SWK Holdings Corp 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. Management’s Report on Internal Control over Financial Reporting Our management, under the supervision of the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures which (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, (iii) provide reasonable assurance that receipts and expenditures are being made only in accordance with appropriate authorization of management and the board of directors, and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements. In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the criteria established in Internal Control—Integrated Framework issued in 2013, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that evaluation, management concluded that as of December 31, 2020, our internal control over financial reporting was effective based on the criteria set forth in the COSO framework. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report. Inherent Limitations over Internal Controls Our system of controls is designed to provide reasonable, not absolute, assurance regarding the reliability and integrity of accounting and financial reporting. Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following: • Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes; • Controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override; • The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; 64 • Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures; and • The design of a control system must reflect the fact that resources are constrained, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Changes in Internal Control over Financial Reporting There have been no changes during the Company’s fiscal year ended December 31, 2020 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 65 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information under the principal headings “ELECTION OF DIRECTORS,” “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE,” and “CODE OF ETHICS AND CONDUCT”, the information regarding executive officers of the Company under the subheading “Executive Officers”, and the information regarding the Audit Committee under the subheading “Board Meetings and Committees” under the principal heading “CORPORATE GOVERNANCE,” in the Company’s 2021 Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information under the principal headings “DIRECTOR COMPENSATION,” “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION”, “EXECUTIVE COMPENSATION,” and “RELATED INFORMATION” in the Company’s 2021 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information under the principal headings “EQUITY COMPENSATION PLAN INFORMATION” and “OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY” in the Company’s 2021 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information under the principal heading “TRANSACTION WITH RELATED PERSONS” in the Company’s 2021 Proxy Statement is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information under the subheadings “Audit Fees and All Other Fees” and “Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors” below the principal heading “AUDIT FEES” in the Company’s 2021 Proxy Statement is incorporated herein by reference. 66 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Report: 1. Financial Statements: Page Report of Independent Registered Public Accounting Firm 32 Consolidated Balance Sheets as of December 31, 2020 and 2019 34 Consolidated Statements of Income for the years ended December 31, 2020 and 2019 35 Consolidated Statements of Comprehensive Income for the years ended December 31, 2020 and 2019 36 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2019 37 Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 38 Notes to the Consolidated Financial Statements 39 2. Exhibits: See attached Exhibit Index. 67 ITEM 16. FORM 10-K SUMMARY None. 68 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 31, 2021. SWK Holdings Corporation By: /s/ Winston L. Black Winston L. Black Chief Executive Officer (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Winston L. Black and Charles M. Jacobson and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 31, 2021 By: /s/ Winston L. Black Winston L. Black Chief Executive Officer and Director (Principal Executive Officer) Date: March 31, 2021 By: /s/ Charles M. Jacobson Charles M. Jacobson Chief Financial Officer (Principal Financial and Accounting Officer) Date: March 31, 2021 By: /s/ D. Blair Baker D. Blair Baker Director Date: March 31, 2021 By: /s/ Aaron G.L. Fletcher Aaron G.L. Fletcher Director Date: March 31, 2021 By: /s/ Christopher W. Haga Christopher W. Haga Director Date: March 31, 2021 By: /s/ Edward B. Stead Edward B. Stead Director Date: March 31, 2021 By: /s/ Michael Weinberg Michael Weinberg Director 69 EXHIBIT INDEX Exhibit Number Exhibit Description Form Exhibit Filing Date Filed Herewith 3.01 Second Amended and Restated Certificate of Incorporation, as amended by the Certificate of Amendment dated April 18, 2000. 