SWK Holdings Corp 10-Q

SWKH 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-39184 SWK Holdings Corporation (Exact Name of Registrant as Specified in its Charter) Delaware 77-0435679 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 5956 Sherry Lane , Suite 650 Dallas , TX 75225 (Address of Principal Executive Offices) (Zip Code) (Registrant’s Telephone Number, Including Area Code): (972) 687-7250 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, par value $0.001 per share SWKH The Nasdaq Stock Market LLC 9.00% Senior Notes due 2027 SWKHL The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ NO Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ NO Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO As of August 8, 2024, there were 12,361,850 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding. SWK Holdings Corporation Form 10-Q Quarter Ended June 30, 2024 Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements 1 Unaudited Condensed Consolidated Balance Sheets—June 30, 2024 and December 31, 2023 1 Unaudited Condensed Consolidated Statements of Income—Three and Six Months Ended June 30, 2024 and 2023 2 Unaudited Condensed Consolidated Statements of Stockholders’ Equity—Three and Six Months Ended June 30, 2024 and 2023 3 Unaudited Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2024 and 2023 4 Notes to the Unaudited Condensed Consolidated Financial Statements 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 3. Quantitative and Qualitative Disclosures About Market Risk 38 Item 4 Controls and Procedures 38 PART II. OTHER INFORMATION Item 1. Legal Proceedings 39 Item 1A. Risk Factors 39 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 Item 3. Defaults Upon Senior Securities 39 Item 4. Mine Safety Disclosures 39 Item 5. Other Information 39 Item 6. Exhibits 40 Signatures 41 FORWARD-LOOKING STATEMENTS In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions, and include, but are not limited to, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Words such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “should,” “will” and variations of these words and similar expressions identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially (both favorably and unfavorably) from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Item 1A, “Risk Factors,” and elsewhere in this report. Forward-looking statements that were believed to be true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SWK HOLDINGS CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value and share data) June 30, 2024 December 31, 2023 Assets: Current assets: Cash and cash equivalents $ 5,549 $ 4,503 Restricted cash — 733 Interest, accounts receivable and other receivables, net 7,384 4,729 Other current assets 1,859 1,904 Total current assets 14,792 11,869 Finance receivables, net of allowance for credit losses of $ 13,083 and $ 13,901 as of June 30, 2024 and December 31, 2023, respectively 265,470 274,504 Collateral on foreign currency forward contract 2,750 2,750 Marketable investments 731 48 Deferred tax assets, net 27,052 28,290 Warrant assets 835 1,759 Intangible assets, net 232 6,487 Property and equipment, net 5,008 5,438 Other non-current assets 4,504 3,109 Total assets $ 321,374 $ 334,254 Liabilities and Stockholders’ Equity: Current liabilities: Accounts payable and accrued liabilities $ 3,310 $ 3,935 Deferred income 2,216 9 Total current liabilities 5,526 3,944 Contingent consideration payable — 4,900 Unsecured senior notes, net 31,078 30,781 Revolving credit facility — 12,350 Other non-current liabilities 1,566 1,964 Total liabilities 38,170 53,939 Commitments and contingencies (Note 6) Stockholders’ equity: Preferred stock, $ 0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.001 par value; 250,000,000 shares authorized; 12,447,195 and 12,497,770 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 12 12 Additional paid-in capital 4,423,472 4,425,104 Accumulated deficit ( 4,140,280 ) ( 4,144,801 ) Total stockholders’ equity 283,204 280,315 Total liabilities and stockholders’ equity $ 321,374 $ 334,254 See accompanying notes to the unaudited condensed consolidated financial statements. 1 SWK HOLDINGS CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues: Finance receivable interest income, including fees $ 10,680 $ 9,278 $ 21,399 $ 18,538 Pharmaceutical development 804 183 1,083 301 Other 57 36 103 69 Total revenues 11,541 9,497 22,585 18,908 Costs and expenses: Provision (benefit) for credit losses 4,074 ( 682 ) 9,397 ( 682 ) Loss on impairment of intangibles assets 5,771 — 5,771 — Interest expense 1,119 363 2,375 545 Pharmaceutical manufacturing, research and development expense 520 1,509 1,050 2,228 Change in fair value of acquisition-related contingent consideration ( 4,900 ) — ( 4,900 ) — Depreciation and amortization expense 421 637 935 1,285 General and administrative expense 2,923 2,997 5,607 5,537 Income from operations 1,613 4,673 2,350 9,995 Other income (expense), net Unrealized net gain (loss) on warrants 226 399 131 ( 583 ) Net realized gain on sale of marketable investments 656 — 513 — Realized gain (loss) on sale of assets 3 — ( 228 ) — Gain on revaluation of finance receivable 2,495 — 2,495 — Realized and unrealized foreign currency transaction gains 437 316 524 502 Income before income tax expense 5,430 5,388 5,785 9,914 Income tax expense 1,035 1,454 1,264 1,345 Net income $ 4,395 $ 3,934 $ 4,521 $ 8,569 Net income per share Basic $ 0.35 $ 0.31 $ 0.36 $ 0.67 Diluted $ 0.35 $ 0.31 $ 0.36 $ 0.67 Weighted average shares outstanding Basic 12,457 12,741 12,466 12,787 Diluted 12,528 12,785 12,534 12,830 See accompanying notes to the unaudited condensed consolidated financial statements. 2 SWK HOLDINGS CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share data) Six Months Ended June 30, 2024 Total Common Stock Additional Paid- Accumulated Stockholders’ Shares Amount In Capital Deficit Equity Balances at December 31, 2023 12,497,770 $ 12 $ 4,425,104 $ ( 4,144,801 ) $ 280,315 Stock-based compensation — — 111 — 111 Forfeiture of unvested restricted stock ( 6,446 ) — — — — Issuance of common stock upon vesting of restricted stock 48,918 — — — — Repurchases of common stock in open market ( 58,298 ) — ( 999 ) — ( 999 ) Net income — — — 126 126 Balances at March 31, 2024 12,481,944 12 4,424,216 ( 4,144,675 ) 279,553 Stock-based compensation — — 249 — 249 Issuance of common stock upon vesting of restricted stock 17,323 — — — — Repurchases of common stock in open market ( 54,667 ) — ( 950 ) — ( 950 ) Net settlement for employee taxes on stock options — — ( 43 ) — ( 43 ) Stock options exercised, net 2,595 — — — — Net income — — — 4,395 4,395 Balances at June 30, 2024 12,447,195 $ 12 $ 4,423,472 $ ( 4,140,280 ) $ 283,204 Six Months Ended June 30, 2023 Total Common Stock Additional Paid- Accumulated Stockholders’ Shares Amount In Capital Deficit Equity Balances at December 31, 2022 12,843,157 $ 12 $ 4,430,922 $ ( 4,151,005 ) $ 279,929 Stock-based compensation — — 35 — 35 Effect of adoption of ASU 2016-13 — — — ( 9,683 ) ( 9,683 ) Issuance of common stock upon vesting of restricted stock 16,008 — — — — Repurchases of common stock in open market ( 28,766 ) — ( 531 ) — ( 531 ) Net income — — — 4,635 4,635 Balances at March 31, 2023 12,830,399 12 4,430,426 ( 4,156,053 ) 274,385 Stock-based compensation — — 164 — 164 Issuance of common stock upon vesting of restricted stock 8,612 — — — — Repurchase of common stock in open market ( 272,492 ) — ( 4,599 ) — ( 4,599 ) Net income — — — 3,934 3,934 Balances at June 30, 2023 12,566,519 $ 12 $ 4,425,991 $ ( 4,152,119 ) $ 273,884 See accompanying notes to the unaudited condensed consolidated financial statements. 3 SWK HOLDINGS CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net income $ 4,521 $ 8,569 Adjustments to reconcile net income to net cash provided by operating activities: Provision (benefit) for credit losses 9,397 ( 682 ) Loss on impairment of intangible assets 5,771 — Right-of-use amortization and cease use costs 261 156 Amortization of debt issuance costs 491 168 Deferred income taxes, net 1,239 1,316 Net change in fair value of warrant assets ( 131 ) 583 Net realized gain on exercise of warrants ( 513 ) — Realized loss from sale of assets 228 — Change in fair value of acquisition-related contingent consideration ( 4,900 ) — Gain on revaluation of finance receivable ( 2,495 ) — Foreign currency transaction gain ( 327 ) ( 516 ) Loan discount amortization and fee accretion ( 2,592 ) ( 2,297 ) Interest paid-in-kind ( 904 ) ( 957 ) Stock-based compensation 360 199 Depreciation and amortization expense 935 1,285 Changes in operating assets and liabilities: Interest, accounts receivable and other receivables ( 2,655 ) ( 1,287 ) Other assets ( 150 ) ( 792 ) Accounts payable, accrued expenses, and other non-current liabilities ( 900 ) ( 354 ) Deferred income 2,207 ( 3 ) Net cash provided by operating activities 9,843 5,388 Cash flows from investing activities: Sale of finance receivables — 13,942 Sale of marketable investments 574 — Investment in finance receivables ( 7,446 ) ( 13,101 ) Repayment of finance receivables 11,693 3,041 Corporate debt securities principal payments 13 17 Purchases of property and equipment ( 21 ) ( 191 ) Net cash provided by investing activities 4,813 3,708 Cash flows from financing activities: Net settlement for employee taxes on stock options ( 43 ) — Net payments on credit facility ( 12,350 ) ( 2,445 ) Payments for financing costs — ( 872 ) Repurchases of common stock, including fees and expenses ( 1,950 ) ( 5,130 ) Net cash used in financing activities ( 14,343 ) ( 8,447 ) Net increase in cash, cash equivalents, and restricted cash 313 649 Cash, cash equivalents, and restricted cash at beginning of period 5,236 6,156 Cash, cash equivalents, and restricted cash at end of period $ 5,549 $ 6,805 Supplemental non-cash investing and financing activities: Derecognition of right-of-use assets and operating lease liabilities upon termination of lease $ 82 $ — See accompanying notes to the unaudited condensed consolidated financial statements. 4 SWK HOLDINGS CORPORATION NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. SWK Holdings Corporation and Summary of Significant Accounting Policies Nature of Operations SWK Holdings Corporation (the “Company,” “we,” or “us”) 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. 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 sciences”). 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. The Company is headquartered in Dallas, Texas, and as of June 30, 2024, the Company had 22 full-time employees. The Company has net operating loss carryforwards (“NOLs”) and believes that the ability to utilize these NOLs is an important and substantial asset. As of August 8, 2024, the Company and its partners have executed transactions with 56 different parties under its specialty finance strategy, funding an aggregate of $779.8 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. During 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). 