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What changed in SWK Holdings Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SWK Holdings Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+220 added−186 removedSource: 10-K (2024-03-20) vs 10-K (2023-03-31)

Top changes in SWK Holdings Corp's 2023 10-K

220 paragraphs added · 186 removed · 142 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

18 edited+7 added−6 removed16 unchanged
Biggest changeIn addition, since many of our competitors that provide non-traditional debt and/or longer term, royalty-related financing options have much greater financial resources than us, they tend not to focus on transaction sizes below $50 million as it is generally inefficient for them to do so.
Biggest changeIn addition, since many of our competitors that provide non-traditional debt and/or royalty financing have greater financial resources than us, they prioritize transaction sizes above $50 million. As such, we believe we face less competition in transactions that are less than $50 million. In our Pharmaceutical Development segment, we face competition in providing clinical development and manufacturing services.
In addition, through our wholly-owned subsidiary, SWK Advisors LLC, we provide non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board.
In addition, through our wholly-owned subsidiary, SWK Advisors LLC, we are able to provide non-discretionary investment advisory services to institutional clients in separately managed accounts to similarly invest in life science finance. SWK Advisors LLC is registered as an investment advisor with the Texas State Securities Board.
Our business partners are primarily engaged in selling products that directly or indirectly cure diseases and/or improve the wellness of people or animals, or they receive royalties paid on the sales of such products.
Our business partners are primarily engaged in selling products that directly or indirectly treat diseases and/or improve the wellness of people or animals, or they receive royalties paid on the sales of such products.
We have been deploying our assets to earn interest, fees, and other income pursuant to this strategy, and we continue to identify and review financing and similar opportunities on an ongoing basis with financial solutions that are tailored to the individual needs of our business partners.
We have deploy our assets to earn interest, fees, and other income pursuant to this strategy, and we continue to identify and review financing and similar opportunities on an ongoing basis with financial solutions that are tailored to the individual needs of our business partners.
We primarily provide capital to companies following the commercialization of a product, although in rare situations we consider pre-approval financings as well.
We primarily provide capital to companies following the commercialization of a product, although in certain situations we consider pre-approval financings as well.
In our portfolio we seek to achieve attractive risk-adjusted current yields and opportunities with the potential for equity-like returns with protection that credit provides. The majority of our finance receivables transactions are structured similarly to factoring transactions whereby we provide capital in exchange for an interest in an existing revenue stream.
In our portfolio we seek to achieve attractive risk-adjusted current yields and opportunities with the potential for equity-like returns with typical credit protections. The majority of our finance receivables transactions are structured similarly to factoring transactions whereby we provide capital in exchange for an interest in an existing revenue stream.
Our structured debt investments may include warrants or other features, giving us the potential to realize enhanced returns on a portion of our portfolio. Capital that we provide directly to our partners is generally used for growth and general working capital purposes, as well as for acquisitions or recapitalizations in select cases.
Our structured debt investments may include warrants or other features, giving us the potential to realize enhanced returns. Capital that we provide directly to our partners is generally used for growth and general working capital purposes, as well as for acquisitions or recapitalizations in select cases.
The existing revenue stream can take several forms, but is most commonly either a royalty derived from the sales of a life science product (1) from the marketing efforts of a third party, such as a royalty paid to an inventor on the sales of a medicine, or (2) from the marketing efforts of a partner company, such as a medical device company that directly sells its own products.
The existing revenue stream can take several forms, but is most commonly either a royalty derived from the sales of a life science product marketed by a third party, such as a royalty paid to an inventor on the sales of a medicine, or from the commercialization by partner company, such as a medical device company that directly sells its own products.
We allocate capital to each segment in order to generate income through the sales of life science products by third parties and related earned income sources. We are headquartered in Dallas, Texas.
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.
For example, our biotechnology and pharmaceutical business partners manufacture medication that directly treat disease states, whereas our life science tools partners sell a wide variety of research instrumentation to help other companies conduct research into disease states.
