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Item 8. Financial Statements and Supplementary Data

2021-03-31 compared with 2020-03-30 · 711 added, 650 removed, 860 unchanged (61% of the section changed)

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HOLDINGS CORPORATION

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Of Independent Registered Public Accounting Firm

To the Stockholders

and Board of Directors of

the Stockholders and Board of Directors of

Holdings Corporation

on the Consolidated Financial Statements

audited the accompanying consolidated balance sheets of SWK Holdings Corporation and its subsidiaries (the “Company”)

have audited the accompanying consolidated balance sheets of SWK Holdings Corporation and its subsidiaries (the “Company”)

as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’

cash flows, for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as

the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and

its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally

and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations

and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally

accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the

Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Our responsibility is to express

an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm

registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be

independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

served as the Company’s auditor since 2006.

San Jose, California

March 30, 2020

audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that

was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are

material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements,

taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical

audit matter or on the accounts or disclosures to which it relates.

of Finance Receivables

As described in Notes

1 and 3 to the consolidated financial statements, the Company’s consolidated finance receivables balance was $204.5 million

as of December 31, 2020, which is net of the allowance for credit losses of $8.4 million.

The Company has also generated $30.8 million

of finance receivable interest income, including fees during the year ended December 31, 2020.

The Company’s finance receivables

are stated at amortized cost, net of unamortized origination fees, if any.

Interest income on the finance receivables is recorded on

an accrual basis based on the effective interest rate method to the extent that the Company expects to collect such amounts.

evaluates the collectability of both interest and principal for each finance receivable to determine whether it is impaired.

receivable is considered to be impaired when, based on current information and events, the Company determines it is probable that it

will be unable to collect amounts due according to existing contractual terms.

When a loan is considered to be impaired, the amount of

loss is calculated by comparing the carrying value of the finance receivable to the value determined by discounting the expected future

If actual cash flows were to be substantially lower than estimated, there could be a significant adverse impact on the carrying

value of the finance receivables and results of operations.

The principal

considerations for our determination that performing procedures relating to valuation of the finance receivables is a critical

audit matter are its overall impact on the consolidated financial statements, including the realization of the Company’s

deferred tax asset, and the significant amount of judgement by management in developing the assumptions of the expected future

cash flows, which in turn led to significant auditor judgement, subjectivity, and effort in performing audit procedures and evaluating

audit evidence relating to the expected future cash flows.

Additionally, for certain finance receivables, there may be limited

historical data with which to evaluate the expected future cash flows.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included, among others, evaluating management’s process and valuation

method for developing the estimate of expected cash flows of its finance receivables and potential credit losses, testing the

completeness and accuracy of the underlying data used in the estimate, and evaluating management’s assumptions used to estimate

future cash flows.

Evaluating management’s assumptions used to estimate future cash flows for reasonableness involved considering

historical cash flows from the Company’s finance receivable portfolio, comparing prior period estimates to actual results

of the same period, publicly available information which supports or is to the contrary of the estimated future cash flows and

determining whether the estimated cash flows used were consistent with evidence obtained in other areas of the audit.

have served as the Company’s auditor since 2006.

Jose, California

HOLDINGS CORPORATION

BALANCE SHEETS

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Marketable investments

Investment in TRT

Deferred tax asset, net

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Accounts payable and accrued liabilities

Revolving credit facility

Total current liabilities

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notes to the consolidated financial statements.

S WK HOLDINGS

SWK HOLDINGS CORPORATION

STATEMENTS OF INCOME

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Impairment expense

Pharmaceutical manufacturing, research and development expense

General and administrative

Depreciation and amortization expense

Pharmaceutical manufacturing, research and development expense

Interest expense

Change in fair value of acquisition-related contingent consideration

Total costs and expenses

Other income (expense), net:

Unrealized net gain on derivatives

Unrealized net gain (loss) on equity securities

Gain (loss) on sale of investments

Income before provision (benefit) for income

Provision (benefit) for income

Other (expense) income, net:

Unrealized net (loss) gain on derivatives

Unrealized net (loss) gain on equity securities

Gain on sale of investments

Income before income tax benefit

Income tax benefit

Consolidated net income

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notes to the consolidated financial statements.

HOLDINGS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME

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notes to the consolidated financial statements.

HOLDINGS CORPORATION

STATEMENTS OF STOCKHOLDERS’

thousands, except share data)

Comprehensive

Stockholders’

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Issuance of common

stock in lieu of employee cash bonuses

Repurchases of common

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notes to the consolidated financial statements.

HOLDINGS CORPORATION

STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

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Gain on sale of investments

Change in fair value of acquisition-related contingent consideration

Loan discount amortization and fee accretion

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Acquisition of business, net of cash acquired

Cash received from settlement of warrants

Proceeds from sale of investments

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Corporate debt security principal payment

Purchases of property and equipment

Net cash used in investing activities

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Repurchases of common stock, including fees and expenses

Debt issuance costs

Net cash used in financing activities

Net proceeds and payments under credit facility

Payment of acquisition-related contingent consideration

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

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Warrants received in connection with finance receivables

Fair value of common stock issued in lieu of employee cash bonuses

Contingent consideration in connection with business combination

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HOLDINGS CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

SWK Holdings Corporation

and Summary of Significant Accounting Policies

TO THE CONSOLIDATED FINANCIAL STATEMENTS

SWK Holdings Corporation and Summary of Significant Accounting Policies

Nature of Operations

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the Company had 34 employees.

The Company has net operating loss carryforwards (“NOLs”)

and believes that the ability to utilize these NOLs is an important and substantial asset.

However, at this time, under current

law, the Company does not anticipate that the Finance Receivables and/or Pharmaceutical Development segments will generate sufficient

income to permit the Company to utilize all of its NOLs prior to their respective expiration dates.

As such, it is possible that

the Company might pursue additional strategies that it believes might result in the ability to utilize more of the NOLs.

As of March 23, 2020, the Company and its partners have executed

transactions with 36 different parties under its specialty finance strategy, funding an aggregate $539.1 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.

Company has net operating loss carryforwards (“NOLs”) and believes that the ability to utilize these NOLs is an important

and substantial asset.

However, at this time, under current law, the Company does not anticipate that the Finance Receivables

and/or Pharmaceutical Development segments will generate sufficient income to permit the Company to utilize all of its NOLs prior

to their respective expiration dates.

As such, it is possible that the Company might pursue additional strategies that it believes

might result in the ability to utilize more of the NOLs.

of March 25, 2021, the Company and its partners have executed transactions with 41 different parties under its specialty

finance strategy, funding an aggregate $584.0 million in various financial products across the life science sector.

The Company’s

portfolio includes senior and subordinated debt backed by royalties and synthetic royalties paid by companies in the life science sector,

and purchased royalties generated by sales of life science products and related intellectual property.

August 26, 2019, the Company commenced its Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc.

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and Principles of Consolidation

The Company’s consolidated financial statements are prepared

in accordance with accounting principles generally accepted in the United States.

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.

Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in

the United States.

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.

Company owns interests in various partnerships and limited liability companies, or LLCs.

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Reclassification

Certain prior year amounts have been reclassified to conform to

current year presentation.

The amounts for prior periods have been reclassified to be consistent with current year presentation

and have no impact on previously reported total assets, total stockholders’

equity or net income.

prior year amounts have been reclassified to conform to current year presentation.

The amounts for prior periods have been reclassified

to be consistent with current year presentation and have no impact on previously reported total assets, total stockholders’

or net income.

Use of Estimates

The preparation of the Company’s consolidated financial statements

in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities

at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions are required in the determination of revenue recognition;

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;

of accounts receivable;

impairment of financing receivables;

valuation of accounts receivable;

impairment of finance

long-lived assets;

valuation of property and equipment;

assets and goodwill;

valuation of warrants;

property and equipment;

intangible assets;

valuation of warrants and other investments;

contingent consideration;

valuation of 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.