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 property. With an effective date of April 21, 2023 we entered into a collaboration agreement with a strategic partner under which we would be the exclusive provider of certain contract development and manufacturing organization (“CDMO”) services to its customers. Fee revenue generated as a result of this agreement is presented as pharmaceutical development revenue on the unaudited condensed consolidated statement of income and is accounted for in accordance with our revenue recognition policy as described under Revenue Recognition below. With an effective date of January 1, 2024, we entered into an Option and Asset Purchase Agreement with the same strategic partner on March 14, 2024, which granted the partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing CDMO services to third parties, subject to certain exclusions. The partner must exercise the option by or before January 1, 2026. Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. The Company consolidates a variable interest entity (“VIE”) when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts and transactions. 5 The Company owns interests in various partnerships and limited liability companies, or LLCs. The Company consolidates its investments in these partnerships or LLCs where the Company, as the general partner or managing member, exercises effective control. Even though the Company’s ownership may be less than 50 percent, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company. The Company has reviewed each of the underlying agreements to determine if it has effective control. If circumstances change and it is determined this control does not exist, any such investment would be recorded using the equity method of accounting. Although this would change individual line items within the Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable to the Company. Unaudited Interim Financial Information The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending December 31, 2024. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 20, 2024. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition; stock-based compensation; valuation of interest and accounts receivable; allowance for credit losses; valuation or impairment of long-lived assets; property and equipment; intangible assets; valuation of warrants and other investments; contingent consideration; income taxes; and contingencies and litigation, among others. Some of these judgments can be subjective and complex, and consequently, actual results may differ from these estimates. The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable. For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable. The Company regularly evaluates its estimates and assumptions using historical experience and other factors, including the economic environment. As future events and their effects cannot be determined with precision, the Company’s estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause changes to those estimates and assumptions. Market conditions, such as illiquid credit markets, 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. Segment Information The 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 (“Finance Receivable segment”), and its business offering CDMO services to pharmaceutical partners as well as innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence ® platform (“Pharmaceutical Development segment”). 6 Revenue Recognition The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. Deferred revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue. The Company classifies as current the portion of deferred revenue that is expected to be recognized within one year from the balance sheet date and is included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets. Correction of an Error in Previously Issued Unaudited Condensed Financial Statements During the quarter ended June 30, 2024, the Company identified an error related to the recognition of a holdback liability for a royalty which was incorrectly recorded into revenue. This error affected the consolidated financial statements for the quarter ended March 31, 2024 and was determined to be immaterial to the prior period’s unaudited condensed consolidated financial statements and did not warrant restatement and reissuance of the previously issued unaudited condensed consolidated financial statements. However, the Company recorded a correction to the prior quarter ended March 31, 2024 and the financial statements will be revised the next time they are presented as comparative information in future filings. The Company based their qualitative and quantitative analysis on SEC Staff’s Accounting Bulletins Topic 1.M, “Materiality and Topic 1.N, Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial Statements.” The following table details the revisions to the line items of our previously issued unaudited condensed financial statements to reflect the correction of the error (in thousands): Schedule of Revisions to the line items of our previously issued financial statements Three Months Ended March 31, 2024 As Reported Adjustment As Revised Revenues: Finance receivable interest income, including fees $ 11,454 $ ( 735 ) $ 10,719 Pharmaceutical development 279 — 279 Other 46 — 46 Total revenues 11,779 ( 735 ) 11,044 Net income $ 861 $ ( 735 ) $ 126 Basic net income per share $ 0.07 $ ( 0.06 ) $ 0.01 Diluted net income per share $ 0.07 $ ( 0.06 ) $ 0.01 Assets: Finance receivables, net of allowance for credit 261,285 ( 13 ) 261,272 Total assets $ 322,350 $ ( 13 ) $ 322,337 Stockholders’ equity: Accumulated deficit ( 4,143,940 ) ( 735 ) ( 4,144,675 ) Total stockholders’ equity $ 280,288 $ ( 735 ) $ 279,553 Research 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, 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 unaudited condensed consolidated statements of income. 7 Recent Accounting Pronouncements In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard 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. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include: (i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity. ASU 2020-04 was effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024. The Company has identified existing loans that reference London Inter-Bank Offered Rate (“LIBOR”) and is in the process of evaluating alternatives in each situation. The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04 and does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Public entities are required to adopt the changes retrospectively, recasting each prior-period disclosure for which a comparative income statement is presented in the period of adoption. The Company is currently evaluating the impact of this ASU on the Company’s consolidated financial statements and disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The standard is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures. 8 Note 2. Net Income per Share Basic net income per share is computed using the weighted-average number of outstanding shares of common stock. Diluted net income per share is computed using the weighted-average number of outstanding shares of common stock, and when dilutive, shares of common stock issuable upon exercise of options and warrants deemed outstanding using the treasury stock method. The following table shows the computation of basic and diluted net income per share for the following periods (in thousands, except per share amounts): Schedule of Basic and Diluted Earning per Share Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Numerator: Net income $ 4,395 $ 3,934 $ 4,521 $ 8,569 Denominator: Weighted-average shares outstanding 12,457 12,741 12,466 12,787 Effect of dilutive securities 71 44 68 43 Weighted-average diluted shares 12,528 12,785 12,534 12,830 Basic net income per share $ 0.35 $ 0.31 $ 0.36 $ 0.67 Diluted net income per share $ 0.35 $ 0.31 $ 0.36 $ 0.67 For the three months ended June 30, 2024 and 2023, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 159,000 and 118,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive. For the six months ended June 30, 2024 and 2023, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 161,000 and 119,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive. 9 Note 3. Finance Receivables Finance receivables are reported at their determined principal balances net of any unearned income, cumulative write offs charged against the allowance for credit losses, and unamortized deferred fees and costs. Unearned income and deferred fees and costs are amortized to interest income based on all cash flows expected using the effective interest method. The carrying values of finance receivables were as follows (in thousands): Schedule of carrying value of finance receivables June 30, 2024 December 31, 2023 Term loans $ 213,683 $ 221,145 Royalty purchases 64,870 67,260 Total before allowance for credit losses 278,553 288,405 Allowance for credit losses ( 13,083 ) ( 13,901 ) Total carrying value $ 265,470 $ 274,504 Allowance for Credit Losses The allowance for credit loss (“ACL”) is management’s estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Given the current level of economic uncertainty, the complexity of the ACL estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially, in future periods. Changes in the ACL may result from changes in current economic conditions, our economic forecast, and circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors. Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For finance receivables that do not share similar risk characteristics with other finance receivables, expected credit losses are estimated on an individual basis. Expected credit losses are estimated over the contractual terms of the finance receivables, adjusted for expected prepayments and unfunded commitments, generally excluding extensions and modifications. The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Company adopted ASU 2016-13, as amended, on January 1, 2023 using the modified retrospective approach method. The implementation of ASU 2016-13 also impacted the Company’s ACL on unfunded loan commitments, as the ACL now represents expected credit losses over the contractual life of commitments not identified as unconditionally cancellable by the Company. The reserve for unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents management’s estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. On January 1, 2023, the Company recorded an adjustment for unfunded commitments of $0.4 million for the adoption of ASU 2016-13. As of June 30, 2024 the Company has a $0.1 million liability for credit losses on off-balance sheet exposures related to unfunded commitments, with this liability included in accounts payable and accrued liabilities on the condensed consolidated balance sheets. As of December 31, 2023, the Company recorded a $0.2 million liability for credit losses on off-balance-sheet credit exposures related to unfunded commitments, with this liability included in accounts payable and accrued liabilities on the condensed consolidated balance sheets. Please refer to Note 6 for further information on the Company’s unfunded commitments. 