For example, our biotechnology and pharmaceutical business partners commercialize medicines that treat disease states, whereas our life science tools partners sell a wide variety of research instrumentation to help other companies conduct clinical research.
We intend to fund transactions through our own working capital and our revolving credit facility, as well as by building our asset management business by raising additional third-party capital to be invested alongside our capital. 1 We fill a niche that we believe is underserved in the sub-$50 million transaction size market.
We intend to fund transactions through our own working capital and our revolving credit facility, as well as by building our asset management business by raising additional third-party capital. We fill an underserved niche in the sub-$50 million transaction size market.
Finance Receivables Segment Our Finance Receivables segment strategy is to be a leading healthcare capital provider by offering sophisticated, customized financing solutions to a broad range of life science companies, institutions and inventors.
We are headquartered in Dallas, Texas. 1 Finance Receivables Segment Our Finance Receivables segment strategy is to be a leading healthcare capital provider by offering customized financing solutions to a broad range of life science companies, institutions and inventors.
As of March 17, 2023, and since inception of the strategy, we and our partners have executed transactions with 50 different parties under our specialty finance strategy, funding an aggregate of approximately $725.2 million in various financial products across the life science sector.
As of March 14, 2024, and since inception of the strategy, we and our partners have executed transactions with 55 different parties under our specialty finance strategy, funding an aggregate of approximately $779.4 million in various financial products across the life science sector.
Governmental Regulation For additional information concerning the effect of existing or probable government regulation on our business, see Item 1A., Risk Factors . 3 Employees As of December 31, 2022, we had 21 employees, all of whom are full-time. None of our employees are represented by a labor union, and we consider our employee relations to be good.
For additional information concerning the competitive risks we face, see Item 1A., Risk Factors . Governmental Regulation For additional information concerning the effect of existing or probable government regulation on our business, see Item 1A., Risk Factors . Human Capital Resources As of December 31, 2023, we had 23 employees, all of whom are full-time.
Our investment advisory clients generally do not originate investment opportunities for us. Pharmaceutical Development Segment During 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). Enteris is a clinical stage biopharmaceutical company offering innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform.
Our investment advisory clients generally do not originate investment opportunities for us. Pharmaceutical Development Segment During 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”).
As such, we believe we face less competition from such investors in transactions that are less than $50 million. In our Pharmaceutical Development segment, we face competition in introducing products that improve efficacy, safety, patients’ and clinicians’ ease of use and cost-effectiveness.
We also face competition in introducing products that improve efficacy, safety, patients’ and clinicians’ ease of use and cost-effectiveness.
Since many of our competitors that provide longer term, non-traditional debt and/or royalty-related financing options typically have much greater financial resources than us, they tend not to focus on transaction sizes below $50 million, as it is generally inefficient for them to do so.
Since many of our competitors that provide non-traditional debt and/or royalty financings typically have greater financial resources than us, they prioritize transaction sizes above $50 million. As such, we believe we face less competition in transactions that are less than $50 million.
Additional Information We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act’’), with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public from the SEC’s internet site at http://www.sec.gov. Our internet site is http://www.swkhold.com.
Our SEC filings are available to the public from the SEC’s internet site at http://www.sec.gov. Our internet site is http://www.swkhold.com.
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In addition, we do not believe that a sufficient number of other companies offer similar types of long-term financing options to fill the demand of the sub-$50 million market. As such, we believe we face less competition from such investors in transactions that are less than $50 million.
Added
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.
Removed
We expect to continue to offer transaction opportunities to our investment advisory clients, as appropriate for each client’s investment strategy. When a client opts into a transaction, each client receives its pro rata allocation of income produced by a transaction in which it participates, and the client pays us management and incentive fees according to a written investment advisory agreement.
Added
With an effective date of January 1, 2024, we entered into an Option and Asset Purchase Agreement with AptarGroup, Inc.
Removed
Fees paid by clients may differ depending upon the terms negotiated with each client and are paid directly by the client upon receipt of an invoice from us.
