“FC2”), the business upon which SWK Funding receives its quarterly royalties, were reduced by 50 percent for the next four payment periods to accommodate Veru’s growth working capital needs. The royalty rates return to the original levels in 2020 and subsequently increase in 2021 in accordance with the terms outlined in the amendment. Furthermore, upon the credit agreement’s termination date of March 5, 2025, the amount Veru must pay was increased to 176.25 percent of the aggregate amount advanced, less the amounts previously paid from product revenue, less the outstanding principal amount of the loans as of such date; however, the residual royalty payable to SWK Funding upon achieving the maximum threshold will commence based on the pre-amendment royalty rates. The $2.0 million unfunded commitment was also eliminated. |
SWK Holdings Corporation and _2
SWK Holdings Corporation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Nature of Operations | Nature of Operations SWK Holdings Corporation (the “Company”) was incorporated in July 1996 in California and reincorporated in Delaware in September 1999. In July 2012, the Company commenced its strategy of building a specialty finance and asset management business. The Company’s strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions to a broad range of life science companies, institutions and inventors. The Company is primarily focused on monetizing cash flow streams derived from commercial-stage products and related intellectual property through royalty purchases and financings, as well as through the creation of synthetic revenue interests in commercialized products. The Company has been deploying its assets to earn interest, fees, and other income pursuant to this strategy, and the Company continues to identify and review financing and similar opportunities on an ongoing basis. In addition, through the Company’s wholly-owned subsidiary, SWK Advisors LLC, the Company provides non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board. The Company intends to fund transactions through its own working capital, and its revolving credit facility, as well as by building its asset management business by raising additional third-party capital to be invested alongside the Company’s capital. The Company fills a niche that it believes is underserved in the sub-$50 million transaction size. Since many of its competitors that provide longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than the Company, they tend to not focus on transaction sizes below $50 million as it is generally inefficient for them to do so. In addition, the Company does not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market. As such, the Company believes it faces less competition from such investors in transactions that are less than $50 million. 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, we do not anticipate that our life science business strategy will generate sufficient income to permit us to utilize all of our NOLs prior to their respective expiration dates. As such, it is possible that we might pursue additional strategies that we believe might result in our ability to utilize more of our NOLs. As of May 9, 2019, the Company and its partners have executed transactions with 34 different parties under its specialty finance strategy, funding an aggregate $499 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. The Company is headquartered in Dallas, Texas. |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. The Company consolidates a variable interest entity (“VIE”) when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts and transactions. The Company owns interests in various partnerships and limited liability companies, or LLCs. The Company consolidates its investments in these partnerships or LLCs, where the Company, as the general partner or managing member, exercises effective control, even though the Company’s ownership may be less than 50 percent, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company. The Company has reviewed each of the underlying agreements to determine if it has effective control. If circumstances change and it is determined this control does not exist, any such investment would be recorded using the equity method of accounting. Although this would change individual line items within the Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable to the Company. |
Unaudited Interim Financial Information | Unaudited Interim Financial Information The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending December 31, 2019. 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, 2018, filed with the SEC on March 28, 2019. |