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

Company regularly evaluates its estimates and assumptions using historical experience and other factors, including the economic

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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

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.

Market conditions, such as illiquid credit markets, health crises such as the COVID-19 global pandemic,

volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates

and assumptions.

The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change.

Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required

to be treated retrospectively under the relevant accounting standard.

It is possible that other professionals, applying reasonable

judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

most significant estimates and assumptions are used to determine amounts and values of, but are not limited to:

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our acquisition of Enteris.

Segment Reporting

The Company earns revenues from its two U.S.-based business segments:

as a specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences

companies (the Finance Receivables segment), and as of August 26, 2019, the Company’s offering of oral therapeutic formulation

solutions built around Enteris’

Segment Information

Company earns revenues from its two U.S.-based business segments:

its specialty finance and asset management business offering

customized financing solutions to a broad range of life-sciences companies, and as of August 26, 2019, the Company’s business

offering oral therapeutic formulation solutions built around Enteris’

pharmaceutical Peptelligence®

platform, which enables the oral delivery of

molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules in an enteric-coated tablet

formulation (the Pharmaceutical Development segment).

The financial results of Enteris are included in the Pharmaceutical Development

segment as of the acquisition date.

Refer to Note 11, Segment Information , for further information regarding the Company’s

reportable segments.

platform, which

enables the oral delivery of molecules that are typically injected, including peptides and BCS Class II, III, and IV small molecules

in an enteric-coated tablet formulation.

financial results of Enteris are included in the Pharmaceutical Development segment as of the acquisition date.

and Intangible Assets

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cash flows generated from the assets are less than their carrying amounts.

Inventories are stated at the lower of cost or net realizable value,

valued at specifically identified cost which approximates the first-in, first-out (“FIFO”) method.

The components of

inventory include raw materials of $0.2 million as of December 31, 2019 and are reflected in Other Assets in the Consolidated Balance

The Company had no inventory as of December 31, 2018.

are stated at the lower of cost or net realizable value, valued at specifically identified cost which approximates the first-in,

first-out (“FIFO”) method.

The components of inventory include raw materials of $0.1 million and $0.2 million as of

December 31, 2020 and 2019 and are reflected in current assets in the consolidated balance sheets.

and Equipment, Net

Property and equipment are recorded at cost less accumulated depreciation

and amortization.

Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance, and

repairs are charged to expense as incurred.

In addition, we capitalize interest on borrowings during the active construction period

of capital projects.

Capitalized interest is added to the cost of the assets and depreciated over the estimated useful lives of

Leased property meeting certain criteria is capitalized and the present value of the related lease payments is recorded

as a liability and included in current liabilities.

and equipment are recorded at cost less accumulated depreciation and amortization.

Expenditures for major additions and improvements

are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred.

In addition, we capitalize

interest on borrowings during the active construction period of capital projects.

Capitalized interest is added to the cost of

the assets and depreciated over the estimated useful lives of the assets.

Leased property meeting certain criteria is capitalized

and the present value of the related lease payments is recorded as a liability and included in current liabilities.

is recorded over the estimated useful lives of the assets involved using the straight-line method.

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The range of estimated useful lives is as follows:

Estimated Useful Life

Leasehold improvements

Lesser of lease term or useful life

Furniture, fixtures and equipment

3 to 10 years

of lease term or useful life

fixtures and equipment

Revenue and Deferred Costs

revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue.

classifies as current the portion of deferred revenue that are expected to be recognized within one year from the balance sheet

Deferred revenue of $0.1 million is included in accounts payable and accrued liabilities in the Consolidated Balance

There were no deferred revenues as of December 31, 2018.

classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet

Deferred revenue was $0.4 million and $0.1 million as of December 31, 2020 and 2019, respectively, and is included

in accounts payable and accrued liabilities in the consolidated balance sheets.

and Development

Research and development expenses include the costs associated with

internal research and development and research and development conducted for the Company by third parties.

These costs primarily

consist of salaries and other benefits, pre-clinical and clinical trials, outside consultants, and supplies.

All research and development

costs discussed above are expensed as incurred.

Third-party expenses reimbursed under research and development contracts, which

are not refundable, are recorded as a reduction to pharmaceutical manufacturing, research and development expense in the Consolidated

Statements of Income.

and development expenses include the costs associated with internal research and development and research and development conducted

for the Company by third parties.

These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants,

and supplies.

All research and development costs discussed above are expensed as incurred.

Third-party expenses reimbursed under

research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research

and development expense in the consolidated statements of income.

Cost Method Investment

Company holds an investment in TRT.

The common stock of TRT does not have a readily determinable fair value and is measured at cost minus

impairment, if any.

Management regularly evaluates the recoverability of its investment in TRT based on TRT’s performance and financial

position, including the status of its intellectual property and related intellectual property licensing agreements.

During the year ended

December 31, 2020, the Company evaluated the recoverability of its investment in TRT and determined there were no indicators of impairment.

Company extends credit to customers through a variety of financing arrangements, including revenue interest term loans.

outstanding on loans are referred to as finance receivables and are included in Finance Receivables on the consolidated balance

It is the Company’s expectation that the loans originated will be held for the foreseeable future or

until maturity.

In certain situations, for example to manage concentrations and/or credit risk, some or all of certain exposures

outstanding on loans are referred to as finance receivables and are included in finance receivables on the consolidated

balance sheets.

It is the Company’s expectation that the loans originated will be held for the foreseeable future or until

In certain situations, for example to manage concentrations and/or credit risk, some or all of certain exposures may

Loans for which the Company has the intent and ability to hold for the foreseeable future or until maturity are classified

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Losses on Finance Receivables

allowance for credit losses is intended to provide for credit losses inherent in the financing receivables portfolio and is periodically

allowance for credit losses is intended to provide for credit losses inherent in the finance receivables portfolio and is periodically

reviewed for adequacy considering credit quality indicators, including expected and historical losses and levels of and trends

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Company’s marketable investment portfolio includes debt and equity securities as of December 31, 2020.

Equity securities

that have readily determinable fair values are reported at fair value with gains and losses recognized in earnings.

The debt security

is classified as an available-for-sale security, which is reported at fair value with unrealized gains or losses recorded in statements

of income, net of applicable income taxes.

In any case where fair value might fall below amortized cost, the Company would consider

whether that security is other-than-temporarily impaired using all available information about the collectability of the security.

The Company would not consider that an other-than temporary impairment for a debt security has occurred if (1) the Company does

not intend to sell the debt security, (2) it is not more likely than not that the Company will be required to sell the debt security

before recovery of its amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized cost

of the security.

The Company would consider that an other-than-temporary impairment has occurred if any of the above mentioned

three conditions are not met.

Equity securities that have

readily determinable fair values are reported at fair value with gains and losses recognized in earnings.

The debt security is classified

as an available-for-sale security, which is reported at fair value with unrealized gains or losses recorded in statements of other

comprehensive income, net of applicable income taxes.

In any case where fair value might fall below amortized cost, the Company would

consider whether that security is other-than temporarily impaired using all available information about the collectability of the security.

The Company would not consider that an other-than temporary impairment for a debt security has occurred if (1) the Company does not intend

to sell the debt security, (2) it is not more likely than not that the Company will be required to sell the debt security before recovery

of its amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized cost of the security.

Company would consider that an other-than-temporary impairment has occurred if any of the above mentioned three conditions are not met.

a debt security for which an other-than-temporary impairment is considered to have occurred, the Company would recognize the entire

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The Company issued a warrant on its own common stock as discussed in Note

This warrant meets the definition of a derivative and is reflected as a warrant liability at fair value in the consolidated

balance sheets.

The warrant expired on September 6, 2020.

Revenue Recognition

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our recommended transactions as earned over the period the services are rendered.

In general, the majority of investment

management fees earned are charged either monthly or quarterly.

Incentive fees, if any, are recognized when earned at the

end of the relevant performance period, pursuant to the underlying contract.

Other service revenues are recognized

when contractual obligations are fulfilled or as services are provided.