Added
(“Aptar”) on March 14, 2024 which granted Aptar an exclusive option to acquire certain of Enteris’ assets related to its business of providing good manufacturing practice (GMP) manufacturing and clinical supply services through Phase 1 and 2 to third parties, subject to certain exclusions. Aptar must exercise the option by or before January 1, 2026.
Removed
Our Pharmaceutical Development segment strategy is to utilize the technology platform to create a wholly-owned portfolio of milestone and royalty income by out-licensing our technology in two ways. First, we intend to continue to out-license our Peptelligence® technology to pharmaceutical companies to create novel and important oral therapeutic treatments for a wide variety of indications.
Added
None of our employees are represented by a labor union, and we consider our employee relations to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.
Removed
Second, we intend to out-license to pharmaceutical companies assets from our internal product pipeline of off-patent previously approved drug compounds with which we seek to create novel formulations using our proprietary technology to develop treatments that have meaningful therapeutic benefits for patients and caregivers. We also seek to generate income by providing customers pharmaceutical development, formulation and manufacturing services.
Added
The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.
Removed
A failure by us to successfully commercialize existing or planned products could have a material adverse effect on our business, financial condition and results of operations. For additional information concerning the competitive risks we face, see Item 1A., Risk Factors .
Added
We regularly evaluate our compensation programs and utilize industry benchmarking in an effort to ensure competitiveness compared to similar companies with which we compete for talent, as well as fair and equitable treatment across our workforce with respect to gender, race, and other personal characteristics.
Added
We are an equal opportunity employer and we maintain policies that prohibit unlawful discrimination based on race, color, religion, gender, sexual orientation, gender identity/expression, national origin/ancestry, age, disability, marital and veteran status. 3 Additional Information We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act’’), with the Securities and Exchange Commission (“SEC”).

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

73 edited+42 added−13 removed191 unchanged
Biggest changeIn addition, the small and middle-market companies which that we target to advance debt are subject to a number of other significant risks, including: · these companies may have limited financial resources and may be unable to meet their obligations under their financial instruments that we hold, which may be accompanied by a deterioration in the value of their assets or of any collateral with respect to any financial obligations and a reduction in the likelihood of our realizing on any guarantees we may have obtained in connection with our investment; · they may have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; · they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our partner company, and in turn, on us; · they may have less predictable operating results, may from time to time be parties to litigation, may be engaged in changing businesses with products subject to a risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; · they operate in the life science industry, which is both highly competitive and subject to extensive regulatory oversight, and their products may be recalled or displaced by new products, or they may lose regulatory approval altogether; · changes in laws and regulations, as well as their interpretations, may adversely affect their business, financial structure or prospects; and · they may have difficulty accessing the capital markets to meet future capital needs.
Biggest changeIn addition, the small and middle-market companies that we target to advance debt are subject to a number of other significant risks, including: · these companies may have limited financial resources and may be unable to meet their obligations under their financial instruments that we hold, which may be accompanied by a deterioration in the value of their assets or of any collateral with respect to any financial obligations and a reduction in the likelihood of our realization of any guarantees we may have obtained in connection with our investment; · they may have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; · they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our partner company, and in turn, on us; · they may have less predictable operating results, may from time to time be parties to litigation, may be engaged in changing businesses with products subject to a risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; · they operate in the life science industry, which is both highly competitive and subject to extensive regulatory oversight, and their products may be recalled or displaced by new products, or they may lose regulatory approval altogether; · changes in laws and regulations, as well as their interpretations, may adversely affect their business, financial structure or prospects; and · they may have difficulty accessing capital markets to meet future capital needs. 5 Under circumstances where a partner company does not achieve commercial success or achieves lower sales than we anticipate, and the partner company requires additional capital that other stakeholders are not willing or are otherwise unable to provide, we may determine it is in our best interest to advance additional capital to such partner company in order to preserve the partner company’s collateral value and protect our investment.
Royalties generally, and the royalty-related income we expect to receive in the future, will directly or indirectly depend upon the marketing efforts of third parties, particularly large pharmaceutical companies that license the right to manufacture and sell products from technology innovators in exchange for royalty payments from the licensees to the licensors, with whom we may transact.
