What changed in this filing

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Item 1. Business

2022-03-25 compared with 2021-03-31 · 160 added, 181 removed, 11 unchanged (97% of the section changed)

Holdings Corporation (the “Company”) was incorporated in July 1996 in California and reincorporated in Delaware in

September 1999.

In July 2012, we commenced a strategy of building a specialty finance and asset management business.

2019, we commenced a complementary strategy of building a pharmaceutical development, manufacturing and intellectual property

licensing business.

Our operations comprise two reportable segments:

“Finance Receivables”

and “Pharmaceutical

Development.”

We allocate capital to each segment in order to generate income through the sales of life science products

by third parties.

July 2012, we commenced a strategy of building a specialty finance and asset management business.

In August 2019, we commenced a complementary

strategy of building a pharmaceutical development, manufacturing and intellectual property licensing business.

Our operations comprise

two reportable segments:

“Finance Receivables” and “Pharmaceutical Development.” We allocate capital to each

segment in order to generate income through the sales of life science products by third parties.

We are headquartered in Dallas, Texas.

Finance Receivables

Finance Receivables segment strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing

solutions to a broad range of life science companies, institutions and inventors.

This segment is primarily focused on monetizing

cash flow streams derived from commercial-stage products and related intellectual property through royalty purchases and financings,

as well as through the creation of synthetic revenue interests in commercialized products.

We have been deploying our assets to

earn interest, fees, and other income pursuant to this strategy, and we continue to identify and review financing and similar

opportunities on an ongoing basis.

In addition, through our wholly-owned subsidiary, SWK Advisors LLC, we provide non-discretionary

investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance.

SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board.

We intend to fund transactions

through our own working capital and our revolving credit facility, as well as by building our asset management business by raising

additional third-party capital to be invested alongside our capital.

fill a niche that we believe is underserved in the sub-$50 million transaction size.

Receivables Segment

Finance Receivables segment strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions

to a broad range of life science companies, institutions and inventors.

This segment is primarily focused on monetizing cash flow streams

derived from commercial-stage products and related intellectual property through royalty purchases and financings, as well as through

the creation of synthetic revenue interests in commercialized products.

We have been deploying our assets to earn interest, fees, and

other income pursuant to this strategy, and we continue to identify and review financing and similar opportunities on an ongoing basis.

In addition, through our wholly-owned subsidiary, SWK Advisors LLC, we provide non-discretionary investment advisory services to institutional

clients in separately managed accounts to similarly invest in life science finance.

SWK Advisors LLC is registered as an investment advisor

with the Texas State Securities Board.

We intend to fund transactions through our own working capital and our revolving credit facility,

as well as by building our asset management business by raising additional third-party capital to be invested alongside our capital.

fill a niche that we believe is underserved in the sub-$50 million transaction size market.

Since many of our competitors that provide

longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than us, they

tend not to focus on transaction sizes below $50 million, as it is generally inefficient for them to do so.

In addition, we do

not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand

of the sub-$50 million market.

As such, we believe we face less competition from such investors in transactions that are less

than $50 million.

of December 31, 2020, and since inception of the strategy, we and our partners have executed transactions with 41 different parties

under our specialty finance strategy, funding an aggregate of approximately $584.0 million in various financial products across

the life science sector.

Our 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

evaluate and invest in a broad range of healthcare related companies and products with innovative intellectual property, including

the biotechnology, medical device, medical diagnostics and related tools, animal health and pharmaceutical industries (together

“life science”), and we tailor our financial solutions to the needs of our business partners.

Our business partners

are primarily engaged in selling products that directly or indirectly cure diseases and/or improve the wellness of people or animals,

or they receive royalties paid on the sales of such products.