Pharmaceutical Development

In general, the majority of investment management

fees earned are charged either monthly or quarterly.

Incentive fees, if any, are recognized when earned at the end of the relevant

performance period, pursuant to the underlying contract.

The Company has not recognized any management or incentive fees in 2019

Other service revenues are recognized when contractual obligations are fulfilled or as services are provided.

Pharmaceutical Development Segment

Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners,

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and royalties on net sales of licensed products.

In determining

the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs

the following steps:

determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the

Company performs the following steps:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether

the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(ii) determination

of whether the promised goods or services are performance obligations including whether they are distinct in the context of the

(iii) measurement of the transaction price, including the constraint on variable consideration;

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transaction price to the performance obligations;

and (v) recognition of revenue when (or as) the Company satisfies each

performance obligation.

and (v) recognition of revenue when (or as) the Company satisfies each performance

As part of the accounting for these arrangements, the Company must use its judgment to determine:

number of performance obligations based on the determination under step (ii) above;

b) the transaction price under step

c) the stand-alone selling price for each performance obligation identified in the contract for the allocation

of transaction price in step (iv) above;

and d) the contract term and pattern of satisfaction of the performance obligations

under step (v) above.

The Company uses judgment to determine whether milestones or other variable consideration, except for

royalties, should be included in the transaction price as described further below.

The transaction price is allocated to each

performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the

performance obligations under the contract are satisfied.

Amounts received prior to satisfying the revenue recognition criteria

are recorded as deferred revenue in the Company’s consolidated balance sheets.

Amounts expected to be recognized as revenue

within the 12 months following the balance sheet date are classified as current deferred revenue.

Amounts not expected to

be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of

current portion.

Deferred revenue as of December 31, 2019 was $0.1 million and is included in accounts payable and accrued liabilities in the

consolidated balance sheets.

There were no deferred revenues as of December 31, 2018.

evaluates collaboration agreements with respect to FASB ASC Topic 808, Collaborative Arrangements, considering

a) the number of

performance obligations based on the determination under step (ii) above;

b) the transaction price under step (iii) above;

the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price

in step (iv) above;

and d) the contract term and pattern of satisfaction of the performance obligations under step (v) above.

The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included

in the transaction price as described further below.

The transaction price is allocated to each performance obligation on a relative

stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract

are satisfied.

received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated

balance sheets.

Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified

as current deferred revenue.

Amounts not expected to be recognized as revenue within the 12 months following the balance sheet

date are classified as deferred revenue, net of current portion.

Deferred revenue as of December 31, 2020 and 2019 was $0.4

million and $0.1 million and is classified as current deferred revenue in the consolidated balance sheets.

Company evaluates collaboration agreements with respect to FASB ASC Topic 808, Collaborative Arrangements , considering

the nature and contractual terms of the arrangement and the nature of its business operations to determine the classification

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to be cash equivalents.

There were no such investments at December 31, 2019 or 2018, as all of our cash was held in checking or

savings accounts.

As of December 31, 2019, cash equivalents were deposited in financial institutions and consisted

of immediately available fund balances.

The Company maintains its cash deposits and cash equivalents with well-known

and stable financial institutions.

There were no such investments at December 31, 2020 or 2019, as all of our cash was held in checking,

savings and brokerage accounts.

As of December 31, 2020, cash equivalents were deposited in financial institutions

and consisted of immediately available fund balances.

The Company maintains its cash deposits and cash equivalents

with well-known and stable financial institutions.

Interest and Accounts Receivable

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value and is in the process of collection.

The Company recognized $2.2 million and $6.2 million in provision for loan credit losses

during 2019 and 2018, respectively.

The Company recognized $2.2 million in provision for loan credit losses during 2019.

The Company did not recognize any provision for loan credit losses in 2020.

receivable for management fees are recorded at the aggregate unpaid amount less any allowance for doubtful accounts.

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The Company has not experienced any losses on its cash and cash equivalents.

The Company performs ongoing credit evaluations of its partner companies

and generally requires collateral.

For both the years ended December 31, 2019 and 2018, our Narcan®

royalty accounted

for 10 percent of total finance receivable revenue.

Company performs ongoing credit evaluations of its partner companies and generally requires collateral.

For the year ended

December 31, 2020, three of our business partners accounted for 34 percent of total finance receivable interest income, including

The Company’s Narcan®

royalty accounted for 10 percent of total finance receivable interest income, including

fees as of December 31, 2019.

Company does not expect its current or future credit risk exposures to have a significant impact on its operations.

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and is recognized as an expense over the requisite service period.

Stock-based compensation expense is reduced for

estimated future forfeitures.

Stock-based compensation expense is reduced for estimated future

These estimates are revised in future periods if actual forfeitures differ from the estimates.

in forfeiture estimates impact compensation expense in the period in which the change in estimate occurs.

Changes in forfeiture

estimates impact compensation expense in the period in which the change in estimate occurs.

restricted stock, the Company recognizes compensation expense in accordance with the fair value of the Company’s stock as

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the statements of income.

December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act

(“TCJA”).

The TCJA makes broad and complex changes to the U.S.

On the same date, the SEC staff issued Staff

Accounting Bulletin (“SAB”) 118, which provides guidance on accounting for the tax effects of the TCJA.

a “measurement period”

lasting through December 22, 2018 to allow registrants time to obtain, prepare and analyze

information to complete the accounting required under ASC 740, Income Taxes.

The Company completed its analysis during the

measurement period, and there were no measurement period adjustments recognized during 2018.

Please refer to Note 12 of the Notes

to the Consolidated Financial Statements.

Comprehensive Income

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equity and the consolidated statements of comprehensive income.

Comprehensive income equals net

income for the years ended December 31, 2020 and 2019.

Net Income per Share

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following table shows the computation of basic and diluted earnings per share for the following (in thousands, except per share

Year Ended December 31,

Net income attributable to SWK Holdings Corporation stockholders

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Diluted net income per share

As of December 31, 2019 and 2018, outstanding stock options and

warrants to purchase shares of common stock in an aggregate of approximately 436,000 and 271,000 shares, respectively, have been

excluded from the calculation of diluted net income per share as these securities were anti-dilutive.

of December 31, 2020 and 2019, outstanding stock options and warrants to purchase shares of common stock in an aggregate of approximately

443,000 and 436,000 shares, respectively, have been excluded from the calculation of diluted net income per share as these

securities were anti-dilutive.

Recent Accounting Pronouncements

On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting

Standards Update (“ASU”) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting”

848), which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing

the effects of) reference rate reform on financial reporting.

ASU 2020-04 provides optional expedients and exceptions

for applying GAAP to transactions affected by reference rate reform if certain criteria are met.

March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2020-04, “Reference Rate Reform (Topic 848),”

which provides optional guidance for a limited period of time to ease

the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria

These transactions include:

(i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity.

(i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt

securities classified as held-to-maturity.

ASU 2020-04 is effective from March 12, 2020 through December 31, 2022.

An entity may elect to adopt the amendments for

contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020,

or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the

financial statements are available to be issued.

An entity may elect to apply the amendments in ASU 2020-04 to eligible

hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging

relationships entered into after the beginning of the interim period that includes March 12, 2020.

The one-time election to

sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made at any time after March 12,

2020 but no later than December 31, 2022.

The Company expects that it will elect to apply some of the expedients and exceptions

provided in ASU 2020-04;

however, the Company is still evaluating the guidance, and therefore, the impact of the adoption

of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

In August 2018, the FASB issued 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.

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

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.

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, 2022, 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.

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.

An entity may

elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes

or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March

12, 2020, up to the date that the financial statements are available to be issued.

An entity may elect to apply the amendments

in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020

and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020.

The one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity may be made

at any time after March 12, 2020 but no later than December 31, 2022.

The Company expects that it will elect to apply some of

the expedients and exceptions provided in ASU 2020-04;

however, the Company is still evaluating the guidance, and therefore, the

impact of the adoption of ASU 2020-04 on the Company’s financial condition and results of operations has not yet been determined.