10 Allowance for Credit Losses - methodology update for the three months ended June 30, 2024 During the three months ended June 30, 2024, the Company revised its methodology for calculating the allowance for credit losses to be more directly tied to the individual risk ratings, as determined by management, of investments. This resulted in a re-allocation of the existing allowance and did not have a material impact on the total allowance for credit losses amount. Previously, the Company’s quarterly assessment of the allowance included two portfolio pools: Term Loans and Royalties. After the change in methodology effective for the quarter ended June 30, 2024, these pools are further broken down into individual risk ratings applied to each investment to allow for a more precise method for calculating the allowance for credit losses. The following table details the changes in the allowance for credit losses by Term Loans and Royalties (in thousands): Schedule of Allowance for Credit Losses Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Term Loans Royalties Total Term Loans Royalties Total Allowance at beginning of period $ 9,731 $ 4,170 $ 13,901 $ — $ 11,846 $ 11,846 Effect of adoption of ASU 2016-13 — — — 8,900 2,886 11,786 Provision (benefit) for credit losses 5,055 127 5,182 ( 572 ) ( 110 ) ( 682 ) Write offs ( 6,000 ) — ( 6,000 ) — ( 11,846 ) (1) ( 11,846 ) Allowance at end of period $ 8,786 $ 4,297 $ 13,083 $ 8,328 $ 2,776 $ 11,104 (1) Reversal of finance receivable-specific ACL recognized in prior periods. No impact to unaudited condensed consolidated statement of income for the six months ended June 30, 2023. Non-Accrual Finance Receivables The Company originates finance receivables to companies primarily in the life sciences sector. This concentration of credit exposes the Company to a higher degree of risk associated with this sector. On a quarterly basis, the Company evaluates the carrying value of its finance receivables. Recognition of income is suspended, and the finance receivable is placed on non-accrual status when management determines that collection of future income is not probable. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. The Company would generally place term loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the term loan is both well-secured and in the process of collection. When placed on nonaccrual, the Company would reverse any accrued unpaid interest receivable against interest income and amortization of any net deferred fees is suspended. Generally, the Company would return a term loan to accrual status when all delinquent interest and principal become current under the terms of the credit agreement. 11 The following table presents nonaccrual and performing finance receivables by portfolio pool, net of allowance for credit losses (in thousands) as of: Schedule of Allowance for Credit Losses June 30, 2024 December 31, 2023 Nonaccrual Performing Total Nonaccrual Performing Total Term loans $ 6,010 $ 207,673 $ 213,683 $ 9,128 $ 212,017 $ 221,145 Royalty purchases 16,434 48,436 64,870 16,854 50,406 67,260 Total before allowance for credit losses 22,444 256,109 278,553 25,982 262,423 288,405 Allowance for credit losses ( 3,368 ) ( 9,715 ) ( 13,083 ) ( 1,447 ) ( 12,454 ) ( 13,901 ) Total carrying value $ 19,076 $ 246,394 $ 265,470 $ 24,535 $ 249,969 $ 274,504 As of June 30, 2024, the Company had five finance receivables in nonaccrual status: (1) the term loan to Trio Healthcare Ltd. (“Trio”), with a carrying value of $ 1.5 million ; (2) the term loan to Exeevo, Inc (“Exeevo”), with a carrying value of $ 4.5 million ; (3) the Flowonix Medical, Inc. (“Flowonix”) royalty, with a carrying value of $ 10.4 million (see Loan Modifications Made to Borrowers Experiencing Financial Difficulty below for further details); (4) the Best ABT, Inc. (“Best”) royalty, with a carrying value of $ 2.4 million ; and (5) the Ideal Implant, Inc. (“Ideal”) royalty, with a carrying value of $ 3.6 million . As of June 30, 2024 Trio was considered impaired by $8.1 million and Exeevo was impaired by $2.2 million with the impairments recognized as a reduction in the allowance for credit losses on the unaudited condensed consolidated statements of income for the six months ended June 30, 2024. The Company collected $0.7 million and $0.2 million on its nonaccrual finance receivables for the six months ended June 30, 2024 and 2023 , respectively . Loan Modifications Made to Borrowers Experiencing Financial Difficulty Effective January 1, 2023, the Company adopted the provisions of ASU 2022-02 “Troubled Debt Restructuring (“TDRs”) and Vintage Disclosures (Topic 326)”, which eliminated the accounting for TDRs while expanding loan modification and vintage disclosure requirements. The update specifically required additional disclosures on loan modifications to borrowers experiencing financial difficulties that involved an interest rate reduction, other-than-insignificant payment delay, a term extension, principal forgiveness or a combination thereof. The Company evaluates the carrying value of each finance receivable for impairment. A term loan is considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect the amounts due according to the loan contract, including scheduled interest payments. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. The Company would generally place term loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the term loan is both well-secured and in the process of collection. When placed on nonaccrual, the Company would reverse any accrued unpaid interest receivable against interest income and amortization of any net deferred fees is suspended. Generally, the Company would return a term loan to accrual status when all delinquent interest and principal become current under the terms of the credit agreement and collectability of remaining principal and interest is no longer doubtful. In certain circumstances, the Company may place a finance receivable on nonaccrual status but conclude it is not impaired. The Company may retain independent third-party valuations on such nonaccrual positions to support impairment decisions. On an ongoing basis, the Company monitors the performance of modified loans to their restructured terms. 12 Revaluation of Finance Receivable During the three months ended June 30, 2024, the Company revalued its royalty for Iluvien as a result of entering into an amendment during the quarter. Pursuant to the amendment, the forecast of cash flows to be received over the life of the financial royalty was revised resulting in a revaluation gain of $2.5 million and corresponding mark-up to the carrying value which is included in the “Gain on revaluation of finance receivable” caption on our unaudited condensed consolidated statements of income for the three and six months ended June 30, 2024. Credit Quality of Finance Receivables The Company evaluates all finance receivables on a quarterly basis and assigns a risk rating based upon management’s assessment of the borrower’s ability and likelihood of repayment. The assessment is subjective and based on multiple factors, including but not limited to, financial strength of borrowers and operating results of the underlying business. The credit risk analysis and rating assignment is performed quarterly in conjunction with the Company’s assessment of its allowance for credit losses. The Company uses the following definitions for its risk ratings for Term Loans: 1: Borrower performing well below Company expectations, and the borrower’s ability to raise sufficient capital to operate its business or repay debt is highly in question. Finance receivables rated a 1 are on non-accrual and are at an elevated risk for principal impairment. 2: Borrower performing below plan, and the loan-to-value is generally worse than at the time of underwriting. Borrower has limited access to additional capital to operate its business. Finance receivables rated a 2 are generally on non-accrual, and while no loss of impairment is anticipated, there is potential for future principal impairment. 3: Borrower performing in-line-to-modestly below Company expectations, and loan-to-value is similar to slightly worse than at the time of underwriting. Borrower has demonstrated access to capital markets. 4: Borrower performing in-line-to-modestly above Company expectations and loan-to-value similar or modestly better than underwriting case. Borrower has demonstrated access to capital markets. 5: Borrower performing in excess of Company expectations, and loan-to-value is better than at time of origination. The Company uses an internal credit rating system which rates each Royalty on a color scale of Green to Red, with Green typically indicative of a Royalty that is exceeding base underwritten case, Yellow indicates a Royalty performing in-line with underwritten plan, and Red reflective of underperformance relative to plan. 13 The following table summarizes the carrying value of Finance Receivables by origination year, grouped by risk rating as of June 30, 2024 and December 31, 2023 (in thousands): Schedule of Financing Receivable by origination year June 30, 2024 2023 2022 2021 2020 2019 Prior Total Term Loans 5 $ — $ — $ 13,835 $ — $ 4,991 $ — $ 18,826 4 31,108 57,988 — — — 9,328 98,424 3 24,604 — 10,718 — 29,154 — 64,476 2 — — 12,601 — — 13,346 25,947 1 — 4,538 1,472 — — — 6,010 Subtotal - Term Loans $ 55,712 $ 62,526 $ 38,626 $ — $ 34,145 $ 22,674 $ 213,683 Royalties Green $ 12,110 $ 11,985 $ — $ 16,595 $ — $ 1,297 $ 41,987 Yellow — — — 3,087 — 3,362 6,449 Red — — 3,564 10,433 — 2,437 16,434 Subtotal - Royalties $ 12,110 $ 11,985 $ 3,564 $ 30,115 $ — $ 7,096 $ 64,870 Total Finance Receivables, gross $ 67,822 $ 74,511 $ 42,190 $ 30,115 $ 34,145 $ 29,770 $ 278,553 December 31, 2023 2023 2022 2021 2020 2019 Prior Total Term Loans 5 $ — $ — $ 13,734 $ — $ 5,696 $ — $ 19,430 4 25,799 32,211 — — — 10,485 68,495 3 24,341 24,285 10,227 — 31,807 — 90,660 2 — 6,924 12,493 — — 14,015 33,432 1 — — 9,128 — — — 9,128 Subtotal - Term Loans $ 50,140 $ 63,420 $ 45,582 $ — $ 37,503 $ 24,500 $ 221,145 Royalties Green $ 27,785 $ — $ — $ 14,650 $ — $ 1,340 $ 43,775 Yellow — — — 3,212 — 3,419 6,631 Red — — 3,834 10,433 — 2,587 16,854 Subtotal - Royalties $ 27,785 $ — $ 3,834 $ 28,295 $ — $ 7,346 $ 67,260 Total Finance Receivables, gross $ 77,925 $ 63,420 $ 49,416 $ 28,295 $ 37,503 $ 31,846 $ 288,405 14 Note 4. Intangible Assets As of June 30, 2024 and December 31, 2023, the gross book value, accumulated amortization, net book value and estimated useful life of acquired intangible assets were as follows (in thousands, except estimated useful life data): Schedule of Intangible Assets June 30, 2024 Gross Book Value Accumulated Amortization Net Book Value Estimated Useful Life Trade names and trademarks $ 