For example, our biotechnology and pharmaceutical business partners

manufacture medication that directly treat disease states, whereas our life science tools partners sell a wide variety of research

instrumentation to help other companies conduct research into disease states.

objective of our Finance Receivables segment is to maximize our portfolio total return, and thus, increase our net income and

book value by generating income from three sources:

primarily owning or financing

through debt investments, royalties or revenue interests generated by the sales of life science products and related intellectual

receiving interest and

other income by advancing capital in the form of secured debt to companies in the life science sector;

to a lesser extent, realizing

capital appreciation from equity-related investments in the life sciences sector.

our portfolio we seek to achieve attractive risk-adjusted current yields and opportunities with the potential for equity-like

returns with protection that credit provides.

majority of our finance receivables transactions are structured similarly to factoring transactions whereby we provide capital

in exchange for an interest in an existing revenue stream.

We do not anticipate providing capital in situations prior to the commercialization

of a product.

The existing revenue stream can take several forms, but is most commonly either a royalty derived from the sales

of a life science product (1) from the marketing efforts of a third party, such as a royalty paid to an inventor on the sales

of a medicine, or (2) from the marketing efforts of a partner company, such as a medical device company that directly sells its

own products.

Our structured debt investments may include warrants or other features, giving us the potential to realize enhanced

returns on a portion of our portfolio.

Capital that we provide directly to our partners is generally used for growth and general

working capital purposes, as well as for acquisitions or recapitalizations in select cases.

We generally fund the full amount

of transactions up to $20 million through our working capital.

circumstances where a transaction is greater than $20 million, we seek to syndicate amounts in excess of $20 million to both other

investors and our investment advisory clients.

We do not expect to earn investment advisory income in transactions where we partner

with investors other than our investment advisory clients.

investment advisory agreements are currently non-discretionary, and each client determines individually if it wants to participate

in a transaction.

Though we have partnered with investment advisory clients in the past, we currently do not have any transactions

in which we have partnered with investment advisory clients.

We expect to continue to offer transaction opportunities to our investment

advisory clients, as appropriate for each client’s investment strategy.

When a client opts into a transaction, each client

receives its pro rata allocation of income produced by a transaction in which it participates, and the client pays us management

and incentive fees according to a written investment advisory agreement.

Fees paid by clients may differ depending upon the terms

negotiated with each client and are paid directly by the client upon receipt of an invoice from us.

We may seek to raise discretionary

capital from similar investors in the future.

source our investment opportunities through a combination of our senior management’s proprietary relationships within the

industry, outbound business development efforts and inbound inquiry from companies, institutions and inventors interested in learning

about our capital financing alternatives.

Our investment advisory clients generally do not originate investment opportunities

longer term, non-traditional debt and/or royalty-related financing options have much greater financial resources than us, they tend not

to focus on transaction sizes below $50 million, as it is generally inefficient for them to do so.

In addition, we do not believe that

a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market.

As such, we believe we face less competition from such investors in transactions that are less than $50 million.

of March 21, 2022, and since inception of the strategy, we and our partners have executed transactions with 43 different parties

under our specialty finance strategy, funding an aggregate of approximately $619.7 million in various financial products across the life

science sector.

Our 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.

evaluate and invest in a broad range of healthcare related companies and products with innovative intellectual property, including the

biotechnology, medical device, medical diagnostics and related tools, animal health and pharmaceutical industries (together “life

science”), and we tailor our financial solutions to the needs of our business partners.

Our business partners are primarily engaged

in selling products that directly or indirectly cure diseases and/or improve the wellness of people or animals, or they receive royalties

paid on the sales of such products.

For example, our biotechnology and pharmaceutical business partners manufacture medication that directly

treat disease states, whereas our life science tools partners sell a wide variety of research instrumentation to help other companies

conduct research into disease states.

objective of our Finance Receivables segment is to maximize our portfolio total return, and thus, increase our net income and book value

by generating income from three sources:

primarily owning or financing through debt investments, royalties or revenue interests generated by the sales of life science products and related intellectual property;

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

to a lesser extent, realizing capital appreciation from equity-related investments in the life sciences sector.

our portfolio we seek to achieve attractive risk-adjusted current yields and opportunities with the potential for equity-like returns

with protection that credit provides.

majority of our finance receivables transactions are structured similarly to factoring transactions whereby we provide capital in exchange

for an interest in an existing revenue stream.