Use of Estimates | Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition, stock-based compensation, impairment of financing receivables and long-lived assets, valuation of warrants, 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, 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 updates the fair value measurement disclosure requirements by (i) eliminating certain requirements, including disclosure of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements, (ii) modifying certain requirements, including clarifying that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and (iii) adding certain requirements, including disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted for any eliminated or modified disclosures. The Company is currently evaluating the new guidance but believes it will not have a material impact on its consolidated financial statements, as the Company has had no historical transfers between hierarchies. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The new standard adds an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of losses. The ASU describes the impairment allowance as a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses relating to available-for-sale debt securities should be measured in a manner similar to current GAAP; however, the amendments in this update require that credit losses be presented as an allowance rather than as a write-down, which will allow an entity the ability to record reversals of credit losses in current period net income. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses on its portfolio under the new CECL model. In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs (Topic 842). ASU 2016-02 supersedes guidance related to accounting for leases and provides for the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The objective of the ASU is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. ASU 2016-02 does not fundamentally change lessor accounting; however, some changes have been made to lessor accounting to conform and align that guidance with the lessee guidance and other areas within GAAP. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company elected to adopt ASU 2016-02 on January 1, 2019 using the modified retrospective transition method, which permits application of the new standard on the adoption date as opposed to the earliest comparative period presented in the financial statements. In addition, the Company elected to use the available practical expedient package, and therefore did not reassess classification of its existing leases. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. |
Net Income per Share (Tables)
Net Income per Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Disclosure Net Income Per Share Tables Abstract | |
Schedule of earnings per share, basic and diluted | The following table shows the computation of basic and diluted net income per share for the following periods (in thousands, except per share amounts): Three Months Ended 2019 2018 Numerator: Net income $ 6,559 $ 3,644 Denominator: Weighted-average shares outstanding 12,906 13,053 Effect of dilutive securities 3 4 Weighted-average diluted shares 12,909 13,057 Basic net income per share $ 0.51 $ 0.28 Diluted net income per share $ 0.51 $ 0.28 |
Finance Receivables (Tables)
Finance Receivables (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Receivables [Abstract] | |
Schedule of carrying value of finance receivables | The carrying value of finance receivables are as follows (in thousands): Portfolio March 31, December 31, Term loans $ 127,689 $ 136,379 Royalty purchases 33,509 36,410 Total before allowance for credit losses 161,198 172,789 Allowance for credit losses (6,788 ) (6,179 ) Total carrying value $ 154,410 $ 166,610 |
Schedule of analysis of nonaccrual and performing loans by portfolio segment | The following table presents nonaccrual and performing finance receivables by portfolio segment, net of credit loss allowance (in thousands): March 31, 2019 December 31, 2018 Nonaccrual Performing Total Nonaccrual Performing Total Term loans $ 8,337 $ 119,352 $ 127,689 $ 8,337 $ 128,042 $ 136,379 Royalty purchases, net of credit loss allowance 5,784 20,937 26,721 5,784 24,447 30,231 Total carrying value $ 14,121 $ 140,289 $ 154,410 $ 14,121 $ 152,489 $ 166,610 |
Marketable Investments (Tables)
Marketable Investments (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of marketable investments | Investments in marketable securities at March 31, 2019 and December 31, 2018 consist of the following (in thousands): March 31, December 31, Corporate debt securities $ 511 $ 532 |
Schedule of available-for-sale securities reconciliation | The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities as of March 31, 2019 and December 31, 2018, are as follows (in thousands): March 31, 2019 Amortized Gross Gross Fair Value Corporate debt securities $ 511 $ — $ — $ 511 December 31, 2018 Amortized Gross Gross Fair Value Corporate debt securities $ 532 $ — $ — $ 532 |