210 $ 102 $ 108 10 Customer relationships 240 116 124 10 Total intangible assets $ 450 $ 218 $ 232 December 31, 2023 Gross Book Value Accumulated Amortization Net Book Value Estimated Useful Life Licensing Agreement (1) $ 29,400 $ 23,167 $ 6,233 10 Trade names and trademarks 210 92 118 10 Customer relationships 240 104 136 10 Total intangible assets $ 29,850 $ 23,363 $ 6,487 (1) Prior to our acquisition of Enteris, Enteris entered into the License Agreement with Cara Therapeutics, Inc. (“Cara”), for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize Oral KORSUVA TM in 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. As of June 30, 2024, the Company concluded that the milestones and royalties pursuant to the License Agreement would not be realized as a result of non-viability of product covered by the License Agreement. The Company has recognized a full impairment on the license of its remaining net book value of $5.8 million which is included in the “Loss on impairment of intangible assets” section of our unaudited condensed consolidated statements of income for the three and six months ended June 30, 2024. Amortization expense was $ 0.2 million and $ 0.4 million for the three months ended June 30, 2024 and 2023, respectively, and was recognized within depreciation and amortization expense on the unaudited condensed consolidated statements of income. Amortization expense related to intangible assets was $0.5 million and $0.9 million for the six months ended June 30, 2024 and 2023, respectively. Based on amounts recorded at June 30, 2024, the Company will recognize acquired intangible asset amortization as follows (in thousands): Schedule of Intangible Asset Amortization Expense Remainder of 2024 $ 23 2025 45 2026 45 2027 45 2028 45 Thereafter 29 Total $ 232 15 Note 5. Debt Revolving Credit Facility On June 28, 2023, the Company entered into a new credit agreement (the “Credit Agreement”) by and among SWK Funding LLC, the Company’s wholly-owned subsidiary (together with the Company, the “Borrower”), the lenders party thereto (“Lenders”), and First Horizon Bank as a Lender and Agent (the “Agent”). The Credit Agreement provides for a revolving credit facility with an initial maximum principal amount of $ 45.0 million . The Credit Agreement provides that the Company may request one or more incremental increases in an aggregate amount not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior to the termination of the revolving credit period on June 28, 2026 (the “Commitment Termination Date”). The revolving credit period will be followed by a one-year amortization period, with the final maturity date of the Credit Agreement occurring on June 28, 2027. The outstanding principal balance of the Credit Agreement will bear interest at a rate per annum equal to the sum of (i) Term Secured Overnight Financing Rate, or SOFR (as defined in the Credit Agreement) plus (ii) 3.75 percent at all times prior to the Commitment Termination Date. The outstanding principal balance of the revolving credit facility will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined in the Credit Agreement) plus (ii) 4.25 percent at all times on and after the Commitment Termination Date. Under the terms of the Credit Agreement, all accrued and unpaid interest shall be due and payable, in arrears, on the first business day of each calendar month. The Credit Agreement contains customary affirmative and negative covenants, in addition to financial covenants specifying that, as of the end of each calendar month, (i) the consolidated leverage ratio of Borrower will not exceed 1.00 to 1.00, (ii) the consolidated interest coverage ratio of Borrower will not be less than 4.00 to 1.00, (iii) the cash collection rate in relation to Borrower’s portfolio of loan assets will not be less than 4.5 percent, for such calendar month, (iv) the net charge-off percentage in relation to Borrower’s portfolio of loan assets will not exceed 3 percent for such calendar month, (v) the weighted average risk rating in relation to Borrower portfolio of loan assets will not be less than 3.00, and (vi) the Company's cumulative share repurchases will not exceed $5 million in value in any 12-month period. In addition, the Credit Agreement provides that at no time shall the Company permit its consolidated tangible net worth to be less than $145.0 million, or its liquidity (as defined in the Credit Agreement) to be less than $5.0 million. The Credit Agreement also contains events of default customary for such financings, the occurrence of which would permit the Agent and Lenders to accelerate the aggregate principal amount due thereunder. As of the date of this filing, the Company is in process of amending the Credit Agreement whereby the covenant for net charge-off percentage will be revised upwards, the consolidated interest coverage ratio will be revised downwards and the Company's share repurchase basket will be increased. The amendment will address covenant defaults as of June 30, 2024 and waive any past defaults. The Credit Agreement refinances the Company’s Loan and Security Agreement dated as of June 29, 2018 (the “Prior Credit Agreement”), as amended, between the Company and Cadence Bank, N.A. (“Cadence Bank”), as the lender and administrative agent, which was due to expire on September 30, 2025. The Prior Credit Agreement was terminated by the Company, effective as of June 28, 2023. On October 10, 2023, the Company entered into a First Amendment to Credit Agreement pursuant to which Woodforest National Bank was added as a lender under the Credit Agreement for an aggregate commitment of $15.0 million, thereby increasing the aggregate commitments under the Credit Agreement from $45.0 million to $ 60.0 million . As of June 30, 2024 there were no amounts outstanding under the new Credit Agreement. During the three months ended June 30, 2024 and 2023, the Company recognized $ 1.1 million and $ 0.4 million , respectively, of interest expense relating to the Credit Agreement and Prior Credit Agreement, respectively. During the six months ended June 30, 2024 and 2023, the Company recognized $ 2.4 million and $ 0.5 million , respectively, of interest expense in connection with the Credit Agreement. 16 Senior Notes Due 2027 On October 3, 2023, the Company issued a $30.0 million aggregate principal amount of 9.00% Senior Notes due 2027 (“2027 Senior Notes” or “Notes”) in a registered underwritten public offering. On October 27, 2023, the underwriter exercised in full, its over-allotment option by purchasing an additional approximately $3.0 million aggregate principal amount of the 2027 Senior Notes. The interest rates are fixed at 9.00% per annum and are payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing on December 31, 2023, and until maturity. The Notes will mature on January 31, 2027. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $30.6 million. The Company intends to use the net proceeds from the offering for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures, and funding working capital. The following table summarizes the outstanding balance of the Notes, net of debt issuance costs (in thousands): Schedule of Long Term Debt June 30, 2024 December 31, 2023 2027 Senior Notes $ 32,969 $ 32,969 Debt issuance costs ( 1,891 ) ( 2,188 ) Total unsecured senior notes, net $ 31,078 $ 30,781 The Company’s future principal obligations for the Notes were as follows (in thousands): Schedule of Maturities of Long Term Notes June 30, 2024 Remainder of 2024 $ — 2025 — 2026 — 2027 32,969 Total unsecured senior notes, net $ 32,969 The Company may redeem the Notes for cash in whole or in part at any time (i) on or after September 30, 2025 (the “First Call Date”) and prior to September 30, 2026, at a price equal to the sum of 102% of their principal amount, and (ii) on or after September 30, 2026 at a price equal to the sum of 100% of their principal amount, plus (in each case noted above) accrued and unpaid interest to, but excluding, the date of redemption. At any time prior to the First Call Date, the Company may, at its option, redeem the Notes for cash, in whole at any time or in part from time to time at a redemption price equal to (i) 100% of the principal amount of Notes redeemed, plus (ii) a Make-Whole Amount (as defined in the Indenture), plus (iii) accrued and unpaid interest, if any, to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Notes. Additionally, upon the occurrence of a Triggering Event (as defined in the Indenture), holders of the Notes will have the right to require the Company to make an offer to repurchase all or any portion of their Notes for cash at a purchase price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase. The Notes are senior unsecured obligations of the Company and rank equal in right of payment with the Company’s existing and future senior unsecured indebtedness. The Company evaluated the 2027 Senior Notes for derivatives pursuant to Accounting Standard Codification (“ASC”) 815, “Derivatives and Hedging,” and identified an embedded derivative that required bifurcation as the feature is not clearly and closely related to the host instrument. The embedded derivative was a default provision, which could require additional interest payments. The Company reassesses the feature quarterly to determine if it requires separate accounting. There have been no changes to the Company’s assessment that the fair value of the embedded derivative is immaterial through June 30, 2024. 