June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).”

This standard adds an

impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather

than incurred losses.

Under this guidance, an entity recognizes as an allowance its estimate of expected credit losses, which

the FASB believes will result in more timely recognition of losses.

This ASU describes the impairment allowance as a valuation

account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount

expected to be collected on the financial asset.

Credit losses relating to available-for-sale debt securities should be measured

in a manner similar to current GAAP;

however, the amendments in this update require that credit losses be presented as an allowance

rather than as a write-down, which will allow an entity the ability to record reversals of credit losses in current period net

On November 15, 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives

and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates,”

which finalized various effective date delays for private

companies, not-for-profit organizations, and certain smaller reporting companies.

Under ASU 2019-10, the effective date for implementation

of CECL for smaller reporting companies was extended to fiscal years, and interim periods within those years, beginning after

December 15, 2022.

The Company is currently evaluating the new guidance but believes it is likely to incur more upfront losses

on its portfolio under the new CECL model.

Business Combinations

On August 26, 2019, Enteris, a biotechnology

company offering innovative formulation solutions utilizing its proprietary oral drug delivery technology, merged with a wholly-owned

subsidiary of the Company, with Enteris continuing as the surviving entity.

The total merger consideration was $34.6 million,

which included contingent consideration of $14.5 million.

The purchase consideration is subject to certain adjustments with respect

to cash, debt, working capital, transaction expenses and the value of the contingent consideration agreement entered into, in connection

with the transaction.

August 26, 2019, Enteris, a biopharmaceutical company offering innovative formulation solutions utilizing its proprietary oral

drug delivery technology, became a wholly-owned subsidiary of the Company.

The total merger consideration was $34.6 million, which

included contingent consideration of $14.5 million, which was remeasured to $16.9 million as of December 31, 2020.

year ended December 31, 2020, the Company recognized $5.0 million of revenue related to the completion of a milestone under the

License Agreement (as defined below) with Cara Therapeutics, Inc.

(“Cara”).

During the year ended December 31, 2020,

the Company paid $2.0 million of such amount to the seller of Enteris, pursuant to earnout provisions of the merger agreement.

The purchase price was subject to certain adjustments with respect to cash, debt, working capital, transaction expenses and the

value of the contingent consideration agreement entered into, in connection with the transaction.

to the acquisition, Enteris entered into a non-exclusive commercial license agreement with Cara (the “License Agreement”),

for oral formulation rights to Enteris’

Peptelligence®

technology to develop and commercialize Oral KORSUVA™

any indication worldwide, excluding South Korea and Japan.

Cara is obligated to pay Enteris certain development, regulatory and

tiered commercial milestone payments, as well as low single-digit royalties based on net sales in the licensed territory.

acquisition was accounted for under the acquisition method of accounting.

Accordingly, the purchase consideration was allocated

Accordingly, the merger consideration was allocated

to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition.

of the purchase consideration over the estimated fair value of the net assets of Enteris was recorded as goodwill, which consists

of the merger consideration over the estimated fair value of the net assets of Enteris was recorded as goodwill, which consists

largely of synergies and the acquisition of intangible assets.

The resulting goodwill is not expected to be deductible for

allocation of the purchase consideration has been prepared on a preliminary basis and changes to the allocation to certain assets,

liabilities, including tax estimates and potential indemnities, may be revised as additional information becomes available.

Company will finalize the acquisition accounting within the required measurement period of one year.

The following table summarizes the allocation of the purchase consideration

(at fair value) to the assets and liabilities of Enteris as of August 26, 2019 (the date of acquisition) (in thousands):

The resulting goodwill is not expected to be deductible for tax

following table summarizes the allocation of the purchase consideration (at fair value) to the assets and liabilities of Enteris

as of August 26, 2019 (the date of acquisition) (in thousands):

Accounts receivable

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Total purchase price

and net loss of Enteris from August 26, 2019 (the date of acquisition) through December 31, 2019 were $0.6 million and $6.7 million,

respectively.

Acquisition-related expenses were expensed as incurred.

Unaudited Supplemental

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on January 1, 2019, the earliest period presented herein (in thousands):

Twelve Months Ended

Net income (loss)

pro forma financial information includes adjustments that are directly attributable to the business combination and are factually

The pro forma adjustments include incremental amortization and depreciation of intangible assets and property

and equipment based on preliminary values of each asset and acquisition-related expenses.

The pro forma financial information

excludes non-recurring acquisition-related expenses.

These pro forma results are illustrative only and not indicative of the actual

results of operations that would have been achieved nor are they indicative of future results of operations.

change in the carrying amount of goodwill from December 31, 2018 to December 31, 2019 is as follows, with

the addition solely due to the acquisition of Enteris (in thousands):

December 31, 2018

Acquisition of Enteris

December 31, 2019

the goodwill is attributable to the acquisition of Enteris, the Company will perform the annual goodwill impairment test during

the fourth quarter of every year, commencing in 2020.

of December 31, 2019, the gross book value and accumulated amortization of intangible assets were as follows (in thousands,

except estimated useful life data):

The pro forma adjustments include incremental amortization and depreciation of intangible assets and property and

equipment based on preliminary values of each asset and acquisition-related expenses.

The pro forma financial information excludes

non-recurring acquisition-related expenses.

These pro forma results are illustrative only and not indicative of the actual results

of operations that would have been achieved nor are they indicative of future results of operations.

was no change in the carrying amount of goodwill from December 31, 2019 to December 31, 2020,

and net book value remains at $8.4 million.

The net book value of goodwill is solely related to the Enteris acquisition in 2019.

The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the

carrying value of an asset may not be recoverable.

The Company first assesses qualitative factors to determine whether it is more-likely-than-not

that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary

to perform an impairment test.

If the qualitative assessment warrants further analysis, the Company compares the fair value of

the reporting unit to its carrying value.

The fair value of the reporting unit is determined using the market approach.

fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is not impaired.

the carrying value of the reporting unit’s goodwill exceeds its fair value, then the Company must record an impairment charge

equal to the difference.

As of December 31, 2020, the Company concluded that it is more

likely than not that fair value of the reporting unit is greater than its carrying value, and goodwill is not considered to be

of December 31, 2020, the gross book value, accumulated amortization, net book value and estimated useful life of acquired

intangible assets were follows (in thousands, except estimated useful life data):

As of December 31, 2020

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Total intangibles

Amortization expense was $4.8 million for

the period ended December 31, 2019 and was recorded in depreciation and amortization expense.

Based on amounts recorded

at December 31, 2019, the Company will recognize acquired intangible asset amortization through 2033 as follows (in thousands):

As of December 31,

Licensing agreement

Trade names and trademarks

Customer relationships

Deferred patent costs

Total intangibles

expense was $11.7 million and $4.8 million for the years ended December 31, 2020 and

2019, respectively, and was recorded in depreciation and amortization expense.

Based on amounts recorded at December

31, 2020, the Company will recognize acquired intangible asset amortization as follows (in thousands):

Finance Receivables

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expected using the effective interest method.

value of finance receivables are as follows (in thousands):

of December 31, 2020, the Company had a credit loss allowance of $8.4 million.

Of the total $8.4 million, $1.2 million is associated

with the Company's Cambia®

royalty, and $0.6 million is associated with the Company’s Besivance®

The Cambia®

and Besivance®

provision for credit losses were recognized in 2018 and 2019, respectively.

The remaining $6.6 million is related

to the ABT Molecular Imaging, Inc.

(“ABT”), now known as Best ABT, Inc.

(“Best”), second lien term loan that

was recognized in 2018 and 2019 in order to reflect the Best royalty at its then estimated fair value of $4.1 million.

