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Item 1. Business

2024-03-20 compared with 2023-03-31 · 114 added, 132 removed, 16 unchanged (94% of the section changed)

1 unchanged sentence

reincorporated in Delaware in September 1999.

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 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 (collectively, “life science”).

We allocate capital to each segment in order to generate income through the sales of life science products by third parties and related

earned income sources.

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

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 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

(collectively, “life science”).

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

science products by third parties and related earned income sources.

We are headquartered in Dallas, Texas.

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.

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.

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

with financial solutions that are tailored to the individual needs of our business partners.

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 typically 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.

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.

Finance Receivables Segment

Finance Receivables segment strategy is to be a leading healthcare capital

provider by offering customized financing solutions to a broad range of life science companies, institutions and inventors.

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.

partners are primarily engaged in selling products that directly or indirectly treat 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

commercialize medicines that treat disease states, whereas our life science tools partners sell a wide variety of research instrumentation

to help other companies conduct clinical research.

We have deploy 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 with financial solutions that

are tailored to the individual needs of our business partners.

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

are able to 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.

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.

fill an underserved niche in the sub-$50 million transaction size market.

Since many of our competitors that provide non-traditional debt and/or royalty financings typically have greater financial resources than

us, they prioritize transaction sizes above $50 million.

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

of March 14, 2024, and since inception of the strategy, we and our partners have executed transactions with 55 different parties

under our specialty finance strategy, funding an aggregate of approximately $725.2 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.

objective of our Finance Receivables segment is to maximize our portfolio total return in the context of a prudent level of risk,

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 primarily provide capital to companies following the commercialization

of a product, although in rare situations we consider pre-approval financings as well.

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

under our specialty finance strategy, funding an aggregate of approximately $779.4 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.

objective of our Finance Receivables segment is to maximize our portfolio total return in the context of a prudent level of risk, 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 typical credit protections.

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 primarily provide capital

to companies following the commercialization of a product, although in certain situations we consider pre-approval financings as well.

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

marketed by a third party, such as a royalty paid to an inventor on the sales of a medicine, or from the commercialization by 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 $25 million through our working capital.

circumstances where a transaction is greater than $25 million, we typically seek to syndicate amounts in excess of $25 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.

Our structured debt investments may include warrants or

other features, giving us the potential to realize enhanced returns.

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 $25 million through our working capital.

circumstances where a transaction is greater than $25 million, we typically seek to syndicate amounts in excess of $25 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.

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 inquiries from companies, institutions and inventors interested in

learning about our capital financing alternatives.

Our investment advisory clients generally do not originate investment opportunities

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 inquiries 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

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

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

drug delivery technologies, the Peptelligence® platform.

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.

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

to deploy our capital in attractive healthcare related companies.

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

Enteris is a clinical

development and manufacturing organization providing development services to pharmaceutical partners as well as innovative formulation

solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform.

We seek to generate income by providing

customers pharmaceutical development, formulation and manufacturing services as well as licensing its internally developed intellectual

With an effective date of January 1, 2024, we entered into an Option and Asset Purchase Agreement with AptarGroup, Inc.

on March 14, 2024 which granted Aptar an exclusive option to acquire certain of Enteris’ assets related to its business of providing

good manufacturing practice (GMP) manufacturing and clinical supply services through Phase 1 and 2 to third parties, subject to certain

Aptar must exercise the option by or before January 1, 2026.

our Finance Receivables segment, we face competition in the pursuit of

outside investors, investment management clients and opportunities to deploy our capital in attractive healthcare related companies.

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.

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

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

have greater financial resources than us, they prioritize transaction sizes above $50 million.

As such, we believe we face less competition

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.

our Pharmaceutical Development segment, we face competition in providing clinical development and manufacturing services.

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.

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

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

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

Human Capital Resources

of December 31, 2023, we had 23 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”).

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

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

we consider our employee relations to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.

The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.

We regularly evaluate our compensation programs and utilize industry benchmarking in an effort to ensure competitiveness compared to similar companies with which we compete for talent, as well as fair and equitable treatment across our workforce with respect to gender, race, and other personal characteristics.

We are an equal opportunity employer and we maintain policies that prohibit unlawful discrimination based on race, color, religion, gender, sexual orientation, gender identity/expression, national origin/ancestry, age, disability, marital and veteran status.

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”).

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” 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 Annual Report.

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 Annual 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