17 Note 6. Commitments and Contingencies Lease Obligations All the Company’s material leases are operating leases. Right-of-use (“ROU”) assets related to operating leases are included on the unaudited condensed consolidated balance sheets in other non-current assets. Operating lease cost is recognized over the lease term on a straight-line basis and is recorded within general and administrative expenses on the unaudited condensed consolidated statements of income. In March of 2023, the Company entered into a new lease for additional office space in Dallas, Texas on Sherry Lane. The Company’s corporate office spaces in Dallas, Texas total approximately 6,850 square feet consisting of the two office locations (Sherry Lane and Preston Road). Total rent expense recognized was $ 0.3 million and $ 0.2 million for six months ended June 30, 2024 and 2023, respectively. On June 10, 2024, the Company entered into a lease termination agreement to its Preston Road office lease in Dallas (the “Lease Termination”). The Lease Termination terminated the Company’s rights and obligations with respect to the leased premises on June 30, 2024. As such, the ROU assets and operating lease liabilities were written off, and the Company recorded a gain of $4 thousand for the quarter ended June 30, 2024 and paid an early termination fee of $9 thousand. The remaining Sherry Lane office lease is set to expire in August 2028. The Enteris headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space. The office lease expires in December 2029 with an option to renew for an additional five years. The components of lease cost was as follows (in thousands): Schedule of Lease Cost Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Operating lease cost $ 134 $ 125 $ 259 $ 222 Variable lease cost 17 23 32 24 Total lease cost $ 151 $ 148 $ 291 $ 246 Future minimum rent on the Company’s operating leases was as follows as of June 30, 2024 (in thousands): Schedule of Future Minimum Rent Remainder of 2024 $ 283 2025 456 2026 461 2027 465 2028 405 Thereafter 272 Total future lease payments $ 2,342 18 Contingent Consideration During fiscal year 2019 the Company recorded contingent consideration related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement. Contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in the estimated fair value recognized in earnings. As of June 30, 2024, it has been determined the milestones and royalties pursuant to the License Agreement would not be realized as a result of non-viability of the product covered by the License Agreement. Accordingly, the Company has concluded that the liability for contingent consideration, previously held at its estimated fair value of $4.9 million, should be $0. The write-off of this contingent consideration liability has resulted in a gain of $4.9 million, which is included in the “Change in fair value of acquisition-related contingent consideration” caption of our unaudited condensed consolidated statements of income for the three and six months ended June 30, 2024. Unfunded Commitments Per the terms of the royalty purchase or credit agreements, unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified date or period of time, and in the case of loan transactions, are subject to being advanced as long as an event of default does not exist. As of June 30, 2024 SWK had $5.0 million of unfunded commitments. Litigation 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 June 30, 2024, 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 As permitted by Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving in such capacity, or in other capacities at the Company’s request. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any such amounts. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is insignificant. Accordingly, the Company had no liabilities recorded for these agreements as of June 30, 2024 and December 31, 2023. 19 Note 7. Fair Value Measurements The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels. Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets. Level 3: Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources. Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the six months ended June 30, 2024 and 2023. The 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. Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Cash and cash equivalents The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values. 20 Finance Receivables Finance receivables are measured at amortized cost, which approximates fair value. The fair value of finance receivables is estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the finance receivables. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. These receivables are classified as Level 3. Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below. Contingent Consideration The 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. 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. As noted above in Note 6, the acquisition-related contingent consideration liability was written down to $0 as of June 30, 2024 due to non-viability of the underlying product. Marketable Investments If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly these securities are classified as Level 2. If market prices are not available and there are no observable inputs, then fair value would be estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes. Such securities are classified as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company checks the validity of received prices based on comparison to prices of other similar assets and market data such as relevant benchmark indices. Available-for-sale securities are measured at fair value on a recurring basis, while securities with no readily available fair market value are not, but estimates of fair value are reflected below. Derivative Instruments For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3. The Company uses a foreign currency forward contract to manage the impact of fluctuations in foreign currency denominated cash flows expected to be received from one of its royalty finance receivables denominated in a foreign currency. The foreign currency forward contract is not designated as a hedging instrument, and changes in fair value are recognized in earnings. The foreign currency forward was recorded in other non-current assets in the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 and totaled to $2.6 million and $1.0 million, respectively. The Company recognized a $0.8 million and $1.2 million gain due to changes in fair value related to its foreign currency forward contract during the three months ended June 30, 2024 and June 30, 2023, respectively. The Company recognized a $1.7 million and $1.6 million gain due to changes in fair value related to its foreign currency forward contract for the six months ended June 30, 2024 and June 30, 2023, respectively. 21 The following table presents financial assets measured at fair value on a recurring basis as of June 30, 2024 (in thousands): Schedule of fair value assets measured on recurring basis Total Carrying Value in Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets Warrant assets $ 835 $ — $ — $ 835 Marketable investments 731 696 — 35 Foreign currency forward contract 2,629 — — 2,629 The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 (in thousands): Total Carrying Value in Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets Warrant assets $ 1,759 $ — $ — $ 1,759 Marketable investments 48 — — 48 Foreign currency forward contract 974 — — 974 Financial liabilities: Contingent consideration payable $ 4,900 $ — $ — $ 4,900 The contingent consideration payable was valued using a discounted cash flow approach and included a significant unobservable input which is the discount rate. During the six months ended June 30, 2024 there was a write off of the full balance of contingent consideration liability due to the non-viability of the underlying product. See Note 6 for further information. 22 The changes in fair value of the warrant assets during the six months ended June 30, 2024 and 2023 were as follows (in thousands): Schedule of fair value assets measured on recurring basis unobservable input reconciliation June 30, 2024 June 30, 2023 Fair value - December 31, 2023 $ 1,759 Fair value - December 31, 2022 $ 1,220 Issued — Issued 822 Exercised ( 984 ) Exercised — Change in fair value 130 Change in fair value ( 583 ) Loss on foreign currency transactions $ ( 70 ) Loss on foreign currency transactions $ — Fair value - June 30, 2024 $ 835 Fair value - June 30, 2023 $ 1,459 The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the unaudited condensed consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value: Schedule of weighted average assumptions June 30, 2024 December 31, 2023 Dividend rate range — — Risk-free rate range 4.3 % to 4.7 % 3.8 % to 4.8 % Expected life (years) range 2.4 to 5.3 1.2 to 5.8 Expected volatility range 73 % to 177.7 % 75.3 % to 154.3 % The warrant assets are valued using a market approach and include significant unobservable inputs such as risk-free rate, expected life, and expected volatility. For the six months ended June 30, 2024 the risk-free rate range weighted average was 4.4 % , and had a median of 4.3 % . For the year ended December 31, 2023 the risk-free rate range weighted average was 4.3 % , and had a median of 3.8 % . For the six months ended June 30, 2024 the expected life range weighted average was 4.2 years, and had a median of 4.5 years. For the year ended December 31, 2023 the expected life range weighted average was 3.4 years, and had a median of 4.4 years. For the six months ended June 30, 2024 the expected volatility range weighted average was 102.7 % , and had a median of 90.8 % . For the year ended December 31, 2023 the expected volatility range weighted average 124.6 % , and median of 134.4 % . As of June 30, 2024 and December 31, 2023, the Company had one royalty, Best, that was deemed to be impaired based on reductions in carrying value in prior periods. As of June 30, 2024, the Company had two loans, Trio Healthcare and Exeevo, that was deemed to be impaired based on reductions in carrying value during the six months ended June 30, 2024 . The following table presents this royalty and the loans measured at amortized cost using the effective interest method, which approximates fair value, on a nonrecurring basis as of June 30, 2024 and December 31, 2023 (in thousands): Schedule of weighted average assumptions Total Carrying Value in Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) June 30, 2024 $ 8,448 $ — $ — $ 8,448 December 31, 2023 $ 2,587 $ — $ — $ 2,587 There were no liabilities measured at fair value on a nonrecurring basis as of June 30, 2024 and December 31, 2023. 23 The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments measured at fair value on a recurring and non-recurring basis. The following table presents the fair value of financial assets as of June 30, 2024 (in thousands): Schedule of fair value by balance sheet grouping Carrying Value Fair Value Level 1 Level 2 Level 3 Financial Assets Finance receivables, net $ 265,470 $ 265,470 $ — $ — $ 265,470 Marketable investments 731 731 696 — 35 Warrant assets 835 835 — — 835 Foreign currency forward contract 2,629 2,629 — — 2,629 The following table presents the fair value of financial assets and liabilities as of year ended December 31, 2023 (in thousands): Carrying Value Fair Value Level 1 Level 2 Level 3 Financial Assets Finance receivables, net $ 274,504 $ 274,504 $ — $ — $ 274,504 Marketable investments 48 48 — — 48 Warrant assets 1,759 1,759 — — 1,759 Foreign currency forward contract 974 974 — — 974 Financial liabilities Contingent consideration payable $ 4,900 $ 4,900 $ — $ — $ 4,900 24 Note 8. Revenue Recognition The 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 three and six months ended June 30, 2024 and 2023 (in thousands): Schedule of Revenue Recognized by Revenue Source Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Pharmaceutical Development Segment License Agreement $ 49 $ 10 $ 49 $ 10 Pharmaceutical Development 755 173 1,034 291 Total contract revenue $ 804 $ 183 $ 1,083 $ 301 The Company’s 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 income and are included in accounts payable and accrued liabilities in the consolidated balance sheets (in thousands): Schedule of Company's Contract Liabilities June 30, 2024 December 31, 2023 Pharmaceutical Development Segment Deferred income $ 2,216 $ 9 Total contract liabilities $ 2,216 $ 9 D uring the six months ended June 30, 2024, the Company recognized the full remaini ng balance of $9 thousand of 2023 deferred income from satisfaction of performance obligations. The Company did not have any contra ct assets as of June 30, 2024 or December 31, 2023. 