The carrying values

of finance receivables are as follows (in thousands):

As of December 31,

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credit losses, the Company considers, among other things, the following credit quality indicators:

business characteristics

and financial conditions of obligors;

current economic conditions

business characteristics and financial conditions of obligors;

current economic conditions and trends;

actual charge-off experience;

current delinquency levels;

value of underlying collateral

and guarantees;

value of underlying collateral and guarantees;

regulatory environment;

any other relevant factors

predicting investment recovery.

The following table presents

nonaccrual and performing loans by portfolio segment (in thousands):

any other relevant factors predicting investment recovery.

The following table

presents nonaccrual and performing loans by portfolio segment (in thousands):

December 31, 2020

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Total carrying value

As of December 31, 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 ABT, Inc.

(“Best”) royalty, with a net carrying value of $4.1 million, and (c) the Tissue Regeneration

Therapeutics, Inc.

(“TRT”) royalty, with a net carrying value of $3.5 million.

As of December 31, 2018, the Company

had two term loans associated with two portfolio companies in nonaccrual status with a carrying value, net of provision for credit

loss allowance, of $14.1 million.

The Company collected $0.6 million on one nonaccrual loan during the year ended December 31,

Although in nonaccrual status, the B&D term loan and the TRT royalty were not considered impaired as of December 31,

The Company collected $0.1 million on one of its nonaccrual royalties during the year ended December 31, 2019.

B&D, Best, Besivance and TRT below for further details regarding nonaccrual and impaired finance receivables).

of December 31, 2020 the Company had two finance receivables in nonaccrual status:

(1) the term loan to B&D Dental Corporation

(“B&D”), with a net carrying value of $8.3 million and (2) the Best royalty, with a net carrying value of $3.9

Although in nonaccrual status, the B&D term loan was not considered impaired as of December 31, 2020 and 2019.

The Company collected $0.3 million on two of its nonaccrual royalties during the year ended December 31, 2020.

(Please see B&D,

Best and Besivance below for further details regarding nonaccrual and impaired finance receivables).

December 10, 2013, the Company entered into a five-year credit agreement to provide B&D a senior secured term loan with a

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Subsequently, the terms of the loan have been amended, and the Company has funded additional amounts to B&D.

As of December 31, 2019, the total amount funded was $8.3 million.

B&D is currently evaluating strategic options, including

a potential sale of the business.

As of December 31, 2020 and 2019, the total amount funded was $8.3 million.

B&D is currently evaluating strategic options,

including a potential sale of the business.

is currently in default under the terms of the credit agreement, and as a result, the Company classified the loan to nonaccrual

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an additional $0.7 million in order to directly pay critical vendors and protect the value of the collateral.

The Company obtained

a third-party valuation of B&D.

As a result of the third-party valuation and facts and circumstances regarding B&D’s

operations, the Company believes its collateral position is greater than the unpaid balance;

thus, accrued interest has not been

reversed nor has an allowance been recorded as of December 31, 2019.

The Company periodically

obtains third-party valuations of B&D.

As a result of the third-party valuations and facts and circumstances regarding B&D’s

operations, including its intellectual property position, improved profitability and working capital position, the Company believes

its collateral position is greater than the unpaid balance;

thus, accrued interest has not been reversed nor has an allowance

been recorded as of December 31, 2020.

October 31, 2018, ABT announced that it entered into an asset purchase agreement with Best ABT, Inc., a wholly-owned subsidiary

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the year ended December 31, 2019, the Company re-evaluated the value of the Best royalty based on 2019 business trends, and as

a result, the Company recognized a provision of credit losses of $1.6 million to reflect the Best royalty at its estimated fair

value of $4.1 million.

a result, the Company recognized a provision for credit losses of $1.6 million.

The estimated fair value as of December 31, 2020

is $3.9 million.

April 2, 2013, the Company purchased an effective 2.4 percent royalty on sales of Besivance®

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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.

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

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.

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, continued receipt of Canadian

licensee royalty payments and anticipated terms of the restructured purchase agreement.

Property and Equipment,

During 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.

the year ended December 31, 2020, the Company re-evaluated the value of the Besivance®

royalty based on 2020 business

trends, and as a result, the Company determined a further provision of credit losses was not warranted based on improving royalty

trends over prior periods.

The estimated fair value as of December 31, 2020 is $0.4 million.

Property and Equipment, Net

and equipment, net consisted of the following as of December 31, 2020 and 2019 (in thousands):

Production equipment and other

equipment and other

Furniture and fixtures

Leasehold improvements

Capitalized software

Less accumulated depreciation

Property and equipment, net

acquired property and equipment with a fair value of $1.3 million in connection with its acquisition of Enteris.

and amortization expense on property and equipment was $0.1 million and $17,000 for the years ended December 31, 2019 and 2018.

Construction-in

accumulated depreciation

and equipment, net

and amortization expense on property and equipment was $0.4 million and $0.1 million for the years ended December 31, 2020 and

2019, respectively.

Marketable Investments

in marketable investments at December 31, 2019 and 2018 consist of the following (in thousands):

Year Ended December 31,

in corporate debt securities and equity securities as of December 31, 2020 and 2019 consist of the following (in thousands):

Corporate debt securities

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Corporate debt securities

following table presents the proceeds from sales and realized net gains and losses on equity securities that were sold during

the year ended December 31, 2019 and 2018.

The table also includes unrealized net losses on equity securities as prescribed by

ASC 321, “Investment - Equity Securities.”

Proceeds from sale of equity securities

Realized net gain (loss) on sale of equity securities

following table presents unrealized gains and losses on equity securities as prescribed by ASC 321, Investment - Equity Securities

during the year ended December 31, 2020 and 2019.

Unrealized net income (loss) on equity securities reflected in the Consolidated Statements of Income

Company did not have any marketable investments with unrealized losses at December 31, 2019.

of December 31, 2019, the Company’s marketable investments include 96,810 shares of Misonix, Inc.

of December 31, 2020, the Company’s equity securities include 96,810 shares of Misonix, Inc.

(“Misonix”) common

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(“Solsys”) on September 27, 2019.

the year ended December 31, 2019 and prior to the acquisition, the Company exercised its Solsys warrants in a cashless transaction

to purchase Solsys preferred stock and exercised its preemptive right to protect against dilution of its Solsys equity position.

Of the total 109,472 shares of Misonix common stock received for its Solsys equity interests, 12,662 shares are held in escrow

by Misonix, are subject to reduction based on terms of the acquisition agreement, and any shares remaining at the end of the escrow

period will be released within 15 to 18 months post closing of the acquisition.

The 96,810 shares are subject to a one year lock-up

that expires on September 27, 2020.

As of December 31, 2019, the 96,810 shares of Misonix common stock are reflected at their

estimated fair value of $1.8 million.

the three months ended September 30, 2019 and prior to the acquisition, the Company exercised its Solsys warrants in a cashless

transaction to purchase Solsys preferred stock and exercised its preemptive right to protect against dilution of its Solsys equity

Of the total 109,353 shares of Misonix common stock received for its Solsys equity interests, 12,543 shares were held

in escrow by Misonix and were subject to reduction based on terms of the acquisition agreement.

The remaining 12,543 shares were

released at the end of the escrow period on January 4, 2021, which was subsequent to December 31, 2020.

The initial 96,810 shares

were subject to a one year lock-up that expired on September 27, 2020;

the 12,543 escrow shares are not subject to a lock-up.

As of December 31, 2020, the 96,810 shares of Misonix common stock are reflected at their estimated fair value of $1.2 million.

Debt Securities

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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.

notes are secured only by certain royalty and milestone payments associated with the sales of pharmaceutical products.

secured notes have been placed on non-accrual status as of June 30, 2016.

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.

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 year ended December 31, 2020

31, 2019 was $0.1 million which was credited to the notes’

and 2019 was $62,000 and $65,000, respectively, which was credited to the notes’

carrying value.

As of December 31, 2019, the notes are reflected

at their estimated fair value of $0.5 million and are included in corporate debt securities in the Condensed Consolidated Balance

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 $20.0 million revolving senior secured credit facility, which

the Company can draw down and repay until maturity, subject to borrowing base eligibility.