We do not anticipate providing capital in situations prior to the commercialization of

The existing revenue stream can take several forms, but is most commonly either a royalty derived from the sales of a life

science product (1) from the marketing efforts of a third party, such as a royalty paid to an inventor on the sales of a medicine, or

(2) from the marketing efforts of a partner company, such as a medical device company that directly sells its own products.

Our structured

debt investments may include warrants or other features, giving us the potential to realize enhanced returns on a portion of our portfolio.

Capital that we provide directly to our partners is generally used for growth and general working capital purposes, as well as for acquisitions

or recapitalizations in select cases.

We generally fund the full amount of transactions up to $20 million through our working capital.

circumstances where a transaction is greater than $20 million, we seek to syndicate amounts in excess of $20 million to both other investors

and our investment advisory clients.

We do not expect to earn investment advisory income in transactions where we partner with investors

other than our investment advisory clients.

investment advisory agreements are currently non-discretionary, and each client determines individually if it wants to participate in

a transaction.

Though we have partnered with investment advisory clients in the past, we currently do not have any transactions in which

we have partnered with investment advisory clients.

We expect to continue to offer transaction opportunities to our investment advisory

clients, as appropriate for each client’s investment strategy.

When a client opts into a transaction, each client receives its

pro rata allocation of income produced by a transaction in which it participates, and the client pays us management and incentive fees

according to a written investment advisory agreement.

Fees paid by clients may differ depending upon the terms negotiated with each client

and are paid directly by the client upon receipt of an invoice from us.

We may seek to raise discretionary capital from similar investors

in the future.

source our investment opportunities through a combination of our senior management’s proprietary relationships within the industry,

outbound business development efforts and inbound inquiry from companies, institutions and inventors interested in learning about our

capital financing alternatives.

Our investment advisory clients generally do not originate investment opportunities for us.

Pharmaceutical

1 unchanged sentence

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

(“Enteris”).

Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral

drug delivery technologies, the Peptelligence®

Since its founding in 2013, Enteris has advanced multiple internal

and external programs leveraging Peptelligence®, 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.

Peptelligence®

utilizes a unique multifaceted approach to increase the solubility and absorption of peptides and small molecules, addressing

the complex challenges regarding solubility and permeability of therapeutics with low oral bioavailability.

Peptelligence®

is protected by an extensive patent estate, some of which extends until 2036.

Pharmaceutical Development segment strategy is to utilize the Peptelligence®

platform to create a wholly-owned portfolio of

milestone and royalty income by out-licensing our technology in two ways.

First, we intend to out-license our technology to pharmaceutical

companies to create novel and important oral therapeutic treatments for a wide variety of indications.

Second, we intend to out-license

to pharmaceutical companies our internally developed reformulations of approved, off-patent injectable therapeutic treatments

where Peptelligence®

enables oral delivery, resulting in meaningful improvements for patients and caregivers.

We also generate

income by providing customers pharmaceutical development services, formulation and manufacturing with the ultimate goal of generating

new out-license agreements of the technology.

Peptelligence®

is the subject of several active external development programs, including an oral formulation of Cara Therapeutics, Inc.'s

(“Cara”) KORSUVA™, a potent peripheral kappa opioid receptor agonist for pruritus, currently

in Phase II clinical development.

internal product pipeline consists of Ovarest®, an oral leuprolide tablet being evaluated for its potential to treat endometriosis,

and Tobrate™, an oral tobramycin tablet being evaluated for the treatment of uncomplicated urinary tract infections (uUTI).

Tax Attributes

Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug

delivery technologies, the Peptelligence® platform.

Since its founding in 2013, Enteris has advanced multiple internal and external

programs leveraging Peptelligence®, which enables the oral delivery of molecules that are typically injected, such as BCS Class II,

III, and IV peptides and small molecules, in an enteric-coated tablet formulation.

Peptelligence® utilizes a unique multifaceted

approach to increase the solubility and absorption of peptides and small molecules, addressing the complex challenges regarding solubility

and permeability of therapeutics with low oral bioavailability.

Peptelligence® is protected by an extensive patent estate, some of

which extends until 2036.

