10-Q

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, 2019

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

Commission File Number: 000-27163

 

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 (Zip Code)
(Address of Principal Executive Offices)

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

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class Trading Symbol(s) Name of each exchange on which registered

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   o   Smaller Reporting Company    x    Emerging Growth Company   o

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

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

As of August 12, 2019, there were 12,904,346 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

SWK Holdings Corporation

Form 10-Q

Quarter Ended June 30, 2019

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets-June 30, 2019 and December 31, 2018	1
	Unaudited Condensed Consolidated Statements of Income-Three and Six Months Ended June 30, 2019 and 2018	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income-Three and Six Months Ended June 30, 2019 and 2018	3
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity-Three and Six Months Ended June 30, 2019 and 2018	4
	Unaudited Condensed Consolidated Statements of Cash Flows-Six Months Ended June 30, 2019 and 2018	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
	Signatures	26
	Certifications

FORWARD-LOOKING STATEMENTS

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

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

PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	June 30,  2019			December 31,  2018
ASSETS
Cash and cash equivalents	$	27,373		$	20,227
Interest receivable		2,179			2,195
Finance receivables, net		169,156			166,610
Corporate debt securities		498			532
Deferred tax asset		20,899			22,684
Warrant assets		3,993			2,777
Other assets		570			637
Total assets	$	224,668		$	215,662
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities	$	1,305		$	2,592
Warrant liability		28			13
Total liabilities		1,333			2,605
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, 2019 and December 31, 2018, respectively		—			—
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,904,399 and 12,933,674 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively		13			13
Additional paid-in capital		4,431,891			4,432,499
Accumulated deficit		(4,208,569	)		(4,219,455	)
Total stockholders’ equity		223,335			213,057
Total liabilities and stockholders’ equity	$	224,668		$	215,662

See accompanying notes to the unaudited condensed consolidated financial statements.

1

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Revenues:
Finance receivable interest income, including fees	$	5,654	$	6,764		$	15,045	$	13,581
Other		1		3			2		7
Total revenues		5,655		6,767			15,047		13,588
Costs and expenses:
Provision for credit losses		—		—			609		1,179
Interest expense		78		2			180		2
General and administrative		1,324		1,176			2,593		2,397
Total costs and expenses		1,402		1,178			3,382		3,578
Other income (expense), net
Unrealized net gain (loss) on warrants		748		(238	)		1,006		61
Unrealized net loss on equity securities		—		(541	)		—		(664	)
Income before provision for income taxes		5,001		4,810			12,671		9,407
Provision for income taxes		674		1,142			1,785		2,095
Consolidated net income	$	4,327	$	3,668		$	10,886	$	7,312
Net income per share
Basic	$	0.34	$	0.28		$	0.84	$	0.56
Diluted	$	0.34	$	0.28		$	0.84	$	0.56
Weighted Average Shares
Basic		12,900		13,059			12,903		13,056
Diluted		12,903		13,063			12,906		13,060

See accompanying notes to the unaudited condensed consolidated financial statements.

2

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Consolidated net income	$	4,327	$	3,668	$	10,886	$	7,312
Other comprehensive income, net of tax		—		—		—		—
Comprehensive income	$	4,327	$	3,668	$	10,886	$	7,312

See accompanying notes to the unaudited condensed consolidated financial statements.

3

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Common Stock					Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares			Amounts
Balances at December 31, 2018		12,933,674		$	13	$	4,432,499		$	(4,219,455	)	$	—	$	213,057
Stock-based compensation		—			—		102			—			—		102
Issuance of common stock		42,225			—		—			—			—		—
Repurchases of common stock in open market		(77,300	)		—		(745	)		—			—		(745	)
Net income		—			—		—			6,559					6,559
Balances at March 31, 2019		12,898,599			13		4,431,856			(4,212,896	)		—		218,973
Stock-based compensation		—			—		88			—			—		88
Issuance of common stock		11,000			—		—			—			—		—
Repurchases of common stock in open market		(5,200	)		—		(53	)		—			—		(53	)
Net income		—			—		—			4,327			—		4,327
Balances at June 30, 2019		12,904,399		$	13	$	4,431,891		$	(4,208,569	)	$	—	$	223,335

	Common Stock				Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Shares		Amounts
Balances at December 31, 2017		13,053,422	$	13	$	4,433,589	$	(4,225,863	)	$	213		$	207,952
Stock-based compensation		—		—		79		—			—			79
Issuance of common stock		5,768		—		—		—			—			—
Cumulative effect of adoption of ASU 2016-01		—		—		—		213			(213	)		—
Net income		—		—		—		3,644			—			3,644
Balances at March 31, 2018		13,059,190	$	13	$	4,433,668	$	(4,222,006	)	$	—		$	211,675
Stock-based compensation		—		—		61		—			—			61
Issuance of common stock		4,725		—		—		—			—			—
Net income		—		—		—		3,668			—			3,668
Balances at June 30, 2018		13,063,915	$	13	$	4,433,729	$	(4,218,338	)	$	—		$	215,404

See accompanying notes to the consolidated financial statements.

4

SWK HOLDINGS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Consolidated net income	$	10,886		$	7,312
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan credit losses		609			1,179
Amortization of debt issuance costs		93			—
Deferred income taxes		1,785			2,095
Change in fair value of warrants		(1,006	)		(61	)
Change in fair value of equity securities		—			664
Loan discount amortization and fee accretion		483			(1,727	)
Interest paid-in-kind		(805	)		(96	)
Stock-based compensation		190			140
Interest income in excess of cash received		(82	)		(125	)
Other		3			8
Changes in operating assets and liabilities:
Interest receivable		16			53
Other assets		(26	)		(19	)
Accounts payable and other liabilities		(1,287	)		(334	)
Net cash provided by operating activities		10,859			9,089
Cash flows from investing activities:
Investment in finance receivables		(33,539	)		(46,710	)
Repayment of finance receivables		30,590			28,458
Corporate debt security principal payment		34			39
Other		—			(4	)
Net cash used in investing activities		(2,915	)		(18,217	)
Cash flows from financing activities:
Repurchases of common stock, including fees and expenses		(798	)		—
Debt issuance costs		—			(148	)
Net cash used in financing activities		(798	)		(148	)
Net increase (decrease) in cash and cash equivalents		7,146			(9,276	)
Cash and cash equivalents at beginning of period		20,227			30,557
Cash and cash equivalents at end of period	$	27,373		$	21,281

See accompanying notes to the unaudited condensed consolidated financial statements.

5

SWK HOLDINGS CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Nature of Operations

SWK Holdings Corporation (the “Company”) was incorporated in July 1996 in California and reincorporated in Delaware in September 1999. In July 2012, the Company commenced its strategy of building a specialty finance and asset management business. 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 August 12, 2019, the Company and its partners have executed transactions with 35 different parties under its specialty finance strategy, funding an aggregate $516 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.

6

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.

7

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 ASU No. 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. The Company adopted 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.