During the year ended December

31, 2020, impairment expense of $0.2 million was recognized in order to reflect the notes at their estimated fair value of $0.2

The notes are included in long-term marketable investments in the consolidated balance sheets.

Revolving Credit Facility

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 provides 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 30, 2021.

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The Company paid $0.5 million in fees

at closing, which have been capitalized as deferred financing costs and will be amortized on a straight-line basis over the term

of the Loan Agreement.

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.

Loan Agreement has an advance rate against the Company’s finance receivables portfolio, including 85 percent against senior

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minimum asset coverage and minimum interest coverage ratios.

As of December 31, 2019, the Company was in compliance with its covenants.

During the year ended December 31, 2019 and 2018, the Company recorded

$0.3 million and $0.2 million respectively, of interest expense, which is included in costs and expenses.

As of December 31, 2019,

no amount was outstanding under the Loan Agreement, and $20.0 million was available for borrowing.

As of March 23, 2020, the Company

drew $15.0 million under the Loan Agreement, which increased the Company’s cash balance to $23.6 million.

entered into a $20.0 million revolving credit facility in June 2018.

As of December 31, 2020, $11.8 million was outstanding under the

credit facility, and $8.2 million was available for borrowing.

As of March 25, 2021, the Company drew an additional $9.0 million under

the credit facility, incurred and paid $0.1 million of interest and fees and made principal payments of $11.2 million.

As of March 25,

2021, $10.3 million was available for borrowing.

Our credit facility matures on June 30, 2021.

We are exploring options with respect

to a new credit facility.

Related Party Transactions

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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 warrants had 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.

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 consolidated balance sheets.

The Company recorded a nominal gain for the year ended December 31, 2019 and 2018.

The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions:

warrants expired unexercised on September 6, 2020.

Company determined the fair value of the warrants as of December 31, 2019 using the Black-Scholes option pricing model with the

following assumptions:

Dividend rate

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December 31, 2020

Commitments and

Contingencies

Commitments and Contingencies

Lease Obligations

842 establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on

the balance sheet for all leases with a term longer than twelve months.

Leases are classified as finance or operating, with classification

affecting the pattern and classification of expense recognition in the income statement.

The Company's leases consist of operating

leases for office space.

The Company determines if an arrangement is a lease at inception.

ROU assets represent the Company's

right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments

arising from the lease.

Operating lease right-of-use assets are recognized at commencement date based on the present value of

lease payments over the lease term.

As the Company's leases do not provide an implicit rate, the Company uses its incremental

borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Company’s corporate headquarters is in Dallas, Texas, where it leases approximately 2,400 square feet.

Total rent expense

recognized under the lease was $57,000 and $55,000 for the years ended December 31, 2019 and 2018, respectively.

office lease expires in May 2020.

The Enteris headquarters is located in Boonton, New Jersey, where

Enteris leases approximately 32,000 square feet of space.

Total rent expense recognized under the lease was $73,000 from August

26, 2019 through December 31, 2019.

expense recognized under the lease was $58,000 and $57,000 for the years ended December 31, 2020 and

2019, respectively.

The office lease expires in May 2025.

Enteris headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space.

rent expense recognized under the lease was $240,000 and $73,000 for the years ended December 31, 2020

The office lease expires in December 2024.

future minimum rent is as follows (in thousands):

Total future minimum rent with non-cancelable terms of one year or more

lease payments

Unfunded Commitments

of December 31, 2019, the Company’s unfunded commitments were as follows (in millions):

Aimmune Therapeutics, Inc.

eTon Pharmaceuticals, Inc.

Harrow Health, Inc.

Total Unfunded Commitments

The unfunded commitment is contingent upon a borrower reaching an

established revenue threshold or other performance metrics on or before a specified date or period of time per the terms of the

credit agreement, and is only subject to being advanced as long as an event of default does not exist.

As of March 23, 2020, the

aggregate unfunded commitment decreased to $6.3 million as a result of funding $3.0 million to 4Web, Inc.

and $2.5 million to Aimmune

Therapeutics, Inc.

pursuant to the terms of the credit agreements, and an expiration of the commitment to Harrow Health, Inc.

The Company is involved in, or has been involved in, arbitrations

or various other legal proceedings that arise from the normal course of its business.

The ultimate outcome of any litigation is

uncertain, and either unfavorable or favorable outcomes could have a material impact on the Company’s results of operations,

balance sheets and cash flows due to defense costs, and divert management resources.

The Company cannot predict the

timing or outcome of these claims and other proceedings.

As of December 31, 2019, the Company is not involved in any arbitration

and/or other legal proceeding that it expects to have a material effect on its business, financial condition, results of operations

and cash flows.

of December 31, 2020, the Company did not have any unfunded commitments.

Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course

of its business.

The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have

a material impact on the Company’s results of operations, balance sheets and cash flows due to defense costs, and divert

management resources.

The Company cannot predict the timing or outcome of these claims and other proceedings.

December 31, 2020, the Company is not involved in any arbitration and/or other legal proceeding that it expects to have a material

effect on its business, financial condition, results of operations and cash flows.

Indemnification

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total number of shares of common stock, $0.001 par value, that the Company is authorized to issue is 250,000,000.

On December 21, 2018 and September 5, 2019, the Board authorized

share repurchase programs, which are more fully described in Part II, Item 5 under Issuer Purchases of Equity Securities.

21, 2018 share repurchase program expired on May 31, 2019, and the September 5, 2019 share repurchase program expired on February

Issuer Purchases of Equity Securities

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 312,497 common shares, in accordance with all applicable

securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act.

The December 21, 2018 share repurchase program

expired on May 31, 2019 and was renewed on September 5, 2019 and March 26, 2020.

Under the March 26, 2020 share repurchase program, the

Board authorized the repurchase of up to $2.0 million worth of common shares.

As of December 31,

2020, the Company repurchased an aggregate 384,368 shares of its outstanding common stock, including three privately negotiated purchases

outside of the share repurchase programs, at a total cost of $4.2 million or $11.06 per share.

The program expired on September 30, 2020.

Preferred Stock

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and other customary forms of equity to be granted to the Company’s directors, officers, employees, and independent contractors.

All forms of equity incentive compensation are granted at the discretion of the Board and have a term not greater than 10

years from the date of grant.

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.

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.

the 2012 and 2014 options received by the CEO were amended to extend the expiration dates to December 31, 2021.

The options will

be forfeited and of no force and effect to the extent the options have not vested or become exercisable on or before December

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.

All forms of equity incentive compensation are granted at the discretion of the Board and have a term not greater than 10 years

from the date of grant.

The calculation of

the fair values of our stock-based compensation plans requires estimates that require management’s judgments.

Under ASC 718, the

fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model.

The valuation models require

assumptions and estimates to determine expected volatility, expected life and expected risk-free interest rates.

The expected volatility

was determined using historical volatility of our stock based on the contractual life of the award.

The risk-free interest rate assumption

was based on the yield on zero-coupon U.S.

Treasury strips at the award grant date.

In valuing options granted in the fiscal years ended

December 31, 2020 and 2019, we used the following weighted average assumptions:

the Year Ended

Risk-free interest rate

Expected stock-price volatility

Expected life

The following

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Options Outstanding

(in thousands)

Balances, December 31, 2018

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Options vested and exercisable at December 31, 2020

At December 31, 2019, there were 0.2 million shares reserved for

issuance under the 2010 Stock Incentive Plan, and the Company had $0.4 million of total unrecognized stock option expense, net

of estimated forfeitures, which will be recognized over the weighted average remaining period of 1.3 years.

December 31, 2020, there were 1.2 million shares reserved for issuance under the 2010 Stock Incentive Plan, and the Company

had $0.4 million of total unrecognized stock option expense, net of estimated forfeitures, which will be recognized over the weighted

average remaining period of 1.3 years.

following table summarizes significant ranges of outstanding and exercisable options as of December 31, 2020:

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During the year ended

December 31, 2018, no restricted shares were granted, or vested.