Generally, royalties and the royalty-related income we expect to receive in the future will directly or indirectly depend upon the marketing efforts of third parties, particularly large pharmaceutical companies that license the right to manufacture and sell products from technology innovators in exchange for royalty payments from the licensees to the licensors, with whom we may transact.
Any of these factors could materially and adversely affect the operations of a partner company, which in turn, would impair our ability to timely collect principal and interest payments owed to us or decrease our royalty-related income. 6 The pharmaceutical industry is subject to numerous risks, including competition, extensive government regulation, product liability, patent exclusivity and commercial difficulties.
Any of these factors could materially and adversely affect the operations of a partner company, which in turn, would impair our ability to timely collect principal and interest payments owed to us or decrease our royalty-related income. The pharmaceutical industry is subject to numerous risks, including competition, extensive government regulation, product liability, patent exclusivity and commercial difficulties.
Although we have endeavored to implement any management and director transition in a non-disruptive manner, such transitions might impact our business, and give rise to uncertainty among our customers, investors, vendors, employees and others concerning our future direction and performance, which may materially and adversely affect our business, financial condition, results of operations and cash flows, and our ability to execute our business model.
Although we have endeavored to implement any management transition in a non-disruptive manner, such transitions might impact our business, and give rise to uncertainty among our customers, investors, vendors, employees and others concerning our future direction and performance, which may materially and adversely affect our business, financial condition, results of operations and cash flows, and our ability to execute our business model.
These business decisions or risks may lead to adverse business or financial consequences for our partner companies, which in turn could adversely affect the performance of our Finance Receivables segment. If we make investments in unsecured debt backed by royalties or revenue interests, those investments might not generate sufficient cash flow to service our debt obligations.
These business decisions or risks may lead to adverse business or financial consequences for our partner companies, which in turn could adversely affect the performance of our Finance Receivables segment. 7 If we make investments in unsecured debt backed by royalties or revenue interests, those investments might not generate sufficient cash flow to service our debt obligations.
If we were to fully avail ourselves of the controlled company rules, you do not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements. If we are unable to obtain additional debt or equity financing on commercially reasonable terms our business could be materially adversely affected.
If we were to fully avail ourselves of the controlled company rules, you do not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements. 16 If we are unable to obtain additional debt or equity financing on commercially reasonable terms our business could be materially adversely affected.
Failure by our partner companies to successfully commercialize pipeline products in which we have an economic interest could have a material adverse effect on our business, financial condition and results of operations. Changes in healthcare laws and other regulations applicable to some of our partner companies’ businesses may constrain their ability to offer their products and services.
Failure by our partner companies to successfully commercialize pipeline products in which we have an economic interest could have a material adverse effect on our business, financial condition and results of operations. 23 Changes in healthcare laws and other regulations applicable to some of our partner companies’ businesses may constrain their ability to offer their products and services.
Efforts to retain or attract key personnel may result in significant additional expenses, which could adversely affect our profitability. Changes in our management may cause uncertainty in, or be disruptive to, our business. Certain of our directors and management team members have been with us in those capacities for only a short time.
Efforts to retain or attract key personnel may result in significant additional expenses, which could adversely affect our profitability. 15 Changes in our management may cause uncertainty in, or be disruptive to, our business. Certain of our directors and management team members have been with us in those capacities for only a short time.
While we have successfully regained compliance, we can provide no assurance that we will continue to maintain compliance with such standards. The trading price of our common stock could be subject to wide fluctuations in response to quarter-to-quarter variations in our operating results and other events or factors.
While we have successfully regained compliance, we can provide no assurance that we will continue to maintain compliance with such standards. 18 The trading price of our common stock could be subject to wide fluctuations in response to quarter-to-quarter variations in our operating results and other events or factors.
If our partner companies incur costly litigation and their personnel are not effectively deployed, the expenses and losses incurred by our partner companies will increase and their profits, if any, will decrease. Third parties have and may assert infringement or other intellectual property claims against our partner companies based on their patents or other intellectual property rights.