8

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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Numerator:
Net income	$	4,327	$	3,668	$	10,886	$	7,312
Denominator:
Weighted-average shares outstanding		12,900		13,059		12,903		13,056
Effect of dilutive securities		3		4		3		4
Weighted-average diluted shares		12,903		13,063		12,906		13,060
Basic net income per share	$	0.34	$	0.28	$	0.84	$	0.56
Diluted net income per share	$	0.34	$	0.28	$	0.84	$	0.56

For the three months ended June 30, 2019 and 2018, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 447,000 and 272,000, respectively, have been excluded from the calculation of diluted net income per share as all such securities were anti-dilutive. For the six months ended June 30, 2019 and 2018, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 424,000, and 287,000, respectively, have been excluded from the calculation of diluted income per share as all such securities were anti-dilutive.

9

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 June 30, 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 values of finance receivables are as follows (in thousands):

Portfolio	June 30,  2019			December 31,  2018
Term loans	$	142,998		$	136,379
Royalty purchases		32,946			36,410
Total before allowance for credit losses		175,944			172,789
Allowance for credit losses		(6,788	)		(6,179	)
Total carrying value	$	169,156		$	166,610

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

	June 30, 2019						December 31, 2018
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,337	$	134,661	$	142,998	$	8,337	$	128,042	$	136,379
Royalty purchases, net of credit loss allowance		9,303		16,855		26,158		5,784		24,447		30,231
Total carrying value	$	17,640	$	151,516	$	169,156	$	14,121	$	152,489	$	166,610

As of June 30, 2019, the Company had three 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, (b) the Best royalty, with a net carrying value of $5.8 million, and (c) the Tissue Regeneration Therapeutics, Inc. (“TRT”) royalty, with a net carrying value of $3.6 million. As of December 31, 2018, the Company had two finance receivables in nonaccrual status: (a) the term loan to B&D, with a net carrying value of $8.3 million, and (b) the Best royalty, with a net carrying value of $5.8 million. Although in nonaccrual status, neither the term loan nor the royalties were considered impaired as of June 30, 2019. The Company collected $33,000 on one of its nonaccrual royalties during the six months ended June 30, 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. 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.

TRT

On June 13, 2013, the Company purchased royalties from TRT related to its technology licenses in the family cord banking services sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon the achievement of royalty receipts-based milestones. During the quarter ended March 31, 2016, royalty payments from the primary U.S. licensee ended as a result of the licensee terminating a technology license. SWK and TRT continue to evaluate both options in regard to enforcing TRT’s intellectual property rights against this licensee, as well as seeking additional U.S. licensees. TRT’s Canadian licensee continues to pay royalties. SWK is in discussions with TRT to restructure the purchase agreement. Given uncertainties regarding the outcome of the negotiations and the ultimate timing of cash flows related to the U.S. intellectual property, SWK has placed the TRT royalty on non-accrual status, although does not consider it impaired. SWK evaluated several factors in this determination, including input from intellectual property counsel regarding the strength of the related intellectual property and continued receipt of Canadian licensee royalty payments.

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Note 4. Marketable Investments

Investments in marketable securities at June 30, 2019 and December 31, 2018 consist of the following (in thousands):

	June 30,  2019		December 31,  2018
Corporate debt securities	$	498	$	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 June 30, 2019 and December 31, 2018, are as follows (in thousands):

June 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	498	$	—	$	—	$	498

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		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 June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Unrealized net loss on equity securities reflected in the Unaudited Condensed Consolidated Statements of Income	$	—	$	(541	)	$	—	$	(664	)

Equity Securities

The Company did not have any investments in equity securities as of June 30, 2019.

As of June 30, 2018, the Company’s equity securities included 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 six months ended June 30, 2019 was $34,000 which was credited to the notes’ carrying value. As of June 30, 2019, the notes are reflected at their estimated fair value of $498,000.

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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 are being 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 six months ended June 30, 2019, the Company recognized $0.2 million of interest expense. As of June 30, 2019, no amount was outstanding under the Loan Agreement, and $20 million was available for borrowing.

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 loss for the six months ended June 30, 2019. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions:

	June 30,  2019			December 31,  2018
Dividend rate		—			—
Risk-free rate		1.9	%		2.5	%
Expected life (years)		1.2			1.7
Expected volatility		27.1	%		18.6	%

The changes on the value of the warrant liability during the six months ended June 30, 2019 were as follows (in thousands):

Fair value – December 31, 2018	$	13
Issuances		—
Changes in fair value		15
Fair value – June 30, 2019	$	28

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Note 7. Commitments and Contingencies

As of June 30, 2019, the Company’s unfunded commitments were as follows (in millions):

4Web, Inc.	$	3.0
Aimmune Therapeutics, Inc.		3.8
Harrow Pharmaceuticals, Inc.		3.1
Solsys Systems, LLC		7.5
Total unfunded commitments	$	17.4

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. The unfunded commitment to Solsys Systems, LLC (“Solsys”) includes $2.5 million available upon Solsys raising at least $4.0 million of equity capital, and $5.0 million available upon consummation of the sale of Solsys to Misonix, Inc., which sale remains subject to certain conditions, including approval by the shareholders of Misonix, Inc.

Note 8. Stockholders’ Equity

Stock Compensation Plans

During the six months ended June 30, 2019 and 2018, the Company’s Board of Directors (the “Board”) approved compensation for Board services by granting 5,725 and 10,493 shares, respectively, of common stock as compensation for the non-employee directors. During both the six months ended June 30, 2019 and 2018, the Company recorded approximately $0.1 million 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 six months ended June 30, 2019 and 2018 was $0.2 million and $0.1 million, respectively.

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 described in Part II, Item 2 under Unregistered Sales of Equity Securities and Use of Proceeds. The program expired on May 31, 2019.

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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 six months ended June 30, 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.

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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 June 30, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	3,993	$	—	$	—	$	3,993
Corporate debt securities		498		—		—		498
Financial Liabilities:
Warrant liability	$	28	$	—	$	—	$	28

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	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 six months ended June 30, 2019 were as follows (in thousands):

Fair value – December 31, 2018	$	2,777
Issued		195
Canceled		—
Change in fair value		1,021
Fair value – June 30, 2019	$	3,993

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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:

	June 30,  2019		December 31,  2018
Dividend rate range	—		—
Risk-free rate range	1.8% to 1.9	%	2.5% to 2.6	%
Expected life (years) range	4.3 to 7.9		4.8 to 7.9
Expected volatility range	69.4% to 89.9	%	67.6% to 101.8	%

As of June 30, 2019 and December 31, 2018, the Company had two royalties, Besivance® and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of June 30, 2019 and December 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		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, 2019
Impaired royalties	$	6,762	$	—	$	—	$	6,762
December 31, 2018
Impaired royalties	$	8,227	$	—	$	—	$	8,227

There were no liabilities measured at fair value on a nonrecurring basis as of June 30, 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 June 30, 2019 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	27,373	$	27,373	$	27,373	$	—	$	—
Finance receivables		169,156		169,156		—		—		169,156
Marketable investments		498		498		—		—		498
Warrant assets		3,993		3,993		—		—		3,993
Financial Liabilities
Warrant liability	$	28	$	28	$	—	$	—	$	28

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

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2018 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report.