8-K 3.1 05/04/00 3.02 Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated June 29, 2001. S-8 4.02 07/03/01 3.03 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation filed on December 11, 2001. S-3 4.03 01/18/02 3.04 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation dated November 21, 2005. 8-A 3.04 01/31/06 3.05 Certificate of Amendment of Second Amended and Restated Certificate of Incorporation of Kana Software, Inc. 10-K 3.05 03/31/10 3.06 Certificate of Amendment of Second Amended and Restated Certificate of Incorporation of SWK Holdings Corporation. 10-Q 3.01 08/14/15 3.07 Amended and Restated Bylaws as of May 20, 2015. 8-K 3.02 05/21/15 4.01 Form of Specimen Common Stock Certificate. S-1/A 4.01 09/21/99 4.02 Form of Rights Certificate (Exhibit B to Rights Agreement filed as Exhibit 4.03 hereto). 8-K 4.01 04/14/16 4.03 Rights Agreement, dated as of April 8, 2016 by and between SWK Holdings Corporation and Computershare Trust Company, N.A. 8-K 4.02 04/14/16 4.04 Common Stock Purchase Warrant to Purchase 100,000 (as adjusted to reflect a net 1-for-10 reverse stock split) shares of the Company’s common stock dated September 6, 2013 issued to Double Black Diamond, L.P. 8-K 4.1 09/09/13 4.05 Description of Securities Registered Under Section 12 of the Exchange Act. X 4.06 Amendment No. 1 to Rights Agreement, dated as of April 8, 2019, by and between SWK Holdings Corporation and Computershare Trust Company, N.A. 8-K 4.01 4/8/19 4.07 Amendment No. 2 to Rights Agreement, effective as of February 23, 2021 by and between SWK Holdings Corporation and Computershare Trust Company, N.A. 8-K 4.01 2/23/21 10.01 Kana Software, Inc. 1999 Stock Incentive Plan, as amended.* 10-Q 10.01 11/14/06 10.02 2010 Equity Incentive Plan.* 10-Q 10.1 11/09/10 10.03 SWK Holdings Corporation 2010 Equity Incentive Plan Restricted Stock Award Agreement.* 10-Q 10.2 11/09/10 70 Exhibit Number Exhibit Description Form Exhibit Filing Date Filed Herewith 10.04 Contract purchase agreement between SWK Holdings Corporation and PBS Capital Management, dated May 14, 2012. 10-Q 10.05 05/15/12 10.05 Voting Agreement, dated as of September 6, 2013, among Double Black Diamond, L.P., Double Black Diamond Offshore Ltd., Black Diamond Offshore, Ltd. and the Company. 8-K 10.3 09/09/13 10.06 Registration Rights Agreement, dated as of September 6, 2013, among Double Black Diamond, L.P., Double Black Diamond Offshore Ltd., Black Diamond Offshore, Ltd. and the Company. 8-K 10.4 09/09/13 10.07 Employment Agreement, dated January 28, 2019, between the Company and Winston L. Black III.* 8-K 10.1 01/30/19 10.08 Royalty Agreement, dated April 2, 2013, among SWK Funding LLC, Bess Royalty, L.P. and InSite Vision Incorporated.# S-1/A 10.13 04/01/14 10.09 Securities Purchase Agreement, dated August 18, 2014, between SWK Holdings Corporation and Carlson Capital, L.P. 8-K/A 10.1 08/21/14 10.10 Stockholders’ Agreement, dated August 18, 2014, among Double Black Diamond Offshore Ltd., Black Diamond Offshore Ltd. and SWK Holdings Corporation. 8-K 10.2 08/19/14 10.11 Royalty Agreement dated December 13, 2016, among SWK Funding LLC and Opiant Pharmaceuticals, Inc. 10-K 10.16 03/29/18 10.12 Loan and Security Agreement between SWK Holdings Corporation and SWK Funding LLC as Borrowers and Certain Financial Institutions as Lenders and State Bank and Trust Company as Agent dated June 29, 2018. 8-K 10.1 06/29/18 10.14 Credit Agreement dated May 20, 2016 among SBT Holdings, Inc., dba Keystone Dental, and SWK Funding LLC. 8-K 10.1 05/26/16 21.01 Subsidiaries. X 23.01 Consent of Independent Registered Public Accounting Firm - BPM LLP. X 71 Exhibit Number Exhibit Description Form Exhibit Filing Date Filed Herewith 24.01 Power of Attorney (included on signature page of this Annual Report on Form 10-K). X 31.01 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.02 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.01 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** X 32.02 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** X 101.INS+ XBRL Instance 101.SCH+ XBRL Taxonomy Extension Schema 101.CAL+ XBRL Taxonomy Extension Calculation 101.DEF+ XBRL Taxonomy Extension Definition 101.LAB+ XBRL Taxonomy Extension Labels 101.PRE+ XBRL Taxonomy Extension Presentation * Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(b) of this report. ** These certifications accompany SWK’s Annual Report on Form 10-K; they are not deemed “filed” with the Securities and Exchange Commission and are not to be incorporated by reference in any filing of SWK under the Securities Act of 1933, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings, except to the extent that SWK specifically incorporates it by reference. # Confidential treatment is requested for certain confidential portions of these exhibit pursuant to Rule 24b-2 under the Exchange Act. In accordance with Rule 24b-2, these confidential portions have been omitted from these exhibits and filed separately with the Securities and Exchange Commission + XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. 72