If our partner companies incur costly litigation and their personnel are not effectively deployed, the expenses and losses incurred by our partner companies will increase and their profits, if any, will decrease. 22 Third parties have and may assert infringement or other intellectual property claims against our partner companies based on their patents or other intellectual property rights.
Also, registration and other requirements under applicable securities laws and contractual restrictions also may adversely affect our ability to dispose of our partner company holdings on a timely basis. Our financial condition and results of operations will depend on our ability to manage future growth of our Finance Receivables segment effectively.
Also, registration and other requirements under applicable securities laws and contractual restrictions also may adversely affect our ability to dispose of our partner company holdings on a timely basis. 11 Our financial condition and results of operations will depend on our ability to manage future growth of our Finance Receivables segment effectively.
This interpretation was promulgated by the SEC staff in a no-action letter issued to the predecessor of Royalty Pharma plc on August 13, 2010. Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our businesses.
This interpretation was promulgated by the SEC staff in a no-action letter issued to the predecessor of Royalty Pharma plc on August 13, 2010. 20 Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our businesses.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject our partners to more stringent product labeling and post-marketing testing and other requirements. Enteris’ technology or products could give rise to product liability claims.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject our partners to more stringent product labeling and post-marketing testing and other requirements. 12 Enteris’ technology or products could give rise to product liability claims.
In recent years, many such changes have been made, and changes are likely to continue to occur in the future. 14 For example, on August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”).
In recent years, many such changes have been made, and changes are likely to continue to occur in the future. For example, on August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”).
However, the economic environment is dynamic, and our portfolio credit quality could decline in the future. 9 Our allowance for credit losses may not keep pace with changes in the credit-worthiness of our partner companies or in collateral values.
However, the economic environment is dynamic, and our portfolio credit quality could decline in the future. Our allowance for credit losses may not keep pace with changes in the credit-worthiness of our partner companies or in collateral values.
In addition, there can be no assurance that any of the licensees has adequate resources and motivation to continue to produce, market and sell such products in which we have a royalty-related interest.
In addition, there can be no assurance that any of the licensees have adequate resources and motivation to continue to produce, market and sell such products in which we have a royalty-related interest.
Enteris’ success depends on its licensees’ ability to commercialize their products that will generate revenues sufficient to sustain and grow Enteris’ operations. Enteris has determined that it will not pursue clinical development of our product candidates. Enteris’ potential licensee may ever develop and commercialize any other peptide or small molecule product that helps us achieve profitability and growth.
Enteris’ success depends on its licensees’ ability to commercialize their products that will generate revenues sufficient to sustain and grow Enteris’ operations. Enteris has determined that it will not pursue clinical development of our product candidates. Enteris’ potential licensee may never develop and commercialize any other peptide or small molecule product that helps us achieve profitability and growth.
If our partner companies are not adequately capitalized or are unable to generate sufficient income from operations, the increased debt burden caused by increased LIBOR rates could materially and adversely affect the operations of a partner company, which in turn, would impair our ability to timely collect principal and interest payments owed to us.
If our partner companies are not adequately capitalized or are unable to generate sufficient income from operations, the increased debt burden caused by increased referenced rates could materially and adversely affect the operations of a partner company, which in turn, would impair our ability to timely collect principal and interest payments owed to us.
The success of new product offerings will depend on many factors, including the ability to properly anticipate and satisfy customer needs, obtain regulatory approvals on a timely basis, develop and manufacture products in an economic and timely manner, obtain or maintain advantageous positions with respect to intellectual property, and differentiate products from competitors.
The success of new product offerings will depend on many factors, including the ability to properly anticipate and satisfy customer needs, obtain regulatory approvals on a timely basis, develop and manufacture products in an economical and timely manner, obtain or maintain advantageous positions with respect to intellectual property, and differentiate products from competitors.
Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and investment income cannot yet be determined. 10 A rise in LIBOR rates could have an adverse impact on the ability of our partner companies to service their debt obligations to us.
Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and investment income cannot yet be determined. A rise in the reference rates could have an adverse impact on the ability of our partner companies to service their debt obligations to us.
If the lender seizes and liquidates pledged collateral, such collateral will likely be sold at distressed price levels. We will fail to realize the full value of such assets in a distressed sale. The liquidity, market price and volume of our stock are volatile. Our common stock is listed on the Nasdaq Capital Market (“Nasdaq”).
If the lender seizes and liquidates pledged collateral, such collateral will likely be sold at distressed price levels. We will fail to realize the full value of such assets in a distressed sale. The liquidity, market price and volume of our stock are volatile. Our common stock is listed on the Nasdaq.
Most of our borrower partners do not hedge their LIBOR rate exposure, and as a result of an increase of LIBOR above the minimum floor threshold, they will experience an increase in the effective interest rate of their debt obligations to us. If LIBOR increases materially, the increased cost of debt service will similarly increase materially.
Most of our borrower partners do not hedge their reference rate exposure, and as a result of an increase of reference rate above the minimum floor threshold, they will experience an increase in the effective interest rate of their debt obligations to us. If the reference rate increases materially, the increased cost of debt service will similarly increase materially.
Enteris’ most important U.S. manufacturing and drug delivery patents are scheduled to expire from 2024 to 2036, although Enteris has applications pending that could extend that protection. As of December 31, 2022, multiple U.S. patents have been issued and other applications are pending.
Enteris’ most important U.S. manufacturing and drug delivery patents are scheduled to expire from 2024 to 2036, although Enteris has applications pending that could extend that protection. As of December 31, 2023, multiple U.S. patents have been issued and other applications are pending.
Any such impairment could increase our credit risk and adversely affect the assets and results of operations of our Finance Receivables segment. 19 Any abrupt and substantial change in economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments.
Any such impairment could increase our credit risk and adversely affect the assets and results of operations of our Finance Receivables segment. 21 Any abrupt and substantial change in economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments.
Any additional capital that we decided to advance would be subject to additional risk. We could lose all of any additional investment. The realization of any of these risks may materially impact our business, financial condition, results of operations, liquidity and cash flows. 5 We operate in a highly competitive market for investment opportunities.
Any additional capital that we decide to advance would be subject to additional risk. We could lose all of any additional investment. The realization of any of these risks may materially impact our business, financial condition, results of operations, liquidity and cash flows. We operate in a highly competitive market for investment opportunities.
In addition, governmental budgetary constraints effecting the regulatory approval process, new laws, regulations or judicial interpretations of existing laws and regulations might adversely affect a partner company or product in this industry.
In addition, governmental budgetary constraints affecting the regulatory approval process, new laws, regulations or judicial interpretations of existing laws and regulations might adversely affect a partner company or product in this industry.
Our success depends upon the continued services of executive officers and other key personnel, as well as their ability to effectively transition to their successors. We have experienced significant changes in our senior leadership in 2022, including the appointment of a new Chief Executive Officer and Chief Financial Officer.
Our success depends upon the continued services of executive officers and other key personnel, as well as their ability to effectively transition to their successors. We have experienced significant changes in our senior leadership in 2023, including the appointment of a new Chief Executive Officer.
Additionally, any such changes to pharmaceutical product reimbursement similarly could reduce the revenues of the pharmaceutical products from which we receive royalties. 22
Additionally, any such changes to pharmaceutical product reimbursement similarly could reduce the revenues of the pharmaceutical products from which we receive royalties. 24
Most recently, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership.
For instance, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership.
The interest rates of many of our term loans to partner companies are priced using a spread over LIBOR.
The interest rates of some of our term loans to partner companies are priced using a spread over LIBOR.
If LIBOR increases above the floor rate, the net effect will be an increase in the interest cost to the borrower.
If the reference rate increases above the floor rate, the net effect will be an increase in the interest cost to the borrower.