Overview

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

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

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

The table below provides an overview of our outstanding transactions as of, and for the three and six months ended June 30, 2019 (in thousands, except rate, share and per share data):

Royalty Purchases and Financings	License Technology	Footnote	Funded Amount		GAAP Balance		Rate		Revenue Recognized
									YTD		Q2
Beleodaq®	Oncology treatment		$	7,600	$	6,963	N/A		$	586	272
Besivance®	Ophthalmic antibiotic	(1), (2)	6,000		1,255		N/A		39		25
Best ABT, Inc.	Oncology diagnosis	(3)	5,784		5,751		N/A		—		—
Cambia®	NSAID migraine treatment	(2)	8,500		5,507		N/A		399		171
Forfivo XL®	Depressive disorder treatment		6,000		2,376		N/A		653		214
Narcan®	Opioid overdose treatment		17,500		754		N/A		734		316
Secured Royalty Financing (Corporate Debt Security)	Women’s health	(3)	3,000		498		11.5	%	—		—
Tissue Regeneration Therapeutics, Inc.	Umbilical cord banking	(3)	3,250		3,552		N/A		110		—

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			Maturity			GAAP				Revenue Recognized
Term Loans	Type	Footnote	Date	Principal		Balance		Rate		YTD		Q2
4Web, Inc.	First Lien		06/03/23	$	17,000	$	16,683	12.8	%	$	221	221
Acerus Pharmaceuticals, Inc.	First Lien		10/11/23	9,000		8,306		12.0	%	726		366
Aimmune Therapeutics, Inc.	First Lien		01/23/25	1,231		1,233		8.50	%	47		29
B&D Dental Corporation	First Lien	(3), (4)	12/10/18	8,368		8,337		14.0	%	—		—
B&D Dental Corporation	Equipment Loan		03/31/20	26		26		16.3	%	3		1
BIOLASE, Inc.	First Lien	(5)	11/09/23	15,000		14,334		12.3	%	993		529
CeloNova BioSciences, Inc.	First Lien		07/31/21	4,436		4,433		13.0	%	324		41
Cheetah Medical, Inc.	First Lien		01/15/24	10,000		9,764		10.8	%	660		316
DxTerity Diagnostics, Inc.	First Lien	(6)	04/06/20	9,982		10,166		13.3	%	788		401
Epica International, Inc.	First Lien		07/23/23	12,200		12,200		10.5	%	792		419
EyePoint Pharmaceuticals, Inc.	First Lien	(7)	03/27/23	—		—		12.0	%	3,454		—
Harrow Health, Inc. (formerly Imprimis Pharmaceuticals)	First Lien	(8)	07/19/23	9,264		8,958		(8)		702		326
Keystone Dental, Inc.	First Lien		05/20/21	15,000		15,201		11.5	%	1,088		546
Solsys Medical, LLC (formerly Soluble Systems)	First Lien	(9)	10/26/22	17,596		17,787		11.8	%	1,113		588
Tenex Health, Inc.	First Lien		06/30/21	7,069		7,204		13.0	%	596		293
Thermedx, LLC	First Lien	(10)	05/05/21	—		—		N/A		328		313
Thermedx, LLC Note	Sub Note	(10)	05/20/29	357		357		12.0	%	4		4
Veru, Inc.	First Lien	(11)	03/05/25	10,000		8,009		N/A		685		263

	Number of	Exercise Price per	GAAP		Change in Fair Value
Warrants to Purchase Stock	Shares	Share	Balance		YTD			Q2
4Web, Inc.	TBD	TBD	$	—	$	—		—
Acerus Pharmaceuticals, Inc.	5,331,563	0.40 CAD	164		(119		)	(3	)
B&D Dental Corporation	225	0.01	—		—			—
BIOLASE, Inc.	372,023	1.34	439		(303		)	166
BIOLASE, Inc.	115,175	2.17	129		(66		)	(66	)
CeloNova BioSciences, Inc.	TBD	0.01	—		—			—
Cheetah Medical, Inc.	1,578,948	0.38	—		—			—
DxTerity Diagnostics, Inc.	686,058	2.08	—		—			—
Epica International, Inc.	TBD	TBD	—		—			—
EyePointPharmaceuticals, Inc. (Tranche 1)	409,091	1.10	464		(63		)	(105	)
EyePoint Pharmaceuticals, Inc. (Trance 2)	77,721	1.93	76		(12		)	(20	)
Harrow Health, Inc. (formerly Imprimis Pharmaceuticals, Inc.)	373,847	2.08	2,721		1,304			1,049
Keystone Dental, Inc.	793,651	1.26	—		—			—
Solsys Medical, LLC	1,209,068	0.99	—		—			—
Solsys Medical, LLC	2,284,793	0.98	—		—			—
Tenex Health, Inc.	2,693,878	0.37	—		—			—

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			Revenue Recognized
	Assets		YTD		Q2
Total Finance Receivables	$	169,156	$	15,045	$	5,654
Total Corporate Debt Securities		498		—		—
Fair Value of Warrant Assets		3,993		—		—
Total Assets/Revenues	$	173,647	$	15,045	$	5,654

(1)	Provision for credit losses of $609 recognized during the six months ended June 30, 2019.
(2)	Investment considered impaired.
(3)	Investment on nonaccrual.
(4)	B&D is evaluating strategic alternatives for the business. The loan is currently in default.
(5)	Executed amendment May 7, 2019 to fund an additional $2,500.
(6)	Executed amendment effective January 1, 2019 to allow DxTerity to pay in kind the interest payments due in January 2019 and April 2019, subject to DxTerity raising additional subordinated capital, which it accomplished.
(7)	EyePoint repaid the term loan on February 13, 2019, which included $3,454 of interest, deferred origination fees, prepayment, and exit fees.
(8)	Executed amendment on May 24, 2019, which decreased the contract rate from 10.5 percent to a scale between 7.0 percent to 9.0 percent. LIBOR floor was increased from 1.5 percent to 2.0 percent, and the maturity date was extended from July 2022 to July 2023. An additional $3,100 of funding is available upon Harrow satisfying certain revenue thresholds by March 23, 2020.
(9)	Executed amendment May 2, 2019 and funded $2,500 at closing, with an additional $2,500 available upon Solsys raising $4,000 of equity capital. Entered into Commitment Letter with Misonix to allow Misonix to assume the credit facility upon closing of the Solsys merger, and to provide for an additional $5,000 term loan to be available to Misonix until the first anniversary of closing of the merger.
(10)	Synthetic royalty was paid off during the quarter, with $357 of the consideration in the form of a note.
(11)	Executed amendment May 13, 2019 whereby the royalty rates applicable to FC2’s net sales 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. Total aggregate amount due by maturity was increased to 176.25 percent of the aggregate amount advanced.

Unless otherwise specified, our senior secured debt assets generally are repaid by a revenue interest that is charged on a company’s quarterly net sales and royalties.

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Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 28, 2019. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the six months ended June 30, 2019, compared to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2018.

Recent Accounting Pronouncements

Refer to Part I. Financial Information, Item 1. Financial Statements, Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements for a listing of recent accounting pronouncements and their potential impact to our consolidated financial statements.

Comparison of the Three Months Ended June 30, 2019 and 2018 (in millions)

	Three Months Ended June 30,
	2019		2018			Change
Revenues	$	5.7	$	6.8		$	(1.1	)
Interest expense		0.1		—			0.1
General and administrative		1.3		1.2			0.1
Other income (expense), net		0.7		(0.8	)		1.5
Provision for income taxes		0.7		1.1			(0.4	)
Consolidated net income		4.3		3.7			0.6

Revenues

We generated revenues of $5.7 million and $6.8 million for the three months ended June 30, 2019 and 2018, respectively, which consisted of interest and fees earned on our finance receivables. The decrease in revenue is primarily due to a $3.7 million decrease in interest and fees earned on finance receivables that were either paid off or paid down since the second quarter of 2018. The decrease in revenue was offset by a $2.7 million increase in interest and fees earned on new and existing finance receivables.