25 Enteris Exclusive Option and Asset Purchase Agreement With an effective date of January 1, 2024, we entered into an exclusive option and asset purchase agreement with a strategic partner on March 14, 2024 which granted the partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing clinical manufacturing and development services. The partner must exercise the option by or before January 1, 2026. In exchange for the exclusive purchase option the partner is to provide consideration in the form of an “option fee” and “guaranteed revenue payments.” The option fee is broken into two components: A low-single digit million fee due within 30 business days of executing the agreement; and should the option not be exercised by the first anniversary of the effective date, an additional low-single digit million fee will be due at that time. The first option fee was paid in April 2024. Option fee payments will be included in deferred income until the earlier of term expiration or exercise of the purchase option. Should the partner exercise the purchase option, any option fee payments made will be applied towards the purchase price. The guaranteed revenue payments include two components: A mid-single digit million guaranteed revenue payment in 2024 and a mid-single digit million guaranteed revenue payment in 2025. The revenue is to be derived by the partner under an existing collaboration agreement, and partner is to pay the difference should the minimum amount not be met each year. Each year’s guaranteed revenue amount is to be paid in two installments semi-annually each year. Should revenue exceed the 2024 or 2025 guaranteed revenue amounts after receiving a difference payment in the first half of the year, we must repay the partner the amount of such overpayment. Guaranteed revenue of $ 0.4 million was recognized during the three and six months ended June 30, 2024 . Note 9. Segment Information Selected 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 the Company’s CEO uses to make decisions about the Company’s operating matters. As 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. The Company does not report assets by reportable segment, nor does the Company report results by geographic region, as these metrics are not used by the Company’s chief executive officer in assessing performance or allocating resources to the segments. Segment performance is evaluated based on several factors, including income (loss) 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. The Company does not report assets by reportable segment, as this metric is not used by the Company’s CEO in assessing performance or allocating resources to the segments. 26 The following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands): Schedule of Reportable Revenue by Geographic Region Three Months Ended June 30, 2024 Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated Revenue $ 10,680 $ 804 $ — $ 11,484 Other revenue 57 — — 57 Provision for credit losses 4,074 — — 4,074 Loss on impairment of intangible assets — 5,771 — 5,771 Interest expense 225 2 892 1,119 Pharmaceutical manufacturing, research and development expense — 520 — 520 Change in fair value of acquisition-related contingent consideration — ( 4,900 ) — ( 4,900 ) Depreciation and amortization expense — 400 21 421 General and administrative expense 91 748 2,084 2,923 Other income (expense), net 3,851 — ( 34 ) 3,817 Income tax expense — — 1,035 1,035 Net income (loss) 10,198 ( 1,737 ) ( 4,066 ) 4,395 Three Months Ended June 30, 2023 Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated Revenue $ 9,278 $ 183 $ — $ 9,461 Other revenue 36 — — 36 Benefit for credit losses ( 682 ) — — ( 682 ) Interest expense 363 — — 363 Pharmaceutical manufacturing, research and development expense — 1,509 — 1,509 Depreciation and amortization expense — 633 4 637 General and administrative expense 137 981 1,879 2,997 Other income, net 715 — — 715 Income tax expense — — 1,454 1,454 Net income (loss) 10,211 ( 2,940 ) ( 3,337 ) 3,934 27 Six Months Ended June 30, 2024 Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated Revenue $ 21,399 $ 1,083 $ — $ 22,482 Other revenue 103 — — 103 Provision for credit losses 9,397 — — 9,397 Loss on impairment intangible assets — 5,771 — 5,771 Interest expense 590 5 1,780 2,375 Pharmaceutical manufacturing, research and development expense — 1,050 — 1,050 Change in fair value of acquisition-related contingent consideration — ( 4,900 ) — ( 4,900 ) Depreciation and amortization expense — 892 43 935 General and administrative expense 169 1,457 3,981 5,607 Other income (expense), net 3,843 — ( 408 ) 3,435 Income tax expense — — 1,264 1,264 Net income (loss) 15,189 ( 3,192 ) ( 7,476 ) 4,521 Six Months Ended June 30, 2023 Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated Revenue $ 18,538 $ 301 $ — $ 18,839 Other revenue 67 — 2 69 Benefit for credit losses ( 682 ) — — ( 682 ) Interest expense 545 — — 545 Pharmaceutical manufacturing, research and development expense — 2,228 — 2,228 Depreciation and amortization expense — 1,277 8 1,285 General and administrative expense 167 1,709 3,661 5,537 Other expense, net ( 81 ) — — ( 81 ) Income tax expense — — 1,345 1,345 Net income (loss) 18,494 ( 4,913 ) ( 5,012 ) 8,569 Included in Holding 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 consolidated amounts. Note 10. Subsequent Events Relief Therapeutics On August 2, 2024, SWK Funding, a subsidiary of the Company, entered into a royalty purchase agreement with Relief Therapeutics Holding SA (“Relief”) and APR Applied Pharma Research SA pursuant to which SWK Funding paid $5.8 million at closing with another $5.3 million available for borrowing should Relief achieve certain milestones. In exchange, SWK Funding will receive royalties based off sales as listed in the agreement. 28 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“Annual Report”), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report. Overview We have organized our operations into two segments: Finance Receivables and Pharmaceutical Development. These segments reflect the way the Company evaluates its business performance and manages its operations. Please refer to Item 1. Financial Statements, Note 9 of the notes to the unaudited condensed consolidated financial statements for further information regarding segment information. 29 Finance Receivables Portfolio Overview The table below provides an overview of our outstanding finance receivables transactions as of, and for the three and six months ended June 30, 2024 (in thousands, except rate, share and per share data). Revenue (Loss) Recognized Royalty Purchases Licensed Technology Footnote Funded Amount GAAP Balance 2Q 2024 Year-to- Date Besivance® Ophthalmic antibiotic (1) $ 6,000 $ — $ 8 $ 17 Best ABT, Inc. Oncology diagnosis (2), (3) 5,784 2,437 — — Coflex®/Kybella® Spinal stenosis/submental fullness 4,350 3,087 (11 ) 82 Cambia® NSAID migraine treatment (4) 8,500 — 93 210 Duo Royalty Japanese Women’s health/cystic fibrosis 15,353 11,986 563 1,178 Flowonix Medical, Inc. Drug delivery device (3), (5) 12,455 10,433 — — Forfivo XL® Depressive disorder treatment 6,000 1,296 245 725 Ideal Implant, Inc. Aesthetics (3), (6) 4,025 3,564 — — Immune Globuin Immune Globulin Therapeutics (9) 14,100 12,110 805 1,303 Iluvien® Diabetic macular edema 16,501 16,595 545 1,103 Veru, Inc. Women’s health 10,000 3,362 130 260 Revenue (Loss) Recognized Term Loans Type Footnote Maturity Date Principal GAAP Balance Rate 2Q 2024 Year-to- Date 4Web, Inc. First lien 12/31/24 $ 26,411 $ 29,154 11.3 % $ 1,190 $ 2,512 AOTI, Inc. First lien 03/21/27 14,478 14,639 11.2 % 573 1,094 Elutia, Inc. First lien 08/10/27 21,045 23,128 12.0 % 944 1,910 BIOLASE, Inc. First lien 05/31/25 12,270 13,346 10.3 % 564 1,142 Biotricity, Inc. First lien 12/21/26 12,364 12,601 11.5 % 594 1,112 CDMO Manufacturer First lien 09/13/27 5,000 5,161 13.3 % 202 400 Epica International, Inc. First lien 07/23/24 8,450 9,328 11.5 % 379 736 eTon Pharmaceuticals, Inc. First lien 11/13/24 4,690 4,991 13.3 % 200 413 Journey Medical Corporation First lien 12/27/27 20,000 19,888 12.8 % 542 1,083 Exeevo, Inc. First lien (2), (3) 07/01/27 4,558 4,538 12.8 % 8 8 MedMinder Systems, Inc. First lien 08/18/27 20,000 20,221 12.3 % 768 1,490 MolecuLight, Inc. First lien 12/29/26 10,426 10,718 12.8 % 461 937 Nicoya Lifesciences, Inc. First lien 11/30/26 6,000 6,059 12.8 % 265 522 NeoLight, LLC First lien 02/17/27 5,000 5,115 13.5 % 266 478 Shield Therapeutics, Plc First lien 09/28/28 20,000 19,489 14.3 % 824 1,638 SKNV First lien 05/15/27 13,497 13,835 10.4 % 522 1,046 Trio Healthcare Ltd. First lien (2), (3) 07/01/26 1,498 1,472 12.5 % — — Revenue (Loss) Recognized Marketable Investments Number of Shares Footnote Funded Amount GAAP Balance 2Q 2024 Year-to- Date Secured Royalty Financing (Marketable Investment) N/A (2), (3) $ 3,000 $ 35 $ — $ — Eyepoint Pharma Common Stock — (7) N/A 0 — — AOTI Common Stock 402,634 (8) N/A $ 696 $ — $ — 30 Change in Fair Value Warrants to Purchase Stock Number of Shares Footnote Exercise Price per Share ($) GAAP Balance 2Q 2024 Year-to- Date 4Web, Inc. TBD $ — $ — $ — $ — Aziyo Biologics, Inc. 157,895 6.65 536 224 253 Aziyo Biologics, Inc. 30,075 6.65 102 43 49 BIOLASE, Inc. 22,039 9.80 1 — — Biotricity, Inc. 57,536 6.26 2 (4 ) (2 ) CDMO Manufacturer 211,442 1.42 — — — CeloNova BioSciences, Inc. TBD — — — — DxTerity Diagnostics, Inc. 2,019,231 — — — — Epica International, Inc. TBD — — — — eTon Pharmaceuticals, Inc. 51,239 5.86 50 (24 ) (47 ) eTon Pharmaceuticals, Inc. 18,141 6.62 19 (9 ) (17 ) Exeevo, Inc. 930 — — — — EyePoint Pharmaceuticals, Inc. 40,910 11.00 — — 127 EyePoint Pharmaceuticals, Inc. 7,773 19.30 — — 22 Shield Warrant 8,910,540 125 (4 ) (254 ) MedMinder Systems, Inc. 72,324 — — — — MolecuLight, Inc. TBD — — — — Revenue (Loss) Recognized Assets 2Q 2024 Year-to-Date Total finance receivables, gross $ 278,553 $ 10,680 $ 21,399 Total marketable investments 731 — — Total fair value of warrant assets 835 — — Total $ 280,119 $ 10,680 $ 21,399 (1) US royalty was paid off during the year ended December 31, 2021. SWK continues to receive insignificant royalties on international sales. (2) Investment considered partially impaired. (3) Investment on non-accrual. (4) Investment was paid off during the nine months ended September 30, 2023. (5) Flowonix Medical assets were sold to a medical device company during the nine months ended September 30, 2023. In exchange for releasing its lien, SWK received cash at close and is expected to receive royalties on sales of two products. The finance receivable is now classified as a royalty. (6) In July 2023, Ideal Implant assets were sold to an aesthetics company, which is expected to pay SWK a mid-single digit, capped royalty on implant sales in 2024. (7) Eyepoint warrants exercised in 1Q 2024 and converted to shares. The shares were sold during 2Q 2024. (8) AOTI warrants exercised in 2Q 2024 and converted to shares. (9) During the three months ended June 30, 2024, the Company identified an error in the calculation of revenue related to the release of a holdback liability for ImmuneGlobulin during the three months ended March 31, 2024. The error led to finance receivable interest income being overstated by $0.7 million for the three months ended March 31, 2024. See Note 1 for more details. Unless otherwise specified, our senior secured debt assets generally are repaid by a revenue interest that is charged on a company’s quarterly net sales and royalties. 