We typically use the U.S. dollar London Interbank Offered Rate (“LIBOR”) as a reference rate in term loans we extend to partner companies such that the interest due to us pursuant to a term loan extended to a partner company is calculated using LIBOR.
We have used U.S. dollar London Interbank Offered Rate (“LIBOR”) as a reference rate in term loans we extend to partner companies such that the interest due to us pursuant to a term loan extended to a partner company is calculated using LIBOR.
Although the ability to issue this preferred stock provides us with flexibility in connection with possible acquisitions and other corporate purposes, it can also be used to make it more difficult for a third party to acquire a majority of our outstanding voting stock.
Although the ability to issue this preferred stock provides us with flexibility in connection with possible acquisitions and other corporate purposes, it can also be used to make it more difficult for a third party to acquire a majority of our outstanding voting stock. We currently have no plans to issue preferred stock.
We have invested and plan to continue investing in cash flow streams produced by life science products that are subject to extensive regulation by the FDA, similar foreign regulatory authorities, and to a lesser extent, other federal and state agencies.
We have invested and plan to continue investing in cash flow streams produced by life science products that are subject to extensive regulation by the Food and Drug Administration (“FDA”), similar foreign regulatory authorities, and to a lesser extent, other federal and state agencies.
Because Carlson controls a majority of our common stock, we are a “controlled company” within the meaning of the Nasdaq listing standards.
Because Carlson controls a majority of our common stock, we are a “controlled company” within the meaning of the Nasdaq Capital Market (“Nasdaq”) listing standards.
Funds affiliated with Carlson can control or exert significant influence over our management and policies through their ownership of a large amount of our common stock. As of December 31, 2022, funds affiliated with Carlson owned in the aggregate 70.8 percent of our combined issued and outstanding common stock and unvested restricted stock.
Funds affiliated with Carlson can control or exert significant influence over our management and policies through their ownership of a large amount of our common stock. As of December 31, 2023, funds affiliated with Carlson owned in the aggregate 73.0 percent of our combined issued and outstanding common stock and unvested restricted stock.
Many of our debt transactions contain LIBOR-based floating interest rates with minimum LIBOR floors. The minimum LIBOR floor insulates partner companies from an increase in LIBOR until the reference LIBOR rate reaches the minimum floor threshold, typically one to two percent.
Many of our debt transactions contain reference rate-based floating interest rates with minimum reference rate floors. The minimum reference rate floor insulates partner companies from an increase in the reference rate until the reference rate reaches the minimum floor threshold.
If our key personnel were to join or form a competitor, our business could similarly suffer a material adverse effect. In addition, we have very few employees, so the loss of any employee could be disruptive to our business.
Accordingly, our retention of our key personnel and our success in recruiting additional personnel is crucial to our success. If our key personnel were to join or form a competitor, our business could similarly suffer a material adverse effect. In addition, we have very few employees, so the loss of any employee could be disruptive to our business.
This limitation would be derived by multiplying the fair market value of the Company’s common stock as of the ownership change by the applicable federal long-term tax-exempt rate, which was 2.92 percent for March 2023.
This limitation would be derived by multiplying the fair market value of our common stock as of the ownership change by the applicable federal long-term tax-exempt rate, which was 3.33 percent for March 2024.
In addition, we could be subject to legal actions by regulatory authorities and others and could be forced to dissolve. 18 In complying with Section 3(c)(5)(A), one of our subsidiaries, SWK Funding LLC (“SWK Funding”), relies on an interpretation that royalty interests that entitle an issuer to collect royalty receivables that are directly based on the sales price of specific biopharmaceutical products that use intellectual property covered by specific license agreements are ICA Exception Qualifying Assets under Section 3(c)(5)(A).
In complying with Section 3(c)(5)(A), one of our subsidiaries, SWK Funding LLC (“SWK Funding”), relies on an interpretation that royalty interests that entitle an issuer to collect royalty receivables that are directly based on the sales price of specific biopharmaceutical products that use intellectual property covered by specific license agreements are ICA Exception Qualifying Assets under Section 3(c)(5)(A).