Pharmaceutical Development segment strategy is to utilize the technology platform to create a wholly-owned portfolio of milestone and

royalty income by out-licensing our technology in two ways.

First, we intend to continue to out-license our Peptelligence® technology

to pharmaceutical companies to create novel and important oral therapeutic treatments for a wide variety of indications.

Second, we intend

to out-license to pharmaceutical companies assets from our internal product pipeline of off-patent previously approved drug compounds

with which we seek to create novel formulations using our proprietary technology to develop treatments that have meaningful therapeutic

benefits for patients and caregivers.

We also seek to generate income by providing customers pharmaceutical development, formulation

and manufacturing services with the ultimate goal of generating new licensing and partnership agreements.

Peptelligence®

is the subject of several active external development programs, including an oral formulation of Cara Therapeutics, Inc.’s (“Cara”)

KORSUVA™, a potent peripheral kappa opioid receptor agonist for pruritus, currently progressing towards Phase III clinical development.

internal product pipeline consists of Ovarest®, an oral leuprolide tablet being evaluated for its potential to treat an endocrine

disease, and a novel product to treat a condition of the central nervous system.

view our ability to carry forward our net operating losses, or NOLs, as an important and substantial asset.

In order to preserve

stockholder value by protecting our ability to carry forward our NOLs, we entered into a rights agreement that provided for a

dividend distribution of one preferred share purchase right for each outstanding share of our common stock.

The purchase rights

may become exercisable after the acquisition or attempted acquisition of 4.9 percent or more of our outstanding common stock without

the prior approval of our board of directors.

Our current rights agreement (the “Rights Agreement”) was entered into

as of April 8, 2016 and has been extended to expire on April 8, 2022.

In order to preserve stockholder

value by protecting our ability to carry forward our NOLs, we entered into a rights agreement that provided for a dividend distribution

of one preferred share purchase right for each outstanding share of our common stock.

The purchase rights may become exercisable after

the acquisition or attempted acquisition of 4.9 percent or more of our outstanding common stock without the prior approval of our board

of directors.

Our current rights agreement (the “Rights Agreement”) was entered into as of April 8, 2016 and has been extended

to expire on April 8, 2022.

Under the Rights Agreement, Carlson Capital, L.P.

affiliates (collectively, “Carlson”), are designated as Exempt Persons (as defined in the Rights Agreement) unless

they own more than 76 percent of the outstanding shares of our common stock in the aggregate.

We have also designated other shareholders

as Exempt Persons because the Board determined that such ownership would not jeopardize or endanger the availability to us of

the NOLs, although potential stockholders should not assume a similar determination would be made with respect to future acquisitions

of beneficial ownership of our common stock.

this time, under current law, we do not anticipate that our current business strategies will generate sufficient income to permit

us to utilize all of our NOLs prior to their respective expiration dates.

As such, it is possible that we might pursue additional

strategies that we believe might result in our ability to utilize more of our NOLs.

and its affiliates (collectively, “Carlson”),

are designated as Exempt Persons (as defined in the Rights Agreement) unless they own more than 76 percent of the outstanding shares

of our common stock in the aggregate.

We have also designated other shareholders as Exempt Persons because the Board determined that

such ownership would not jeopardize or endanger the availability to us of the NOLs, although potential stockholders should not assume

a similar determination would be made with respect to future acquisitions of beneficial ownership of our common stock.

this time, under current law, we do not anticipate that our current business strategies will generate sufficient income to permit us

to utilize all of our NOLs prior to their respective expiration dates.

As such, it is possible that we might pursue additional strategies

that we believe might result in our ability to utilize more of our NOLs.

our Finance Receivables segment, we face competition in the pursuit of outside investors, investment management clients and opportunities

1 unchanged sentence

Our primary competitors provide financing to prospective companies

and include non-bank financial institutions, federal or state chartered banks, venture debt funds, venture capital funds, private

equity funds, pharmaceutical royalty and other investment funds, business development companies and investment banks.

these entities have greater financial and managerial resources than we have.

Some of these competitors may also have a lower cost

of capital and access to funding sources that are not available to us, which may create a competitive disadvantage for us.

a result, we tend not to compete on price, but instead focus on our industry experience, flexible financing options and speed

to evaluate and complete a transaction.

