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 June 30, 2021

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

Commission File Number: 001-39184

(SWK HOLDINGS LOGO)

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) 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, 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 Companyx

Emerging Growth Company o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES x NO

As of August 11, 2021, there were 12,798,494 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

SWK Holdings Corporation

Form 10-Q

Quarter Ended June 30, 2021

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Unaudited Condensed Consolidated Balance Sheets—June 30, 2021 and December 31, 2020	1

	Unaudited Condensed Consolidated Statements of Income (Loss)—Three and Six Months Ended June 30, 2021 and 2020	2

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three and Six Months Ended June 30, 2021 and 2020	3

	Unaudited Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2021 and 2020	4

	Notes to the Unaudited Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4	Controls and Procedures	26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

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

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

	Signatures	29

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.

	June 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	6,619		$	3,008
Interest and accounts receivable, net		2,639			1,911
Marketable investments		2,425			1,210
Other current assets		1,146			542
Total current assets		12,829			6,671

Finance receivables, net		202,968			204,491
Marketable investments		210			241
Cost method investment		3,491			3,491
Deferred tax asset, net		23,122			27,491
Warrant assets		3,864			2,972
Intangible assets, net		11,126			13,617
Goodwill		8,404			8,404
Property and equipment, net		5,716			5,211
Other non-current assets		1,093			1,312
Total assets	$	272,823		$	273,901

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	3,075		$	3,652
Revolving credit facility		—			11,758
Total current liabilities		3,075			15,410

Contingent consideration payable		10,670			16,900
Other non-current liabilities		843			1,079
Total liabilities		14,588			33,389

Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		—			—
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,798,547 and 12,792,586 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		13			13
Additional paid-in capital		4,431,288			4,430,924
Accumulated deficit		(4,173,066	)		(4,190,425	)
Total stockholders’ equity		258,235			240,512
Total liabilities and stockholders’ equity	$	272,823		$	273,901


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenues:
Finance receivables interest income, including fees	$	11,805		$	7,733		$	20,484		$	14,869
Pharmaceutical development		10,461			150			10,659			298
Other		—			20			496			38
Total revenues		22,266			7,903			31,639			15,205
Costs and expenses:
Impairment expense		—			—			—			163
Interest expense		94			163			239			264
Pharmaceutical manufacturing, research and development expense		1,542			1,008			3,090			2,158
Change in fair value of acquisition-related contingent consideration		(147	)		1,790			(147	)		1,790
Depreciation and amortization expense		811			3,443			2,493			6,948
General and administrative		3,360			2,648			6,245			5,688
Total costs and expenses		5,660			9,052			11,920			17,011
Other income (expense), net
Unrealized net gain (loss) on warrants		609			622			892			(1,238	)
Unrealized net gain (loss) on equity securities		283			402			1,215			(488	)
Income (loss) before income tax expense (benefit)		17,498			(125	)		21,826			(3,532	)
Income tax expense (benefit)		3,528			(1,001	)		4,467			252
Consolidated net income (loss)	$	13,970		$	876		$	17,359		$	(3,784	)
Net income (loss) per share
Basic	$	1.09		$	0.07		$	1.36		$	(0.29	)
Diluted	$	1.09		$	0.07		$	1.35		$	(0.29	)
Weighted Average Shares
Basic		12,796			12,905			12,794			12,909
Diluted		12,834			12,915			12,822			12,909


	Six Months Ended June 30, 2021
	Common Stock											Total
	Shares			Amounts		Additional Paid- In Capital			Accumulated Deficit			Stockholders’ 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

	Six Months Ended June 30, 2020
	Common Stock											Total
	Shares			Amounts		Additional Paid- In Capital			Accumulated Deficit			Stockholders’ 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

Portfolio	June 30, 2021			December 31, 2020
Term loans	$	160,980		$	164,032
Royalty purchases		50,376			48,847
Total before allowance for credit losses		211,356			212,879
Allowance for credit losses		(8,388	)		(8,388	)
Total carrying value	$	202,968		$	204,491


	June 30, 2021						December 31, 2020
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,334	$	152,646	$	160,980	$	8,334	$	155,698	$	164,032
Royalty purchases, net of credit loss allowance		3,552		38,436		41,988		3,863		36,596		40,459
Total carrying value	$	11,886	$	191,082	$	202,968	$	12,197	$	192,294	$	204,491

	June 30, 2021		December 31, 2020
Corporate debt securities	$	210	$	241
Equity securities		2,425		1,210
Total marketable investments	$	2,635	$	1,451

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
June 30, 2021	$	210	$	—	$	—	$	210

December 31, 2020	$	241	$	—	$	—	$	241

	June 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	$	18,641	$	10,759	$	29,400	$	16,336	$	13,064
Patents		—		—		—		198		153		45
Trade names and trademarks		210		39		171		210		29		181
Customer relationships		240		44		196		240		32		208
		29,850		18,724		11,126		30,048		16,550		13,498
Deferred patent costs		—		—		—		119		—		119
Total intangible assets	$	29,850	$	18,724	$	11,126	$	30,167	$	16,550	$	13,617

Fiscal Year	Amount
Remainder of 2021	$	1,239
2022		1,757
2023		1,757
2024		1,413
2025		1,069
2026 and thereafter		3,891
Total	$	11,126


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

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2	Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.

Level 3	Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.

	June 30, 2021		December 31, 2020
Dividend rate range		—		—
Risk-free rate range		0.46% - 1.21%		0.17% to 0.65%
Expected life (years) range		3.1 - 6.9		3.6 to 7.4
Expected volatility range		64.6% - 150.8%		74.3% to 174.7%

	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)
June 30, 2021	$	6,716	$	—	$	—	$	6,716

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


Fair value – December 31, 2020	$	2,972
Issued		—
Canceled		—
Change in fair value		892
Fair value – June 30, 2021	$	3,864

	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	6,619	$	6,619	$	6,619	$	—	$	—
Finance receivables		202,968		202,968		—		—		202,968
Marketable investments		2,635		2,635		2,425		—		210
Warrant assets		3,864		3,864		—		—		3,864

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Pharmaceutical Development Segment
License Agreement	$	10,431	$	126	$	10,610	$	224
Pharmaceutical Development and other		30		33		545		101
Total contract revenue	$	10,461	$	159	$	11,155	$	325


	Three Months Ended June 30, 2021
	Finance Receivables		Pharmaceutical Development and Other		Holding Company and Other		Consolidated
Revenue	$	11,805	$	10,461	$	—	$	22,266
Interest expense		94		—		—		94
Manufacturing, research and development		—		1,542		—		1,542
Depreciation and amortization		—

SEC Form 10-Q filed by SWK Holdings Corporation