31 Critical Accounting Policies and Estimates Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the six months ended June 30, 2024, compared to those discussed in our Annual Report. Recent Accounting Pronouncements Refer to Part I. Financial Information, Item 1. Financial Statements, Note 1 of the notes to the unaudited condensed consolidated financial statements for a listing of recent accounting pronouncements and their potential impact to our consolidated financial statements. Comparison of the three months ended June 30, 2024 and 2023 ( in millions ) Three Months Ended June 30, 2024 2023 Change $ Revenues $ 11.5 $ 9.5 $ 2.0 Provision (benefit) for credit losses 4.1 (0.7 ) 4.8 Loss on impairment of intangible assets 5.8 — 5.8 Interest expense 1.1 0.4 0.7 Pharmaceutical manufacturing, research and development expense 0.5 1.5 (1.0 ) Change in fair value of acquisition-related contingent consideration (4.9 ) — (4.9 ) Depreciation and amortization expense 0.4 0.6 (0.2 ) General and administrative expense 2.9 3.0 (0.1 ) Other income, net 3.8 0.7 3.1 Income tax expense 1.0 1.5 (0.5 ) Net income 4.4 3.9 0.5 Revenues Revenues increased to $11.5 million for the three months ended June 30, 2024 from $9.5 million for the three months ended June 30, 2023. The $2.0 million increase in revenue for the three months ended June 30, 2024 consisted of a $1.4 million increase in Finance Receivables segment revenue and a $0.6 million increase in Pharmaceutical Development segment revenue. The $1.4 million increase in Finance Receivables segment revenue was primarily due an increase of $3.1 million in interest and fees earned due to funding new and existing loans offset by $1.7 million decrease in interest, fees and royalties earned on finance receivables that were paid off during the period. Provision (Benefit) for Credit Losses Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a net provision for credit losses of $4.1 million during the three months ended June 30, 2024 and $0.7 million benefit during three months ended June 30, 2023, respectively. The $2.1 million impairment on the Trio loan and $2.2 million impairment on the Exeevo loan were both included within the provision for credit losses. See Note 3 to the unaudited condensed consolidated financial statements for further information on the allowance for credit losses. 32 Interest Expense Interest expense consists of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense increased to $1.1 million for the three months ended June 30, 2024 from $0.4 million for the three months ended June 30, 2023. The $0.7 million increase in interest expense was mainly due to issuing approximately $32.9 million of Notes in an underwritten public offering in October of 2023, and the establishment of the Credit Agreement as of June 30, 2023. See Note 6 for further information on the Notes, new Credit Agreement, and Prior Credit Agreement. Pharmaceutical Manufacturing, Research and Development Expense Pharmaceutical manufacturing, research and development expense decreased from $1.5 million for the three months ended June 30, 2023 to $0.5 million for the three months ended June 30, 2024. The $1.0 million decrease was primarily due to reduction in research and development and clinical trial related to cancelled projects. Depreciation and Amortization Expense The $0.2 million decrease in depreciation and amortization expense for the three months ended June 30, 2024 primarily consists of a decrease in amortization expense related to no longer amortizing intangible assets related to the Cara license. Amortization expense is aligned with the expected future cash flows of the intangible assets. General and Administrative Expense General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses decreased to $2.9 million for the three months ended June 30, 2024 from $3.0 million for the three months ended June 30, 2023 resulting in an immaterial change in total activity between the periods. Other Income, Net Other income, net increased to $3.8 million for the three months ended June 30, 2024 from $0.7 million for the three months ended June 30, 2023. The $3.1 million increase includes a $2.5 million gain on revaluation related to the Iluvien royalty after a contractual re-negotiation during the current quarter, and also includes a gain of $0.7 million from the exercise of warrants during current quarter. Income Tax Expense During the three months ended June 30, 2024 we recognized $1.0 million of income tax expense, while for the three months ended June 30, 2023 we recognized income tax of $1.5 million. The change in income tax expense is primarily attributed to changes in pre-tax net income, and the Company’s effective tax rate, which was 20.9% and 10.1% as of June 30, 2024 and 2023. 33 Comparison of the six months ended June 30, 2024 and 2023 ( in millions ) Six Months Ended June 30, 2024 2023 Change $ Revenues $ 22.6 $ 18.9 $ 3.7 Provision (benefit) for credit losses 9.4 (0.7 ) 10.1 Loss on impairment of intangible assets 5.8 — 5.8 Interest expense 2.4 0.5 1.9 Pharmaceutical manufacturing, research and development expense 1.1 2.2 (1.1 ) Change in fair value of acquisition-related contingent consideration (4.9 ) — (4.9 ) Depreciation and amortization expense 0.9 1.3 (0.4 ) General and administrative expense 5.6 5.5 0.1 Other income (expense), net 3.4 (0.1 ) 3.5 Income tax expense 1.3 1.3 — Net income 4.5 8.6 (4.1 ) Revenues Revenues increased to $22.6 million for the six months ended June 30, 2024 from $18.9 million for the six months ended June 30, 2023. The $3.7 million increase in revenue for the six months ended June 30, 2024 consisted of a $2.9 million increase in Finance Receivables segment revenue and a $0.8 million increase in Pharmaceutical Development segment revenue. The $2.9 million increase in Finance Receivables segment revenue was primarily due to a $6.3 million increase in interest and fees earned due to funding new and existing loans offset by $3.4 million decrease in interest, fees and royalties earned on finance receivables that were paid off during the period. Provision (Benefit) for Credit Losses Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a net provision for credit losses of $9.4 million during the six months ended June 30, 2024 and a $0.7 million benefit during six months ended June 30, 2023, respectively. Most of the change was related to a $8.1 million impairment on the Trio loan and $2.2 million impairment on the Exeevo loan that were included within the provision for credit losses during the period. See Note 3 to the unaudited condensed consolidated financial statements for further information on the allowance for credit losses. Interest Expense Interest expense consists of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense increased to $2.4 million for the six months ended June 30, 2024 from $0.5 million for the six months ended June 30, 2023. The $1.9 million increase in interest expense was mainly due to issuing approximately $32.9 million of Notes in an underwritten public offering in October of 2023. See Note 6 for further information on the Notes, new Credit Agreement, and Prior Credit Agreement. 34 Pharmaceutical Manufacturing, Research and Development Expense Pharmaceutical manufacturing, research and development expense decreased from $2.2 million for the six months ended June 30, 2023 to $1.1 million for the six months ended June 30, 2024. The $1.1 million decrease was primarily due to a reduction in research and development and clinical trial expenditures related to cancelled projects during the period. Depreciation and Amortization Expense The $0.4 million decrease in depreciation and amortization expense for the six months ended June 30, 2024 primarily consists of a decrease in amortization expense related to no longer amortizing intangible assets related to the Cara license. Amortization expense is aligned with the expected future cash flows of the intangible assets. See Note 4 for more information on the impairment of the Cara license. General and Administrative Expense General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses increased to $5.6 million for the six months ended June 30, 2024 from $5.5 million for the six months ended June 30, 2023 resulting in an immaterial change in total activity between the periods. Other Income (Expense), Net Other expense, net increased to $3.4 million for the six months ended June 30, 2024 from $0.1 million for the six months ended June 30, 2023. The $3.5 million increase includes a $2.5 million gain on revaluation related to the Iluvien royalty after a contractual re-negotiation, a gain of $0.7 million due to the exercise of warrants, a loss of $0.3 million on the sale of common shares, and the remaining activity relating to warrant fair value adjustments based on share price. Income Tax Expense During the six months ended June 30, 2024 and 2023 we recognized $1.3 million of income tax expense. Income tax expense remained consistent period over period and the Company’s effective tax rate was 20.9% and 10.1% as of June 30, 2024 and 2023, respectively, and a release of valuation allowance on deferred tax assets of $0.6 million took place during the six months ended June 30, 2023 35 Liquidity and Capital Resources As of June 30, 2024, we had $5.5 million in cash and cash equivalents and restricted cash, compared to $5.2 million as of December 31, 2023. The primary driver of the $0.3 million increase in our cash balance was $29 million of interest, fees, principal and royalty payments received on our finance receivables. The increase in cash and cash equivalents was partially offset by $8.2 million of investment funding, net of deferred fees and origination expenses; $0.8 million holdback repayment; a net credit facility payment of $12.4 million; a payroll and benefits expense of $2.4 million; $3.2 million of accounts payable; and $1.9 million to repurchase shares of the Company’s common stock on the open market, pursuant to the Company’s stock repurchase program. We entered into a $45.0 million revolving credit facility in June 2023 with First Horizon Bank. The Credit Agreement provides for one or more incremental increases not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior to the Commitment Termination Date. On October 