As of December 31, 2019, there were 44,655 shares of restricted

stock outstanding.

The Company did not recognize any expense related to restricted stock for the year ended December 31, 2018.

December 31, 2019, 57,155 restricted shares were granted and 12,500 restricted shares vested.

As of December 31, 2020 and 2019,

there were 27,471 and 44,655 shares of restricted stock outstanding.

October 2019, the Board approved a change in the compensation plan for non-employee directors such that each non-employee director

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in advance annually on October 1 of restricted shares of the Company’s common stock, subject to a one year cliff vesting

In addition, each member of (i) the Audit Committee shall receive an additional fee of $11,000 payable quarterly in

(ii) the Compensation Committee shall receive an additional fee of $2,000 payable quarterly in arrears and (iii) the

Governance Committee shall receive an additional fee of $4,000 payable quarterly in arrears.

Each non-employee director has the

option to elect to receive up to 100 percent of the annual cash retainer in shares of the Company’s common stock.

During the years ended December 31, 2019 and 2018, the Board approved

compensation for Board services by granting 25,574 and 20,318 shares, respectively, of common stock as compensation for the non-employee

The Company recorded $0.2 million and $0.1 million in Board compensation expense during the years ended December 31,

2019 and 2018, respectively.

The Company recorded aggregate stock-based compensation expense, including the quarterly Board grants,

of $0.5 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively.

In addition, each member of (i) the Audit Committee shall receive an additional fee of $11,000 payable quarterly in arrears;

(ii) the Compensation Committee shall receive an additional fee of $2,000 payable quarterly in arrears and (iii) the Governance

Committee shall receive an additional fee of $4,000 payable quarterly in arrears.

Each non-employee director has the option to

elect to receive up to 100 percent of the annual cash retainer in shares of the Company’s common stock.

the years ended December 31, 2020 and 2019, the Board approved compensation for Board services by granting 24,940 and 25,574 shares,

respectively, of common stock as compensation for the non-employee directors.

The Company recorded $0.3 million and $0.2 million

in Board compensation expense during the years ended December 31, 2020 and 2019, respectively.

The Company recorded aggregate

stock-based compensation expense, including the quarterly and annual Board grants, of $0.7 million and $0.5 million for

the years ended December 31, 2020 and 2019, respectively.

Fair Value Measurements

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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.

1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or

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.

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.

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.

into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred.

no transfers between any levels during the years ended December 31, 2020 and 2019.

fair value of equity method investments is not readily available nor have we estimated the fair value of these investments and

disclosure is not required.

The Company is not aware of any identified events or changes in circumstances that would have a significant

adverse effect on the carrying value of any of its equity method investments included in the consolidated balance sheets as of

December 31, 2019 and 2018.

following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying consolidated financial statements and the related market or fair value.

The disclosures include financial

instruments and derivative financial instruments, other than investment in affiliates.

are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the

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royalties due to Enteris pursuant to the License Agreement.

Please refer to the Pharmaceutical Development Segment - Acquisition

of Enteris BioPharma, Inc.

section of Note 1 for further details on the Company’s acquisition of Enteris and the contingent

consideration.

The fair value measurements of contingent consideration obligations and the related intangible

assets arising from business combinations are classified as Level 3 estimates under the fair value hierarchy as these items have

been valued using unobservable inputs.

Please refer to Note 2, Business Combinations , for further

details on the Company’s acquisition of Enteris and contingent consideration.

fair value measurements of the contingent consideration obligations and the related intangible assets arising from business combinations

are classified as Level 3 estimates under the fair value hierarchy, as these items have been valued using unobservable inputs.

These inputs include:

(a) the estimated amount and timing of projected cash flows;

(b) the probability of the achievement of the factors on which the contingency is based;

and (c) the risk-adjusted discount

rate used to present value the probability-weighted cash flows.

Significant increases or decreases in any of those inputs in isolation

could result in a significantly lower or higher fair value measurement.

During the year ended December 31, 2019, the Company recorded a contingent consideration liability of $14.5

(b) the probability of the achievement of the

factors on which the contingency is based;

and (c) the risk-adjusted discount rate used to present value the probability-weighted

Changes in fair value of this obligation are recorded as income or expense within operating income in our consolidated

statements of income.

Significant increases or decreases in any of those inputs in isolation could result in a significantly

lower or higher fair value measurement.

of December 31, 2020 and 2019, the acquisition-related contingent consideration was $16.9 million and $14.5 million, respectively.

During the year ended December 31, 2020, the Company recorded $4.4 million of expense for the change in fair value of contingent

consideration.

The Company also made payments of $2.0 million against the contingent consideration liability.

Marketable Investments

and Derivative Securities

active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities

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market value are not, but estimates of fair value are reflected below.

Derivative securities

exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1.

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Contingent consideration payable

Warrant liability

following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019

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Financial Liabilities:

Contingent consideration payable

Warrant liability

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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 consolidated balance sheet.

The fair values for warrants outstanding, that have a readily

determinable value, are measured using the Black-Scholes option pricing model.

The following range of assumptions were used in

the models to determine fair value:

These warrants meet the definition of

a derivative and are included in the consolidated balance sheet.

The fair values for warrants outstanding, for companies that

have a readily determinable value, are measured using the Black-Scholes option pricing model.

The following range of assumptions were

used in the models to determine fair value:

Dividend rate

Risk-free rate

0.17% to 0.65%

Expected life (years)

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50.3% to 114.6%

following table presents financial assets measured at fair value on a nonrecurring basis as of December 31, 2019 and 2018

(in thousands):

following table presents financial assets measured at fair value on a nonrecurring basis as of December 31, 2020 and 2019 (in

Total Carrying

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refer to Note 3 for further information on impaired loans.

were no remeasured liabilities at fair value on a non-recurring basis during the year ended December 31, 2019 or 2018.

following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying

consolidated financial statements and the related market or fair value.

The disclosures include financial instruments and derivative

financial instruments, other than investment in unconsolidated entity.

For the year ended December 31, 2019 (in thousands):

were no liabilities measured at fair value on a nonrecurring basis as of December 31, 2020 or 2019.

The disclosures include financial

instruments and derivative financial instruments.

the year ended December 31, 2020 (in thousands):

Financial Assets

cash equivalents

Cash and cash equivalents

Finance receivables

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Financial Liabilities

Contingent consideration

Warrant liability

Contingent consideration payable

year ended December 31, 2019 (in thousands):

Financial Assets

cash equivalents

Cash and cash equivalents

Finance receivables

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Financial Liabilities

Contingent consideration payable

Warrant liability

Revenue Recognition

Company’s Pharmaceutical Development segment recognizes revenues received from contracts with its customers by revenue source,

as we believe it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow.

The Company’s Finance Receivables

segment does not have any revenues received from contracts with customers.

The following table provides the contract revenue recognized

by revenue source for the year ended December 31, 2020 (in thousands):

Pharmaceutical Development Segment

License Agreement

Total Contract Revenue

As of December

31, 2020 and 2019, the Company recognized $0.1 million and $0.1 million, respectively, of accounts receivable related

to its Pharmaceutical Development segment revenue.

Contract Assets and Liabilities

contract liabilities represent advance consideration received from customers and are recognized as revenue when the related performance

obligation is satisfied.

The Company’s contract liabilities are presented as deferred revenues and are included in accounts payable

and accrued liabilities in the consolidated balance sheets (in thousands):

Pharmaceutical Development Segment

Deferred revenue

Total Contract Liabilities

the year ended December 31, 2020, the Company recognized $0.1 million of 2019 deferred revenue from satisfaction of performance

Please refer to Notes 1 and 2 for further details on the Company’s deferred revenue and License Agreement,

respectively.

The Company did not have any contract assets nor did it have any contract liabilities related to the License Agreement

as of December 31, 2020 or 2019.

Segment Information

financial and descriptive information is required to be provided about reportable operating segments, considering

a “management approach”

financial and descriptive information is required to be provided about reportable operating segments, considering a “management

approach”

concept as the basis for identifying reportable segments.