Schedule of Proceeds from sales, gross unrealized gains and gross unrealized losses for available-for-sale securities | The following table presents unrealized net losses on equity securities as prescribed by ASC 321, “Investment - Equity Securities.” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” was adopted on January 1, 2018, at which time a cumulative effect adjustment of $213,000 was recorded to reclassify the amount of accumulated unrealized gains related to equity securities from accumulated other comprehensive income to retained earnings (in thousands): Three Months Ended 2019 2018 Unrealized net loss on equity securities reflected in the Unaudited Condensed Consolidated Statements of Income $ — $ (124 ) |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of assumptions used | The Company recorded a nominal gain for the three months ended March 31, 2019. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: March 31, December 31, Dividend rate — — Risk-free rate 2.4 % 2.5 % Expected life (years) 1.4 1.7 Expected volatility 23.7 % 18.6 % |
Schedule of value of the warrant liability | The changes on the value of the warrant liability during the three months ended March 31, 2019 were as follows (in thousands): Fair value – December 31, 2018 $ 13 Issuances — Changes in fair value 22 Fair value – March 31, 2019 $ 35 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Unfunded Commitments | As of March 31, 2019, the Company’s unfunded commitments were as follows (in millions): Aimmune Therapeutics, Inc. $ 3.8 Veru, Inc. 2.0 Total unfunded commitments $ 5.8 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value assets measured on recurring basis | The following table presents financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 (in thousands): Total Quoted Significant Significant Financial Assets: Warrant assets $ 3,057 $ — $ — $ 3,057 Corporate debt securities 511 — — 511 Financial Liabilities: Warrant liability $ 35 $ — $ — $ 35 The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 (in thousands): Total Quoted Significant Significant Financial Assets: Warrant assets $ 2,777 $ — $ — $ 2,777 Corporate debt securities 532 — — 532 Financial Liabilities: Warrant liability $ 13 $ — $ — $ 13 |
Schedule of fair value assets measured on recurring basis unobservable input reconciliation | The changes on the value of the warrant assets during the three months ended March 31, 2019 were as follows (in thousands): Fair value – December 31, 2018 $ 2,777 Issued — Canceled — Change in fair value 280 Fair value – March 31, 2019 $ 3,057 |
Schedule of weighted average assumptions | The following ranges of assumptions were used in the models to determine fair value: March 31, December 31, Dividend rate range — — Risk-free rate range 2.2% to 2.3% 2.5% to 2.6% Expected life (years) range 4.5 to 7.6 4.8 to 7.9 Expected volatility range 68.8% to 84.6% 67.6% to 101.8% |
Schedule of fair value assets and liabilities measured on nonrecurring basis | As of March 31, 2019 and December 31, 2018, the Company had two royalties, Besivance® and Cambia®, that were deemed to be impaired. The following table presents these royalties measured at fair value on a nonrecurring basis as of March 31, 2019 and December 31, 2018 (in thousands): Total Quoted Significant Significant March 31, 2019 Impaired royalties $ 7,160 $ — $ — $ 7,160 December 31, 2018 Impaired royalties $ 8,227 $ — $ — $ 8,227 There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2019 and December 31, 2018. |
Schedule of fair value by balance sheet grouping | The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments. As of March 31, 2019 (in thousands): Carry Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 39,183 $ 39,183 $ 39,183 $ — $ — Finance receivables 154,410 154,410 — — 154,410 Marketable investments 511 511 — — 511 Warrant assets 3,057 3,057 — — 3,057 Financial Liabilities Warrant liability $ 35 $ 35 $ — $ — $ 35 As of December 31, 2018 (in thousands): Carry Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 20,227 $ 20,227 $ 20,227 $ — $ — Finance receivables 166,610 166,610 — — 166,610 Marketable investments 532 532 — — 532 Warrant assets 2,777 2,777 — — 2,777 Financial Liabilities Warrant liability $ 13 $ 13 $ — $ — $ 13 |
Net Income per Share (Details)
Net Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Numerator: | ||
Net income (loss) attributable to SWK Holdings Corporation Stockholders | $ 6,559 | $ 3,644 |
Denominator: | ||
Weighted-average shares outstanding | 12,906,000 | 13,053,000 |
Effect of dilutive securities | 3,000 | 4,000 |
Weighted-average diluted shares | 12,909,000 | 13,057,000 |
Basic income (loss) per share attributable to SWK Holdings Corporation Stockholders | $ .51 | $ 0.28 |
Diluted income (loss) per share attributable to SWK Holdings Corporation Stockholders | $ .51 | $ 0.28 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares) | 400,000 | 286,000 |
Finance Receivables (Details)
Finance Receivables (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Portfolio | ||
Total before allowance for credit losses | $ 161,198 | $ 172,789 |