10, 2023, the Company entered into a First Amendment to Credit Agreement pursuant to which Woodforest National Bank was added as a lender under the Credit Agreement for an aggregate commitment of $15.0 million, thereby increasing the aggregate commitments under the Credit Agreement from $45.0 million to $60.0 million. As of June 30, 2024, there was no outstanding amount under the new Credit Agreement, and $55.0 million was available for borrowing. The $60.0 million Credit Agreement contains a $5.0 million liquidity covenant, bringing the total amount available for borrowing to $55.0 million. Our Prior Credit Agreement with Cadence Bank was terminated in connection with the establishment of the new Credit Agreement (please refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 6 of the notes to the consolidated financial statements for further information regarding the Credit Agreement with First Horizon Bank). On October 3, 2023, the Company completed a registered underwritten public offering of $30.0 million of the Notes. On October 27, 2023, the underwriters exercised their option to purchase an additional approximately $3.0 million in aggregate principal amount of the Notes. The Notes will mature on January 31, 2027, unless earlier redeemed, and will bear interest at a rate of 9.00% per annum, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year and at maturity, commencing on December 31, 2023. The Company received net proceeds after discounts, commissions, expenses and fees, of approximately $30.6 million. As of the date of this filing the Company is in process of amending the Credit Agreement whereby the covenant for net charge-off percentage will be revised upwards, and will include an increase to the Company’s share buyback basket. The amendment will be retroactively applicable to the quarter ended June 30, 2024. See Note 5 for more information. 36 Primary Driver of Cash Flow Our ability to generate cash in the future depends primarily upon our success in implementing our Finance Receivables business model of generating income by providing capital to a broad range of life science companies, institutions and inventors, as well as the success of our Pharmaceutical Development segment. We generate income primarily from four sources: 1. Primarily owning or financing through debt investments, royalties generated by the sales of life science products and related intellectual property; 2. Receiving interest and other income by advancing capital in the form of secured debt to companies in the life science sector; 3. Pharmaceutical development, manufacturing, and licensing activities utilizing the Peptelligence® platform; and 4. To a lesser extent, realizing capital appreciation from equity-related investments in the life science sector. As of June 30, 2024, our finance receivables portfolio contains $265.5 million of net finance receivables and $731 thousand of marketable investments. We expect these assets to generate positive cash flows in 2024. We continuously monitor the short and long-term financial position of our finance receivables portfolio. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates. Changes in interest rates, including the levels of the underlying reference rates may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future. We continue to evaluate multiple attractive opportunities that, if consummated, we believe would similarly generate additional income. Since the timing of any investment is difficult to predict, our Finance Receivables segment may not be able to generate positive cash flow above what our existing assets are expected to produce in 2024. We do not assume any near-term repayments from borrowers, and as a result, no assurances can be given that actual results would not differ materially from the statement above. Off-Balance Sheet Arrangements In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in our consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage partner companies’ requests for funding and take the form of loan commitments and lines of credit. The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the partner company defaults, and the value of any existing collateral becomes worthless. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. As of June 30, 2024, we had $5.0 million in unfunded commitments. Please refer to Item 1., Financial Statements, Note 6 of the notes to the unaudited condensed consolidated financial statements for further information regarding the Company’s commitments and contingencies. 37 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. During the six months ended June 30, 2024, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at June 30, 2024 approximated its carrying value. Investment and Interest Rate Risk We are subject to financial market risks, including changes in interest rates. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flow. As we seek to provide capital to a broad range of life science companies, institutions and investors with the majority of our finance receivables portfolio paying interest based on floating interest rates with a reference rate floor, our net investment income is dependent, in part, upon the difference between the rate at which we earn on our cash and cash equivalents and the rate at which we lend those funds to third parties. As a result, we are subject to risks relating to changes in market interest rates. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations by providing capital at variable interest rates. We do not currently engage in any interest rate hedging activities. We constantly monitor our portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any of our investments. We entered into a revolving credit facility. As we borrow funds to make additional investments, our income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we are subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have debt outstanding, our cost of funds would increase, which could reduce our income, especially to the extent we continue to hold fixed rate investments. We generally seek to mitigate this risk by pricing our debt investments with floating interest rates to maintain the spread of our portfolio over the cost of leverage. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations, which we have not done. Adverse developments resulting from changes in interest rates or hedging transactions could have a materially adverse effect on our business, financial condition and results of operations. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our investment income, net of borrowing expenses. Inflation Certain of our partner companies may be impacted by inflation. If such partner companies are unable to pass any increases in their costs along to their customers, it could adversely affect their results and impact their ability to pay interest and principal on our loans. In addition, any projected future decreases in our partner companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce carrying value of our net assets. ITEM 4. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. In connection with the preparation of this report, our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. Changes in Internal Control over Financial Reporting There have been no changes during the three months ended June 30, 2024 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 38 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material negative impact on our results of operations, balance sheets and cash flows due to defense costs, and divert management resources. Currently, we are not involved in any arbitration and/or other legal proceeding that we expect to have a material effect on our business, financial condition, results of operations and cash flows. ITEM 1A. RISK FACTORS Information regarding the Company’s risk factors appears in “Part I. – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 20, 2024. There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. On May 16, 2023, the Company announced that the Board had authorized the Company to repurchase up to $10.0 million of the Company’s outstanding shares of common stock from time-to-time until May 16, 2024, through a trading plan established in compliance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act (the “Repurchase Program”). The actual timing, number and value of shares repurchased under the Repurchase Program will depend on several factors, including the constraints specified in the Rule 10b5-1 trading plan, price, and general market conditions. There is no guarantee as to the exact number of shares that will be repurchased under the Repurchase Program. Our Board may also suspend or discontinue the Repurchase Program at any time, in its sole discretion. The purchase period for the Repurchase Program is May 16, 2023 through May 16, 2024. The table below summarizes information about our purchases of common stock during the three months ended June 30, 2024: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan April 1, 2024 - April 30, 2024 15,529 $ 17.33 15,529 3,304 May 1, 2024 - May 31, 2024 33,240 17.51 33,240 2,722 June 1, 2024 - June 30, 2024 5,898 16.72 5,898 2,623 54,667 $ 17.19 54,667 As of June 30, 2024, the Company has repurchased an aggregate of 439,053 shares under the Repurchase Program at a total cost of $7.4 million, or $16.80 per share. As of June 30, 2024, the maximum dollar value of shares that may yet be purchased under the Repurchase Program was approximately $2.6 million shares of common stock. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. ITEM 5. OTHER INFORMATION. None. 39 ITEM 6. EXHIBITS Filing Filed Number Exhibit Description Form Exhibit Date Herewith 3.01 Third Amended and Restated Certificate of Incorporation, dated as of August 12, 2022. 8-K 3.1 8/15/22 3.02 Amended and Restated Bylaws, dated as of August 12, 2022. 8-K 3.02 8/15/22 31.01 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.02 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.01 Certification of Principal 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 Principal Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* X 101.INS+ XBRL Instance X 101.SCH+ XBRL Taxonomy Extension Schema X 101.CAL+ XBRL Taxonomy Extension Calculation X 101.DEF+ XBRL Taxonomy Extension Definition X 101.LAB+ XBRL Taxonomy Extension Labels X 101.PRE+ XBRL Taxonomy Extension Presentation X * These certifications accompany this Quarterly Report on Form 10-Q. They are not deemed “filed” with the Securities and Exchange Commission and are not to be incorporated by reference in any filing of SWK Holdings Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. + XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. 40 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 14, 2024. SWK Holdings Corporation By: /s/ Joe D. Staggs Joe D. Staggs Chief Executive Officer (Principal Executive Officer) By: /s/ Adam Rice Adam Rice Chief Financial Officer (Principal Financial and Accounting Officer) 41