The management approach is

based on the way that management organizes the segments within the Company for making operating decisions, allocating resources,

and assessing performance.

Consequently, the segments are evident from the structure of the Company’s internal organization,

focusing on financial information that a Company’s chief operating decision-makers use to make decisions about the Company’s

operating matters.

described in Note 1, “SWK Holdings Corporation and Summary of Significant Accounting Policies,”

has determined it has two reportable segments:

Finance Receivables and Pharmaceutical Development, and each are individually managed

and provide separate services.

The management approach is based on the way that management

organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance.

Consequently,

the segments are evident from the structure of the Company’s internal organization, focusing on financial information that the

Company’s chief executive officer uses to make decisions about the Company’s operating matters.

described in Note 1, SWK Holdings Corporation and Summary of Significant Accounting Policies, the Company has determined

it has two reportable segments:

Finance Receivables and Pharmaceutical Development, and each are individually managed and provide

separate services.

Revenues by segment represent revenues earned on the services offered within each segment.

Segment performance is evaluated based on several factors, including

income from continuing operations before income taxes.

Management uses this measure of profit (loss) to evaluate segment performance

because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.

performance is evaluated based on several factors, including income (loss) from continuing operations before income taxes.

uses this measure of profit (loss) to evaluate segment performance because the Company believes this measure is indicative of performance

trends and the overall earnings potential of each segment.

following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):

Twelve Months Ended December 31, 2019

Year Ended December 31, 2020

Pharmaceutical

Provision for credit losses and impairment expense

Provision for credit losses and impairment

Interest expense

Pharmaceutical manufacturing, research and development expense

Depreciation and amortization

General and administrative expense

Manufacturing, research and development

Depreciation and amortization expense

Change in fair value of acquisition-related contingent consideration

General and administrative

Other income (expense), net

Income (loss) from continuing operations before

Income tax benefit

Consolidated net income (loss)

Year Ended December 31, 2019

Pharmaceutical

Provision for credit losses and impairment

Interest expense

Manufacturing, research and development

Depreciation and amortization expense

Change in fair value of acquisition-related contingent

consideration

General and administrative

Other income (expense), net

Income tax benefit

Consolidated net income (loss)

in Holdings Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs,

including public company costs and non-Enteris corporate employees, which have been included for purposes of reconciling to the

in Holdings Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, which have been included for purposes of reconciling to the

consolidated amounts.

Of the $4.8 million included in Holdings Company and Other general

and administrative expense for the year ended December 31, 2019, respectively, approximately $1.2 million relates to the acquisition

of Enteris for both the year ended December 31, 2019.

The components

of income before income tax provision are as follows (in thousands):

the years ended December 31, 2019 and 2018, the Company’s provision for (benefit from) income taxes was as follows

(in thousands):

the years ended December 31, 2020 or 2019, the Company’s provision for (benefit from) income taxes was as follows (in thousands):

Current provision

Deferred provision (benefit)

Total provision (benefit) for income taxes

Total income tax benefit

The components

of the income tax provision (benefit) are as follows (in thousands):

Federal tax provision at statutory rate

Federal tax provision

at statutory rate

Change in valuation allowance

Transaction costs

Write off of expired deferred tax assets

Provision related to non-controlling interest

Total provision (benefit) for income taxes

Contingent consideration

off of expired deferred tax assets

income tax benefit

Company records deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting

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of profitability on a quarterly basis.

As of December 31, 2019, the Company had cumulative net income before

tax for the three years then ended.

Based on its historical operating performance, the Company has concluded that it was more likely

than not that the Company would not be able to realize the full benefit of the U.S.

federal and state deferred tax assets in the

However, the Company has concluded that it is more likely than not that the Company will be able to realize approximately

$25.8 million benefit of the U.S.

of December 31, 2020, the Company had cumulative net income before tax for the three years then ended.

Based on its historical

operating performance, the Company has concluded that it was more likely than not that the Company would not be able to realize

the full benefit of the U.S.

federal and state deferred tax assets in the future.

However, the Company has concluded that it is

more likely than not that the Company will be able to realize approximately $27.5 million benefit of the U.S.

federal and state

deferred tax assets in the future.

Company will continue to assess the need for a valuation allowance on the deferred tax assets by evaluating both positive and

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and tax credit carryforwards could be limited.

of December 31, 2020, the Company had NOL carryforwards for federal income tax purposes of approximately $289.4 million.

NOL carryforwards, if not offset against future income, will expire by 2037, with the majority of such NOLs expiring by 2021.

Approximately $4.0 million can be carried forward indefinitely.

Company also had federal research carryforwards of $3.0 million.

The federal credits will expire by 2039, with the majority of

such credits expiring by 2029.

Company records liabilities, where appropriate, for all uncertain income tax positions and recognizes potential accrued

interest and penalties related to unrecognized tax benefits within income tax expense.

As of both December 31,

2020 and 2019, the Company had approximately $0.1 million of unrecognized tax benefit.

The Company does not expect the

unrecognized tax benefits to change materially over the next twelve months.

There are no tax positions for which it is

reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve

months of December 31, 2020.

Company is subject to taxation in the U.S.

and various state jurisdictions.

The Company is currently open to audit under

the statute of limitations by the Internal Revenue Service for the years ending December 31, 1999 through December 31, 2020 due

to carryforward of unutilized net operating losses and research and development credits.

The Company does not anticipate

significant changes to its uncertain tax positions through December 31, 2020.

Investment in TRT

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

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.

TRT’s Canadian licensee continues to

pay royalties.

August 21, 2020, the Company and TRT agreed to terminate the royalty purchase agreement in exchange for TRT issuing the Company TRT common

equity and a convertible note.

The convertible note carries no interest, can be redeemed in cash without penalty at any time by TRT,

and converts into common equity of TRT at decreasing valuations over time to induce repayment in cash.

The convertible feature is

at the option of TRT.

of December 31, 2020, the Company does not believe there is an impairment of the carrying value of the investment in TRT.

evaluated several factors in this determination, including input from intellectual property counsel regarding the strength of the related

intellectual property, advancements with TRT’s intellectual property estate and technology license agreements generally, continued

receipt of Canadian licensee royalty payments and a third party valuation the Company’s investment in TRT.

As of December 31,

31, 2019, the Company had NOL carryforwards for federal income tax purposes of approximately $360.4 million.

The federal NOL carryforwards,

if not offset against future income, will expire by 2037, with the majority of such NOLs expiring by 2021.

Approximately $4.0 million

can be carried forward indefinitely.

The Company also had federal research

carryforwards of $3.0 million.

The federal credits will expire by 2039, with the majority of such credits expiring by 2029.

The Company records liabilities, where appropriate, for all uncertain

income tax positions and recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations

as income tax expense.

As of December 31, 2019, the Company had approximately $0.1 million of unrecognized tax benefit.

does not expect the unrecognized tax benefits to change materially over the next twelve months.

During the year ended December

31, 2019, the Company did not recognize any interest and penalty benefit associated with unrecognized tax benefits.

tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase

or decrease within twelve months of December 31, 2019.

The Company is subject to taxation in the U.S.

and various state

jurisdictions.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for

the years ending December 31, 1999 through December 31, 2019 due to carryforward of unutilized net operating losses and research

and development credits.

The Company does not anticipate significant changes to its uncertain tax positions through December

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

2020, there were no adjustments to the carrying amount of $3.5 million.

Subsequent Events

March 19, 2021, SWK Funding entered into a credit agreement pursuant to which SWK Funding provided to Sincerus Pharmaceuticals,

(“Sincerus”) a term loan in the maximum principal amount of $9.0 million.

SWK Funding funded $7.1 million at

The loan matures on March 19, 2026.

The loan bears interest at the greater of (a) three-month LIBOR and (b) 1.0 percent,

plus a margin of 12.0 percent, payable in cash, quarterly in arrears.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data