Provision for Credit Losses and Impairment Expense

We did not recognize any credit loss provision or impairment expense during the three months ended June 30, 2019 and June 30, 2018.

General and Administrative

General and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff, Board of Directors, legal and audit expenses, and corporate governance. General and administrative expenses increased to $1.3 million for the three months ended June 30, 2019 from $1.2 million for the three months ended June 30, 2018, which was primarily due to an increase in the performance-based bonus accrual.

Other Income (Expense), Net

Other income for the three months ended June 30, 2019 reflected a net fair market value gain of $0.7 million on our warrant derivatives. Other income for the three months ended June 30, 2018, reflected a net fair market value loss of $0.2 million on our warrant derivatives and a net fair market value loss of $0.5 million on our equity securities.

Income Tax Expense

We recognized deferred income tax expense of $0.7 million and $1.1 million during the three months ended June 30, 2019 and 2018, respectively. The decrease in deferred income tax expense was primarily due to the change in fair value of our warrant assets and equity securities, which created a lower effective tax rate for the three months ended June 30, 2019.

20

Comparison of the Six Months Ended June 30, 2019 and 2018 (in millions)

	Six Months Ended June 30,
	2019		2018			Change
Revenues	$	15.0	$	13.6		$	1.4
Provision for credit losses		0.6		1.2			(0.6	)
Interest expense		0.2		—			0.2
General and administrative		2.6		2.4			0.2
Other income (expense), net		1.0		(0.6	)		1.6
Provision for income taxes		1.8		2.1			(0.3	)
Consolidated net income		10.9		7.3			3.6

We generated revenues of $15.0 million and $13.6 million for the six months ended June 30, 2019 and 2018, respectively, which consisted of interest and fees earned on our finance receivables. The increase in revenue is primarily due to a $4.3 million increase in interest and fees earned on new and existing finance receivables and $2.9 million in exit and prepayment fees from a loan that was paid off in the first quarter of 2019. The increase in revenue was offset by a $5.7 million decrease in interest and fees earned on finance receivables that were paid off or paid down since the second quarter of 2018, including $2.9 million of prepayment and exit fees earned on two finance receivables that were paid off in 2018.

Provision for Credit Losses and Impairment Expense

During the six months ended June 30, 2019, we recognized credit loss provision expense of $0.6 million related to the Besivance® royalty, which was due to increases in sales chargebacks and various rebates (gross sales to net sales deductions) and lower sales volumes. Please refer to Item 1. Financial Statements, Note 3 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information regarding the provision for credit loss recognized during the six months ended June 30, 2019.

We recognized an allowance for credit loss on a royalty purchase of $1.2 million during the six months ended June 30, 2018 related to the Cambia® royalty, which was due to reduced sales expectations.

General and Administrative

General and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff, Board of Directors, legal and audit expenses, and corporate governance. General and administrative expenses increased to $2.6 million for the six months ended June 30, 2019 from $2.4 million for the six months ended June 30, 2018, which was primarily due to an increase in the performance-based bonus accrual.

Other Income (Expense), Net

 Other income, net for the six months ended June 30, 2019 reflected a $1.0 million net fair market value gain on our warrant derivatives. Other income (expense) for the six months ended June 30, 2018, reflected a $0.1 million net fair market value gain on our warrant derivatives and a net fair market value loss of $0.7 million on our equity securities.

Income Tax Provision

As of June 30, 2019, we had NOLs for federal income tax purposes of $365.0 million. The federal NOL carryforwards, if not offset against future income, will expire by 2032, with the majority expiring by 2021. Deferred income tax expense decreased to $1.8 million for the six months ended June 30, 2019 from $2.1 million for the six months ended June 30, 2018. The decrease in deferred income tax expense was primarily due to the change in fair value of our warrant assets and equity securities, which created a lower effective tax rate for the six months ended June 30, 2019.

Liquidity and Capital Resources

As of June 30, 2019, we had $27.4 million in cash and cash equivalents, compared to $20.2 million in cash and cash equivalents as of December 31, 2018. The primary driver of the net increase in our cash balance was $43.7 million of interest, fees, and principal payments generated by our finance receivables, which includes $27.7 million received from the payoff of two terms loans. The increase in our cash balance was offset by $32.3 million, net of origination costs and fees, of new and add-on investment funding.

21

Our ability to generate cash in the future depends primarily upon our success in implementing our business model of generating income by providing capital to a broad range of life science companies, institutions and inventors. We generate income primarily from four sources:

1. Primarily owning or financing through debt investments, royalties generated by the sales of life science products and related intellectual property;

2. Receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector; and

3. To a lesser extent, realizing capital appreciation from equity-related investments in the life science sector.

As of June 30, 2019, our portfolio contains $169.2 million of finance receivables and $0.5 million of corporate debt securities. We expect these assets to generate positive cash flows in 2019. We continue to evaluate multiple attractive opportunities that, if consummated, we believe would similarly generate additional income. Since the timing of any investment is difficult to predict, we may not be able to generate positive cash flow above what our existing assets will produce in 2019.

We entered into a $20 million revolving credit facility in June 2018. We intend to borrow funds to make investments to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities. The total undrawn amount of the credit facility as of June 30, 2019 was $20 million, and based on available future investment opportunities, we may seek to increase our revolving credit facility.

Off Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in our consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage partner companies’ requests for funding and take the form of loan commitments and lines of credit.

The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the partner company defaults, and the value of any existing collateral becomes worthless. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Please refer to Note 7, “Commitments and Contingencies,” of the Notes to the Unaudited Condensed Consolidated Financial Statements in Item 1. 

22

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

During the six months ended June 30, 2019, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at June 30, 2019 approximated its carrying value.

Investment and Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. As we seek to provide capital to a broad range of life science companies, institutions and investors, our net investment income is dependent, in part, upon the difference between the rate at which we earn on our cash and cash equivalents and the rate at which we lend those funds to third parties. As a result, we would be subject to risks relating to changes in market interest rates. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations by providing capital at variable interest rates.  We constantly monitor our portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any of our investments.

During 2018, we entered into a revolving credit facility. As we borrow funds to make additional investments, our income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we are subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our income, especially to the extent we continue to hold fixed rate investments. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. Adverse developments resulting from changes in interest rates or hedging transactions could have a materially adverse effect on our business, financial condition and results of operations.

Inflation

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

ITEM 4.      CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no changes during the six months ended June 30, 2019 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

23

PART II. OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

We are involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material negative impact on our results of operations, balance sheets and cash flows due to defense costs, and divert management resources. Currently, we are not involved in any arbitration and/or other legal proceeding that we expect to have a material effect on our business, financial condition, results of operations and cash flows.

ITEM 1A.    RISK FACTORS.