In addition, since many of our competitors that provide non-traditional debt and/or longer

term, royalty-related financing options have much greater financial resources than us, they tend not to focus on transaction sizes

below $50 million as it is generally inefficient for them to do so.

As such, we believe we face less competition from such investors

in transactions that are less than $50 million.

our Pharmaceutical Development segment, we face competition in introducing products that improve efficacy, safety, patients’

and clinicians’

ease of use and cost-effectiveness.

The success of new product offerings will depend on many factors, including

our ability to properly anticipate and satisfy customer needs, obtain regulatory approvals on a timely basis, develop and manufacture

products in an economic and timely manner, obtain or maintain advantageous positions with respect to intellectual property, and

differentiate products from competitors.

A failure by us to successfully commercialize existing or planned products could have

a material adverse effect on our business, financial condition and results of operations.

additional information concerning the competitive risks we face, see Item 1A., Risk Factors.

of December 31, 2020, we had 34 full-time employees.

None of our employees are represented by a labor union, and we

consider our employee relations to be good.

Additional Information

file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of

1934, as amended (the “Exchange Act’’), with the Securities and Exchange Commission (“SEC”).

SEC filings are available to the public from the SEC’s internet site at http://www.sec.gov.

and include non-bank financial institutions, federal or state chartered banks, venture debt funds, venture capital funds, private equity

funds, pharmaceutical royalty and other investment funds, business development companies and investment banks.

Many of these entities

have greater financial and managerial resources than we have.

Some of these competitors may also have a lower cost of capital and access

to funding sources that are not available to us, which may create a competitive disadvantage for us.

As a result, we tend not to compete

on price, but instead focus on our industry experience, flexible financing options and speed to evaluate and complete a transaction.

In addition, since many of our competitors that provide non-traditional debt and/or longer term, royalty-related financing options have

much greater financial resources than us, they tend not to focus on transaction sizes below $50 million as it is generally inefficient

for them to do so.

As such, we believe we face less competition from such investors in transactions that are less than $50 million.

our Pharmaceutical Development segment, we face competition in introducing products that improve efficacy, safety, patients’ and

clinicians’ ease of use and cost-effectiveness.

The success of new product offerings will depend on many factors, including our

ability to properly anticipate and satisfy customer needs, obtain regulatory approvals on a timely basis, develop and manufacture products

in an economic and timely manner, obtain or maintain advantageous positions with respect to intellectual property, and differentiate

products from competitors.

A failure by us to successfully commercialize existing or planned products could have a material adverse effect

on our business, financial condition and results of operations.

additional information concerning the competitive risks we face, see Item 1A., Risk

additional information concerning the effect of existing or probable government regulation on our business, see Item 1A., Risk

of December 31, 2021, we had 35 employees, all of whom are full-time.

None of our employees are represented by a labor union,

and we consider our employee relations to be good.

file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as

amended (the “Exchange Act’’), with the Securities and Exchange Commission (“SEC”).

Our SEC filings are

available to the public from the SEC’s internet site at http://www.sec.gov.

internet site is http://www.swkhold.com.

We will make available free of charge through our website in the “Investor Relations

- SEC Filings”

section our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy

statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to those reports filed

or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or

furnish it to, the SEC.

Also, posted on our website in the “Investor Relations - Corporate Governance”

charters for our Audit Committee, Compensation Committee and Governance Committee as well as our Code of Ethics and Insider Trading

Policy governing our directors, officers and employees.

Information on or accessible through our website is not a part of, and

is not incorporated into, this report.

We will make available free of charge through our website in the “Investor Relations -

SEC Filings” section our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements

and Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to those reports filed or furnished pursuant

to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

posted on our website in the “Investor Relations - Corporate Governance” section are charters for our Audit Committee, Compensation

Committee and Governance and Nominating Committee as well as our Code of Ethics and Insider Trading Policy governing our directors, officers

and employees.

Information on or accessible through our website is not a part of, and is not incorporated into, this report.

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 1. Business