Allowance for credit losses | (6,788) | (6,179) |
Total carrying value | 154,410 | 166,610 |
Life Science Term Loans [Member] | ||
Portfolio | ||
Total before allowance for credit losses | 127,689 | 136,379 |
Total carrying value | 127,689 | 136,379 |
Life Science Royalty Purchases [Member] | ||
Portfolio | ||
Total before allowance for credit losses | 33,509 | 36,410 |
Total carrying value | $ 26,721 | $ 30,231 |
Finance Receivables (Details 2)
Finance Receivables (Details 2) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Nonaccrual | $ 14,121 | $ 14,121 |
Performing | 140,289 | 152,489 |
Total | 154,410 | 166,610 |
Life Science Term Loans [Member] | ||
Nonaccrual | 8,337 | 8,337 |
Performing | 119,352 | 128,042 |
Total | 127,689 | 136,379 |
Life Science Royalty Purchases [Member] | ||
Nonaccrual | 5,784 | 5,784 |
Performing | 20,937 | 24,447 |
Total | $ 26,721 | $ 30,231 |
Finance Receivables (Details Na
Finance Receivables (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2018 | Apr. 02, 2013 | |
Allowance for credit loss | $ 6,800 | ||
Besivance [Member] | |||
Royalty Purchased on Sales, Percent | 2.40% | ||
Royalty Purchased on Sales, Amount | $ 6,000 | ||
ABT Molecular Imaging, Inc [Member] | |||
Face amount | 5,800 | $ 5,800 | |
ABT Molecular Imaging, Inc [Member] | First Lien Loan [Member] | |||
Allowance for credit loss | 5,000 | ||
ABT Molecular Imaging, Inc [Member] | Second Lien Loan [Member] | |||
Allowance for credit loss | 5,800 | ||
Cambia [Member] | |||
Allowance for credit loss | 1,200 | ||
Besivance [Member] | |||
Allowance for credit loss | 600 | ||
B&D Dental [Member] | |||
Face amount | $ 8,300 | $ 8,300 |
Marketable Investments (Details
Marketable Investments (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Investments, Debt and Equity Securities [Abstract] | ||
Corporate debt securities | $ 511 | $ 532 |
Equity securities | ||
Total | $ 511 | $ 532 |
Marketable Investments (Detai_2
Marketable Investments (Details 2) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Available for Sale Securities: | |||
Amortized Cost | $ 532 | ||
Gross Unrealized Gains | |||
Gross Unrealized Loss | |||
Fair Value | 600 | 532 | |
Equity investment losses reflected in the Consolidated Statements of Income | (124) | ||
Corporate Debt Securities [Member] | |||
Available for Sale Securities: | |||
Amortized Cost | 511 | 532 | |
Gross Unrealized Gains | |||
Gross Unrealized Loss | |||
Fair Value | $ 511 | $ 532 |
Marketable Investments (Detai_3
Marketable Investments (Details Narrative) - USD ($) $ in Thousands | Nov. 15, 2013 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | Jul. 09, 2013 |
Fair Value | $ 600 | $ 532 | |||
Senior notes | 511 | $ 532 | |||
Paid-in-kind interest | $ 406 | $ 47 | |||
Cancer Genetics, Inc [Member] | |||||
Number of common shares sold | 661,076 | ||||
Agreement To Purchase Senior Secured Notes [Member] | |||||
Fair Value | $ 500 | ||||
Senior notes | $ 3,000 | ||||
Paid-in-kind interest | $ 100 | ||||
Cash collected from debt | $ 21 | ||||
Tribute [Member] | Agreement To Purchase Senior Secured Notes [Member] | |||||
Senior notes | $ 100,000 |
Revolving Credit Facility (Deta
Revolving Credit Facility (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Disclosure Revolving Credit Facility Details Narrative Abstract | ||
Maximum Revolving Credit Available | $ 20,000 | |
Remaining Revolving Credit | 20,000 | |
Interest expense | $ 102 |
Related Party Transactions (Det
Related Party Transactions (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected Dividend Rate [Member] | ||
Dividend rate | ||
Loan Credit Agreement [Member] | Expected Dividend Rate [Member] | ||
Dividend rate | ||
Loan Credit Agreement [Member] | Risk Free Interest Rate [Member] | ||
Risk-free rate | 2.40% | 2.50% |
Loan Credit Agreement [Member] | Expected Term [Member] | ||
Expected life (years) | 1 year 4 months 24 days | 1 year 8 months 12 days |
Loan Credit Agreement [Member] | Price Volatility [Member] | ||
Expected volatility | 23.70% | 18.60% |
Related Party Transactions (D_2
Related Party Transactions (Details 2) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Fair value at beginning | $ 13 |
Fair value at ending | 35 |
Warrant Liability [Member] | |
Fair value at beginning | 13 |
Issuances | |
Changes in fair value | 22 |
Fair value at ending | $ 35 |
Related Party Transactions (D_3
Related Party Transactions (Details Narartive) - Delayed Draw [Member] - $ / shares | 3 Months Ended | |
Mar. 31, 2019 | Sep. 06, 2013 | |
Number of securities called by warrants or rights (in shares) | 100,000 | |
Exercise price of warrants or rights (in dollars per Share) | $ 13.88 | |
Reduction in strike price | $ 13.48 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Total unfunded commitments | ||
Aimmune Therapeutics, Inc. [Member] | ||
Total unfunded commitments | 3,800 | |
Veru, Inc. [Member] | ||
Total unfunded commitments | 2,000 | |
Unfunded Loan Commitment [Member] | ||