Information regarding the Company’s risk factors appears in “Part I. – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 28, 2019. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

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

On December 21, 2018, the Board authorized a share repurchase program under which the Company was authorized to repurchase up to $3.5 million of the Company’s outstanding shares of common stock, or approximately 312,491 common shares, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act. The purchase period was December 21, 2018 through May 31, 2019.

As of June 30, 2019, the Company repurchased 222,566 shares of its outstanding common stock. Of the total 222,566 shares, 143,000 were repurchased under the share repurchase program at a total cost of $1.4 million, or $9.59 per share. The share repurchase program expired on May 31, 2019.

The table below summarizes information about our purchases of common stock during the quarter ended June 30, 2019:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares That May Yet Be Purchased Under the Plan
Balance as of March 31, 2019		—	$	—		—		174,691
April 1, 2019 through April 30, 2019		900		10.03		900		173,791
May 1, 2019 through May 31, 2019		4,300		10.03		4,300		—
June 1, 2019 through June 30, 2019		—		—		—		—
		5,200	$	10.03		5,200

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

None. 

24

ITEM 6. EXHIBITS

Number	Exhibit Description			Filing	Filed
		Form	Exhibit	Date	Herewith
31.01	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.02	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.01	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*				X
32.02	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*				X
101.INS+	XBRL Instance				X
101.SCH+	XBRL Taxonomy Extension Schema				X
101.CAL+	XBRL Taxonomy Extension Calculation				X
101.DEF+	XBRL Taxonomy Extension Definition				X
101.LAB+	XBRL Taxonomy Extension Labels				X
101.PRE+	XBRL Taxonomy Extension Presentation				X

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

+ XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. 

25

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 12, 2019.

SWK Holdings Corporation
By:	/s/ Winston L. Black
	Winston L. Black
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Charles M. Jacobson
	Charles M. Jacobson
	Chief Financial Officer
	(Principal Financial Officer)

26

EX-31.1

EXHIBIT 31.01

CERTIFICATION

I, Winston L. Black, Chief Executive Officer of the registrant, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SWK Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2019	/s/ Winston L. Black
	Winston L. Black Chief Executive Officer

EX-31.2

EXHIBIT 31.02

CERTIFICATION

I, Charles M. Jacobson, Chief Financial Officer of the registrant, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SWK Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2019	/s/ Charles M. Jacobson
	Charles M. Jacobson Chief Financial Officer

EX-32.1

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of SWK Holdings Corporation (the “Registrant”) on Form 10-Q for the quarterly period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Winston L. Black, Chief Executive Officer of the Registrant, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report, to which this certification is attached as Exhibit 32.01, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 12, 2019	/s/ Winston L. Black
	Winston L. Black Chief Executive Officer

EX-32.2

EXHIBIT 32.02

CERTIFICATION PURSUANT TO

RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of SWK Holdings Corporation (the “Registrant”) on Form 10-Q for the quarterly period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles M. Jacobson, Chief Financial Officer of the Registrant, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report, to which this certification is attached as Exhibit 32.02, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 12, 2019	/s/ Charles M. Jacobson
	Charles M. Jacobson Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 12, 2019
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Current Fiscal Year End Date	--12-31
Entity File Number	000-27163
Entity Registrant Name	SWK Holdings Corp
Entity Central Index Key	0001089907
Entity Tax Identification Number	77-0435679
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	14755 Preston Road
Entity Address, Address Line Two	Suite 105
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75254
City Area Code	972
Local Phone Number	687-7250
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Elected Not To Use the Extended Transition Period	false
Entity Common Stock, Shares Outstanding		12,904,346
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents	$ 27,373	$ 20,227
Accounts receivable	2,179	2,195
Finance receivables, net	169,156	166,610
Marketable investments	498	532
Deferred tax asset	20,899	22,684
Warrant assets	3,993	2,777
Other assets	570	637
Total assets	224,668	215,662
Commitments and contingencies
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities	1,305	2,592
Warrant liability	28	13
Total liabilities	1,333	2,605
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
Common stock, $0.001 par value; 250,000,000 shares authorized; 12,904,399 and 12,933,674 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	13	13
Additional paid-in capital	4,431,891	4,432,499
Accumulated deficit	(4,208,569)	(4,219,455)
Total SWK Holdings Corporation stockholders' equity	223,335	213,057
Total liabilities and stockholders' equity	$ 224,668	$ 215,662

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 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	12,904,399	12,933,674
Common stock, outstanding	12,904,399	12,933,674

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Finance receivable interest income, including fees	$ 5,654	$ 6,764	$ 15,045	$ 13,581
Other	1	3	2	7
Revenues	5,655	6,767	15,047	13,588
Costs and expenses:
Provision for loan credit losses			609	1,179
Interest expense	78	2	180	2
General and administrative	1,324	1,176	2,593	2,397
Total costs and expenses	1,402	1,178	3,382	3,578
Other income (expense), net
Unrealized net gain on warrants	748	(238)	1,006	61
Unrealized net loss on equity securities		(541)		(664)
Income before provision for income taxes	5,001	4,810	12,671	9,407
Provision (benefit) for income taxes	674	1,142	1,785	2,095
Consolidated net income	$ 4,327	$ 3,668	$ 10,886	$ 7,312
Net income (loss) per share attributable to SWK Holdings Corporation Stockholders
Basic (in dollars per share)	$ 0.34	$ 0.28	$ 0.84	$ 0.56
Diluted (in dollars per share)	$ 0.34	$ 0.28	$ 0.84	$ 0.56
Weighted Average Shares
Basic (in shares)	12,900,000	13,059,000	12,903,000	13,056,000
Diluted (in shares)	12,903,000	13,063,000	12,906,000	13,060,000

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Consolidated net income	$ 4,327	$ 3,668	$ 10,886	$ 7,312
Other comprehensive income (loss), net of tax
Other comprehensive income, net of tax
Comprehensive income	$ 4,327	$ 3,668	$ 10,886	$ 7,312

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	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
Cumulative effect of adoption of New Accounting Principles			213	(213)
Net income			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, 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					140
Net income					7,312
Ending Balance at Jun. 30, 2018	$ 13	4,433,729	(4,218,338)		215,404
Ending Balance, in Shares at Jun. 30, 2018	13,063,915
Beginning Balance at Mar. 31, 2018	$ 13	4,433,668	(4,222,006)		211,675
Beginning Balance, in Shares at Mar. 31, 2018	13,059,190
Stock-based compensation		61			61
Issuance of common stock
Issuance of common stock, in Shares	4,725
Net income			3,668		3,668
Ending Balance at Jun. 30, 2018	$ 13	4,433,729	(4,218,338)		215,404
Ending Balance, in Shares at Jun. 30, 2018	13,063,915
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			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
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					190
Net income					10,886
Ending Balance at Jun. 30, 2019	$ 13	4,431,891	(4,208,569)		223,335
Ending Balance, in Shares at Jun. 30, 2019	12,904,399
Beginning Balance at Mar. 31, 2019	$ 13	4,431,856	(4,212,896)		218,973
Beginning Balance, in Shares at Mar. 31, 2019	12,898,599
Stock-based compensation		88			88
Issuance of common stock
Issuance of common stock, in Shares	11,000
Repurchases of common stock in open market		(53)			(53)
Repurchases of common stock in open market (in shares)	(5,200)
Net income			4,327		4,327
Ending Balance at Jun. 30, 2019	$ 13	$ 4,431,891	$ (4,208,569)		$ 223,335
Ending Balance, in Shares at Jun. 30, 2019	12,904,399

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Consolidated net income	$ 10,886	$ 7,312
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan credit losses	609	1,179
Amortization of debt issuance costs	93
Deferred income taxes	1,785	2,095
Change in fair value of warrants	(1,006)	(61)
Change in fair value of equity securities		664
Loan discount amortization and fee accretion	483	(1,727)
Interest paid-in-kind	(805)	(96)
Stock-based compensation	190	140
Interest income in excess of cash collected	(82)	(125)
Other	3	8
Changes in operating assets and liabilities:
Interest receivable	16	53
Other assets	(26)	(19)
Accounts payable and other liabilities	(1,287)	(334)
Net cash provided by operating activities	10,859	9,089
Cash flows from investing activities:
Investment in finance receivables	(33,539)	(46,710)
Repayment of finance receivables	30,590	28,458
Corporate debt security principal payment	34	39
Other		(4)
Net cash provided by (used in) investing activities	(2,915)	(18,217)
Cash flows from financing activities:
Repurchases of common stock, including fees and expenses	(798)
Debt issuance costs		(148)
Net cash used in financing activities	(798)	(148)
Net decrease in cash and cash equivalents	7,146	(9,276)
Cash and cash equivalents at beginning of period	20,227	30,557
Cash and cash equivalents at end of period	$ 27,373	$ 21,281

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SWK Holdings Corporation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 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 August 12, 2019, the Company and its partners have executed transactions with 35 different parties under its specialty finance strategy, funding an aggregate $516 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 ASU No. 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. The Company adopted 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.

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Net Income per Share

6 Months Ended

Jun. 30, 2019

Financial Assets

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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Numerator:
Net income	$	4,327	$	3,668	$	10,886	$	7,312
Denominator:
Weighted-average shares outstanding		12,900		13,059		12,903		13,056
Effect of dilutive securities		3		4		3		4
Weighted-average diluted shares		12,903		13,063		12,906		13,060
Basic net income per share	$	0.34	$	0.28	$	0.84	$	0.56
Diluted net income per share	$	0.34	$	0.28	$	0.84	$	0.56

For the three months ended June 30, 2019 and 2018, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 447,000 and 272,000, respectively, have been excluded from the calculation of diluted net income per share as all such securities were anti-dilutive. For the six months ended June 30, 2019 and 2018, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately 424,000, and 287,000, respectively, have been excluded from the calculation of diluted income per share as all such securities were anti-dilutive.

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Finance Receivables

6 Months Ended

Jun. 30, 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 June 30, 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 values of finance receivables are as follows (in thousands):

Portfolio	June 30,  2019			December 31,  2018
Term loans	$	142,998		$	136,379
Royalty purchases		32,946			36,410
Total before allowance for credit losses		175,944			172,789
Allowance for credit losses		(6,788	)		(6,179	)
Total carrying value	$	169,156		$	166,610

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

	June 30, 2019						December 31, 2018
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,337	$	134,661	$	142,998	$	8,337	$	128,042	$	136,379
Royalty purchases, net of credit loss allowance		9,303		16,855		26,158		5,784		24,447		30,231
Total carrying value	$	17,640	$	151,516	$	169,156	$	14,121	$	152,489	$	166,610

As of June 30, 2019, the Company had three 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 (b) the Best royalty, with a net carrying value of $5.8 million, and (c) the Tissue Regeneration Therapeutics, Inc. (“TRT”) royalty, with a net carrying value of $3.6 million. As of December 31, 2018, the Company had two finance receivables in nonaccrual status: (a) the term loan to B&D, with a net carrying value of $8.3 million, and (b) the Best royalty, with a net carrying value of $5.8 million. Although in nonaccrual status, neither the term loan nor the royalties were considered impaired as of June 30, 2019. The Company collected $33,000 on one of its nonaccrual royalties during the six months ended June 30, 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. 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.

TRT

On June 13, 2013, the Company purchased royalties from TRT related to its technology licenses in the family cord banking services sector for $2.0 million, and on October 20, 2014, funded an additional $1.25 million upon the achievement of royalty receipts-based milestones. During the quarter ended March 31, 2016, royalty payments from the primary U.S. licensee ended as a result of the licensee terminating a technology license. SWK and TRT continue to evaluate both options in regard to enforcing TRT’s intellectual property rights against this licensee, as well as seeking additional U.S. licensees. TRT’s Canadian licensee continues to pay royalties. SWK is in discussions with TRT to restructure the purchase agreement. Given uncertainties regarding the outcome of the negotiations and the ultimate timing of cash flows related to the U.S. intellectual property, SWK has placed the TRT royalty on non-accrual status, although does not consider it is impaired. SWK evaluated several factors in this determination, including input from intellectual property counsel regarding the strength of the related intellectual property and continued receipt of Canadian licensee royalty payments.

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Marketable Investments

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Marketable Investments

Note 4. Marketable Investments

Investments in marketable securities at June 30, 2019 and December 31, 2018 consist of the following (in thousands):

	June 30,  2019		December 31,  2018
Corporate debt securities	$	498	$	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 June 30, 2019 and December 31, 2018, are as follows (in thousands):

June 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	498	$	—	$	—	$	498

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		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 June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Unrealized net loss on equity securities reflected in the Unaudited Condensed Consolidated Statements of Income	$	—	$	(541	)	$	—	$	(664	)

Equity Securities

The Company did not have any investments in equity securities as of June 30, 2019.

As of June 30, 2018, the Company’s equity securities included 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 six months ended June 30, 2019 was $34,000 which was credited to the notes’ carrying value. As of June 30, 2019, the notes are reflected at their estimated fair value of $498,000.

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Revolving Credit Facility

6 Months Ended

Jun. 30, 2019

SWKHP Holdings LP [Member]

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 are being 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 six months ended June 30, 2019, the Company recognized $0.2 million of interest expense. As of June 30, 2019, no amount was outstanding under the Loan Agreement, and $20 million was available for borrowing.

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Related Party Transactions

6 Months Ended

Jun. 30, 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 loss for the six months ended June 30, 2019. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions:

	June 30,  2019			December 31,  2018
Dividend rate		—			—
Risk-free rate		1.9	%		2.5	%
Expected life (years)		1.2			1.7
Expected volatility		27.1	%		18.6	%

The changes on the value of the warrant liability during the six months ended June 30, 2019 were as follows (in thousands):

Fair value – December 31, 2018	$	13
Issuances		—
Changes in fair value		15
Fair value – June 30, 2019	$	28

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 7. Commitments and Contingencies

As of June 30, 2019, the Company’s unfunded commitments were as follows (in millions):

4Web, Inc.	$	3.0
Aimmune Therapeutics, Inc.		3.8
Harrow Pharmaceuticals, Inc.		3.1
Solsys Systems, LLC		7.5
Total unfunded commitments	$	17.4

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. The unfunded commitment to Solsys Systems, LLC (“Solsys”) includes $2.5 million available upon Solsys raising at least $4.0 million of equity capital, and $5.0 million available upon consummation of the sale of Solsys to Misonix, Inc., which sale remains subject to certain conditions, including approval by the shareholders of Misonix, Inc.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Note 8. Stockholders’ Equity

Stock Compensation Plans

During the six months ended June 30, 2019 and 2018, the Company’s Board of Directors (the “Board”) approved compensation for Board services by granting 5,725 and 10,493 shares, respectively, of common stock as compensation for the non-employee directors. During both the six months ended June 30, 2019 and 2018, the Company recorded approximately $0.1 million 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 six months ended June 30, 2019 and 2018 was $0.2 million and $0.1 million, respectively.