Total unfunded commitments | $ 5,800 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | |
Jan. 28, 2019 | Mar. 31, 2019 | Mar. 31, 2018 | |
Options exercise price, per share | |||
Compensation for non-employee directors (in shares) | 4,725 | 5,768 | |
Allocated share-based compensation | $ 47 | $ 62 | |
Value of compensation for non-employee directors | $ 100 | $ 100 | |
Restricted Stock [Member] | Chief Executive Officer [Member] | |||
Options granted | 37,500 | ||
Stock Incentive Plan [Member] | Chief Executive Officer [Member] | |||
Options granted | 75,000 | ||
Options exercise price, per share | $ 12.50 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Financial Assets: | ||
Warrant assets | $ 3,057 | $ 2,777 |
Marketable investments | 600 | 532 |
Financial Liabilities: | ||
Warrant liability | 35 | 13 |
Tribute Warrant [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Financial Assets: | ||
Marketable investments | ||
Tribute Warrant [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Financial Assets: | ||
Warrant assets | 3,057 | 2,777 |
Marketable investments | 511 | 532 |
Financial Liabilities: | ||
Warrant liability | 35 | 13 |
Warrant Liability [Member] | ||
Financial Liabilities: | ||
Warrant liability | 35 | 13 |
Marketable Securities [Member] | Tribute Warrant [Member] | ||
Financial Assets: | ||
Warrant assets | 3,057 | 2,777 |
Marketable investments | 511 | 532 |
Financial Liabilities: | ||
Warrant liability | $ 35 | $ 13 |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 2) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Fair value - December 31, 2017 | $ 2,777 |
Fair value - June 30, 2018 | 3,057 |
Tribute Warrant [Member] | |
Fair value - December 31, 2017 | 2,777 |
Issuances | |
Canceled | |
Change in fair value | 280 |
Fair value - June 30, 2018 | $ 3,057 |
Fair Value Measurements (Deta_3
Fair Value Measurements (Details 3) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected Dividend Rate [Member] | ||
Dividend rate range | ||
Risk Free Interest Rate [Member] | Minimum [Member] | ||
Risk-free rate range | 2.20% | 2.50% |
Risk Free Interest Rate [Member] | Maximum [Member] | ||
Risk-free rate range | 2.30% | 2.60% |
Expected Term [Member] | Minimum [Member] | ||
Expected life (years) range | 4 years 6 months | 4 years 9 months 18 days |
Expected Term [Member] | Maximum [Member] | ||
Expected life (years) range | 7 years 7 months 6 days | 7 years 10 months 24 days |
Price Volatility [Member] | Minimum [Member] | ||
Expected volatility range | 68.80% | 67.60% |
Price Volatility [Member] | Maximum [Member] | ||
Expected volatility range | 84.60% | 101.80% |
Fair Value Measurements (Deta_4
Fair Value Measurements (Details 4) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Financial Assets: | ||
Impaired loans | $ 3,057 | $ 2,777 |
Fair Value, Inputs, Level 3 [Member] | ||
Financial Assets: | ||
Impaired loans | 3,057 | 2,777 |
Tribute Warrant [Member] | ||
Financial Assets: | ||
Impaired loans | 3,057 | 2,777 |
Tribute Warrant [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Financial Assets: | ||
Impaired loans | 7,160 | 8,227 |
Marketable Securities [Member] | Tribute Warrant [Member] | ||
Financial Assets: | ||
Impaired loans | $ 7,160 | $ 8,227 |
Fair Value Measurements (Deta_5
Fair Value Measurements (Details 5) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Financial Assets | ||||
Cash and cash equivalents | $ 39,183 | $ 20,227 | $ 21,451 | $ 30,557 |
Cash and cash equivalents at fair value | 39,183 | 20,227 | ||
Finance receivables | 154,410 | 166,610 | ||
Finance receivables at fair value | 154,410 | 166,610 | ||
Marketable investments | 511 | 532 | ||
Marketable investments at fair value | 511 | 532 | ||
Warrant assets | 3,057 | 2,777 | ||
Warrant assets at fair value | 3,057 | 2,777 | ||
Financial Liabilities | ||||
Warrant liability | 35 | 13 | ||
Gross liability at fair value | 35 | 13 | ||
Fair Value, Inputs, Level 1 [Member] | ||||
Financial Assets | ||||
Cash and cash equivalents at fair value | 39,183 | 20,227 | ||
Marketable investments at fair value | ||||
Fair Value, Inputs, Level 3 [Member] | ||||
Financial Assets | ||||
Finance receivables at fair value | 154,410 | 166,610 | ||
Marketable investments at fair value | 511 | 532 | ||
Warrant assets at fair value | 3,057 | 2,777 | ||
Financial Liabilities | ||||
Gross liability at fair value | $ 35 | $ 13 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) $ in Thousands | May 07, 2019 | May 02, 2019 | Mar. 31, 2019 |
Maximum additional capital under Credit Agreement | $ 20,000 | ||
Remaining Borrowing Capacity | $ 20,000 | ||
Solsys Medical LLC [Member] | Subsequent Event [Member] | |||
Maximum additional capital under Credit Agreement | $ 5,000 | ||
Current Borrowing Capacity | 2,500 | ||
Remaining Borrowing Capacity | $ 2,500 | ||
BIOLASE [Member] | Subsequent Event [Member] | |||
Maximum additional capital under Credit Agreement | $ 2,500 |