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 described in Part II, Item 2 under Unregistered Sales of Equity Securities and Use of Proceeds. The program expired on May 31, 2019.

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Fair Value Measurements

6 Months Ended

Jun. 30, 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 six months ended June 30, 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 June 30, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	3,993	$	—	$	—	$	3,993
Corporate debt securities		498		—		—		498
Financial Liabilities:
Warrant liability	$	28	$	—	$	—	$	28

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	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 six months ended June 30, 2019 were as follows (in thousands):

Fair value – December 31, 2018	$	2,777
Issued		195
Canceled		—
Change in fair value		1,021
Fair value – June 30, 2019	$	3,993

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:

	June 30,  2019		December 31,  2018
Dividend rate range	—		—
Risk-free rate range	1.8% to 1.9	%	2.5% to 2.6	%
Expected life (years) range	4.3 to 7.9		4.8 to 7.9
Expected volatility range	69.4% to 89.9	%	67.6% to 101.8	%

As of June 30, 2019 and December 31, 2018, the Company had two royalties, Besivance® and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of June 30, 2019 and December 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		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, 2019
Impaired royalties	$	6,762	$	—	$	—	$	6,762
December 31, 2018
Impaired royalties	$	8,227	$	—	$	—	$	8,227

There were no liabilities measured at fair value on a nonrecurring basis as of June 30, 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 June 30, 2019 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	27,373	$	27,373	$	27,373	$	—	$	—
Finance receivables		169,156		169,156		—		—		169,156
Marketable investments		498		498		—		—		498
Warrant assets		3,993		3,993		—		—		3,993
Financial Liabilities
Warrant liability	$	28	$	28	$	—	$	—	$	28

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

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SWK Holdings Corporation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 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 August 12, 2019, the Company and its partners have executed transactions with 35 different parties under its specialty finance strategy, funding an aggregate $516 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 ASU No. 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. The Company adopted 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.

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Net Income per Share (Tables)

6 Months Ended

Jun. 30, 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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Numerator:
Net income	$	4,327	$	3,668	$	10,886	$	7,312
Denominator:
Weighted-average shares outstanding		12,900		13,059		12,903		13,056
Effect of dilutive securities		3		4		3		4
Weighted-average diluted shares		12,903		13,063		12,906		13,060
Basic net income per share	$	0.34	$	0.28	$	0.84	$	0.56
Diluted net income per share	$	0.34	$	0.28	$	0.84	$	0.56

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Finance Receivables (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of carrying value of finance receivables

Portfolio	June 30,  2019			December 31,  2018
Term loans	$	142,998		$	136,379
Royalty purchases		32,946			36,410
Total before allowance for credit losses		175,944			172,789
Allowance for credit losses		(6,788	)		(6,179	)
Total carrying value	$	169,156		$	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):

	June 30, 2019						December 31, 2018
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	8,337	$	134,661	$	142,998	$	8,337	$	128,042	$	136,379
Royalty purchases, net of credit loss allowance		9,303		16,855		26,158		5,784		24,447		30,231
Total carrying value	$	17,640	$	151,516	$	169,156	$	14,121	$	152,489	$	166,610

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Marketable Investments (Tables)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Schedule of marketable investments

Investments in marketable securities at June 30, 2019 and December 31, 2018 consist of the following (in thousands):

	June 30,  2019		December 31,  2018
Corporate debt securities	$	498	$	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 June 30, 2019 and December 31, 2018, are as follows (in thousands):

June 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
Corporate debt securities	$	498	$	—	$	—	$	498

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		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 June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Unrealized net loss on equity securities reflected in the Unaudited Condensed Consolidated Statements of Income	$	—	$	(541	)	$	—	$	(664	)

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of assumptions used

The Company recorded a nominal loss for the six months ended June 30, 2019. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions:

	June 30,  2019			December 31,  2018
Dividend rate		—			—
Risk-free rate		1.9	%		2.5	%
Expected life (years)		1.2			1.7
Expected volatility		27.1	%		18.6	%

Schedule of value of the warrant liability

The changes on the value of the warrant liability during the six months ended June 30, 2019 were as follows (in thousands):

Fair value – December 31, 2018	$	13
Issuances		—
Changes in fair value		15
Fair value – June 30, 2019	$	28

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of Unfunded Commitments

As of June 30, 2019, the Company’s unfunded commitments were as follows (in millions):

4Web, Inc.	$	3.0
Aimmune Therapeutics, Inc.		3.8
Harrow Pharmaceuticals, Inc.		3.1
Solsys Systems, LLC		7.5
Total unfunded commitments	$	17.4

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2019 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	3,993	$	—	$	—	$	3,993
Corporate debt securities		498		—		—		498
Financial Liabilities:
Warrant liability	$	28	$	—	$	—	$	28

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Warrant assets	$	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 six months ended June 30, 2019 were as follows (in thousands):

Fair value – December 31, 2018	$	2,777
Issued		195
Canceled		—
Change in fair value		1,021
Fair value – June 30, 2019	$	3,993

Schedule of weighted average assumptions

The following ranges of assumptions were used in the models to determine fair value:

	June 30,  2019		December 31,  2018
Dividend rate range	—		—
Risk-free rate range	1.8% to 1.9	%	2.5% to 2.6	%
Expected life (years) range	4.3 to 7.9		4.8 to 7.9
Expected volatility range	69.4% to 89.9	%	67.6% to 101.8	%

Schedule of fair value assets and liabilities measured on nonrecurring basis

As of June 30, 2019 and December 31, 2018, the Company had two royalties, Besivance® and Cambia®, that were deemed to be impaired based on reductions in carrying values in prior periods. The following table presents these royalties measured at fair value on a nonrecurring basis as of June 30, 2019 and December 31, 2018 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		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, 2019
Impaired royalties	$	6,762	$	—	$	—	$	6,762
December 31, 2018
Impaired royalties	$	8,227	$	—	$	—	$	8,227

There were no liabilities measured at fair value on a nonrecurring basis as of June 30, 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 June 30, 2019 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	27,373	$	27,373	$	27,373	$	—	$	—
Finance receivables		169,156		169,156		—		—		169,156
Marketable investments		498		498		—		—		498
Warrant assets		3,993		3,993		—		—		3,993
Financial Liabilities
Warrant liability	$	28	$	28	$	—	$	—	$	28

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

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SWK Holdings Corporation and Summary of Significant Accounting Policies (Details Narrative) $ in Thousands	Aug. 12, 2019 USD ($)
Subsequent Event [Member] | Life Science [Member]
Business Combination, Aggregate Funding	$ 516,000

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Net Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net income (loss) attributable to SWK Holdings Corporation Stockholders	$ 4,327	$ 6,559	$ 3,668	$ 3,644	$ 10,886	$ 7,312
Denominator:
Weighted-average shares outstanding	12,900,000		13,059,000		12,903,000	13,056,000
Effect of dilutive securities	3,000		4,000		3,000	4,000
Weighted-average diluted shares	12,903,000		13,063,000		12,906,000	13,060,000
Basic income (loss) per share attributable to SWK Holdings Corporation Stockholders	$ 0.34		$ 0.28		$ 0.84	$ 0.56
Diluted income (loss) per share attributable to SWK Holdings Corporation Stockholders	$ 0.34		$ 0.28		$ 0.84	$ 0.56
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	447,000		272,000		424,000	287,000

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Finance Receivables (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Portfolio
Total before allowance for credit losses	$ 175,944	$ 172,789
Allowance for credit losses	(6,788)	(6,179)
Total carrying value	169,156	166,610
Life Science Term Loans [Member]
Portfolio
Total before allowance for credit losses	142,998	136,379
Total carrying value	142,998	136,379
Life Science Royalty Purchases [Member]
Portfolio
Total before allowance for credit losses	32,946	36,410
Total carrying value	$ 26,158	$ 30,231

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Finance Receivables (Details 2) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Nonaccrual	$ 17,640	$ 14,121
Performing	151,516	152,489
Total	169,156	166,610
Life Science Term Loans [Member]
Nonaccrual	8,337	8,337
Performing	134,661	128,042
Total	142,998	136,379
Life Science Royalty Purchases [Member]
Nonaccrual	9,303	5,784
Performing	16,855	24,447
Total	$ 26,158	$ 30,231

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Finance Receivables (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 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

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Marketable Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investments, Debt and Equity Securities [Abstract]
Corporate debt securities	$ 498	$ 532

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Marketable Investments (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Available for Sale Securities:
Amortized Cost					$ 532
Gross Unrealized Gains
Gross Unrealized Loss
Fair Value	$ 498		498		532
Equity investment losses reflected in the Consolidated Statements of Income		$ (541)		(664)
Corporate Debt Securities [Member]
Available for Sale Securities:
Amortized Cost	498		498		532
Gross Unrealized Gains
Gross Unrealized Loss
Fair Value	$ 498		$ 498		$ 532

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Marketable Investments (Details Narrative) - USD ($) $ in Thousands		6 Months Ended
	Nov. 15, 2013	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jul. 09, 2013
Fair Value		$ 498		$ 532
Senior notes		498		$ 532
Paid-in-kind interest		805	$ 96
Agreement To Purchase Senior Secured Notes [Member]
Fair Value		498
Senior notes					$ 3,000
Paid-in-kind interest	$ 100
Cash collected from debt		$ 34
Tribute [Member] | Agreement To Purchase Senior Secured Notes [Member]
Senior notes					$ 100,000

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Revolving Credit Facility (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disclosure Revolving Credit Facility Details Narrative Abstract
Maximum Revolving Credit Available	$ 20,000		$ 20,000
Remaining Revolving Credit	20,000		20,000
Interest expense	$ 78	$ 2	$ 180	$ 2

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Related Party Transactions (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 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	1.90%	2.50%
Loan Credit Agreement [Member] | Expected Term [Member]
Expected life (years)	1 year 2 months 12 days	1 year 8 months 12 days
Loan Credit Agreement [Member] | Price Volatility [Member]
Expected volatility	27.10%	18.60%

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Related Party Transactions (Details 2) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair value at beginning	$ 13
Fair value at ending	28
Warrant Liability [Member]
Fair value at beginning	13
Issuances
Changes in fair value	15
Fair value at ending	$ 28

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Related Party Transactions (Details Narartive) - Delayed Draw [Member] - $ / shares	6 Months Ended
	Jun. 30, 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

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Total unfunded commitments
4Web, Inc. [Member]
Total unfunded commitments	3,000
Aimmune Therapeutics, Inc. [Member]
Total unfunded commitments	3,800
Harrow Pharmaceuticals, Inc. [Member]
Total unfunded commitments	3,100
Solsys Systems, LLC [Member]
Total unfunded commitments	7,500
Unfunded Loan Commitment [Member]
Total unfunded commitments	$ 17,400

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Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	6 Months Ended
	Jan. 28, 2019	Jun. 30, 2019	Jun. 30, 2018
Options exercise price, per share
Compensation for non-employee directors (in shares)		5,725	10,493
Allocated share-based compensation		$ 100	$ 100
Value of compensation for non-employee directors		$ 200	$ 200
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

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financial Assets:
Warrant assets	$ 3,993	$ 2,777
Marketable investments	498	532
Financial Liabilities:
Warrant liability	28	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	3,993	2,777
Marketable investments	498	532
Financial Liabilities:
Warrant liability	28	13
Warrant Liability [Member]
Financial Liabilities:
Warrant liability	28	13
Marketable Securities [Member] | Tribute Warrant [Member]
Financial Assets:
Warrant assets	3,993	2,777
Marketable investments	498	532
Financial Liabilities:
Warrant liability	$ 28	$ 13

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Fair Value Measurements (Details 2) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair value - December 31, 2017	$ 2,777
Fair value - June 30, 2018	3,993
Tribute Warrant [Member]
Fair value - December 31, 2017	2,777
Issuances	195
Canceled
Change in fair value	1,021
Fair value - June 30, 2018	$ 3,993

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Fair Value Measurements (Details 3)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Expected Dividend Rate [Member]
Dividend rate range
Risk Free Interest Rate [Member] | Minimum [Member]
Risk-free rate range	1.80%	2.50%
Risk Free Interest Rate [Member] | Maximum [Member]
Risk-free rate range	1.90%	2.60%
Expected Term [Member] | Minimum [Member]
Expected life (years) range	4 years 3 months 18 days	4 years 9 months 18 days
Expected Term [Member] | Maximum [Member]
Expected life (years) range	7 years 10 months 24 days	7 years 10 months 24 days
Price Volatility [Member] | Minimum [Member]
Expected volatility range	69.40%	67.60%
Price Volatility [Member] | Maximum [Member]
Expected volatility range	89.90%	101.80%

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Fair Value Measurements (Details 4) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financial Assets:
Impaired loans	$ 3,993	$ 2,777
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Impaired loans	3,993	2,777
Tribute Warrant [Member]
Financial Assets:
Impaired loans	3,993	2,777
Tribute Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Impaired loans	6,762	8,227
Marketable Securities [Member] | Tribute Warrant [Member]
Financial Assets:
Impaired loans	$ 6,762	$ 8,227

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Fair Value Measurements (Details 5) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Financial Assets
Cash and cash equivalents	$ 27,373	$ 20,227	$ 21,281	$ 30,557
Cash and cash equivalents at fair value	27,373	20,227
Finance receivables	169,156	166,610
Finance receivables at fair value	169,156	166,610
Marketable investments	498	532
Marketable investments at fair value	498	532
Warrant assets	3,993	2,777
Warrant assets at fair value	3,993	2,777
Financial Liabilities
Warrant liability	28	13
Gross liability at fair value	28	13
Fair Value, Inputs, Level 1 [Member]
Financial Assets
Cash and cash equivalents at fair value	27,373	20,227
Fair Value, Inputs, Level 3 [Member]
Financial Assets
Finance receivables at fair value	169,156	166,610
Marketable investments at fair value	498	532
Warrant assets at fair value	3,993	2,777
Financial Liabilities
Gross liability at fair value	$ 28	$ 13