(“Double Black”), they have the ability to control or exert significant influence over our management and policies, such as the election of our directors, the appointment of new management and the approval of any other action requiring the approval of our stockholders, including any amendments to our certificate of incorporation, a sale of all or substantially all of our assets or a merger or other significant transaction.
Due to the large percentage of ownership by funds affiliated with Carlson, they have the ability to control or exert significant influence over our management and policies, such as the election of our directors, the appointment of new management and the approval of any other action requiring the approval of our stockholders, including any amendments to our certificate of incorporation, a sale of all or substantially all of our assets or a merger or other significant transaction.
Funds associated with Carlson own an aggregate of 70.8 percent (9,093,766 common shares).
Funds associated with Carlson own an aggregate of 73.0 percent (9,093,766 common shares).
Risks Related to Our Business and Structure Our ability to use NOL carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited, and our future cash tax liability may increase. As of December 31, 2022, we had NOL carryforwards for U.S. federal income tax purposes of $124.5 million.
Risks Related to Our Business and Structure Our ability to use NOL carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited, and our future cash tax liability may increase. As of December 31, 2023, we had Net Operating Loss ("NOL") carryforwards for U.S. federal income tax purpose s of $87.7 million.
If we are not able to continue to satisfy the continued listing standards, or qualify for an exemption to such standards, then we could be subject non-compliance status or de-listing. 16 As previously announced, we received a letter from Nasdaq indicating that, as a result of the resignations of four of our directors, we were no longer in compliance with Nasdaq Listing Rules 5605(b)(1), 5605(c)(2), 5605(d)(2) and 5605(e)(1), which require the Board to be comprised of a majority of independent directors, that the audit committee consist of at least three independent members and the compensation committee consist of at least two independent members, and that director nominees be selected, or be recommended for the Board’s selection, by a separate vote of a majority of independent directors or a committee comprised solely of independent directors.
As previously announced, in 2022, we received a letter from Nasdaq indicating that, as a result of the resignations of four of our directors, we were no longer in compliance with Nasdaq Listing Rules 5605(b)(1), 5605(c)(2), 5605(d)(2) and 5605(e)(1), which require the Board to be comprised of a majority of independent directors, that the audit committee consist of at least three independent members and the compensation committee consist of at least two independent members, and that director nominees be selected, or be recommended for the Board’s selection, by a separate vote of a majority of independent directors or a committee comprised solely of independent directors.
The United Kingdom’s Financial Conduct Authority and the administrator of LIBOR have announced that the publication of the most commonly used LIBOR settings will cease to be published or cease to be representative after June 30, 2023. The publication of all other LIBOR settings ceased to be published as of December 31, 2021.
On June 30, 2023, the United Kingdom’s Financial Conduct Authority and the administrator of LIBOR ceased the publication of the most commonly used LIBOR settings. The publication of all other LIBOR settings ceased to be published as of December 31, 2021.
If we make an unsecured investment in a partner company, that partner company may be highly leveraged, and its relatively high debt-to-equity ratio may increase the risk that its operations might not generate sufficient cash to service its debt obligations.
If we make an unsecured investment in a partner company, that partner company may be highly leveraged, and its relatively high debt-to-equity ratio may increase the risk that its operations might not generate sufficient cash to service its debt obligations. In such cases we would not have any collateral to help secure repayment of the obligations owed to us.
Generally, little public information exists about these royalty streams and private companies, and we are required to rely on the ability of our senior management to obtain adequate information to evaluate the potential returns from investing in these assets.
We invest primarily in privately-held royalties and debt backed by royalties or revenue interests issued by private companies. Generally, little public information exists about these royalty streams and private companies, and we are required to rely on the ability of our senior management to obtain adequate information to evaluate the potential returns from investing in these assets.
In such cases we would not have any collateral to help secure repayment of the obligations owed to us. 7 Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations, or those of the companies in our portfolio, which in turn could adversely impact the performance of our Finance Receivables segment.
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations, or those of the companies in our portfolio, which in turn could adversely impact the performance of our Finance Receivables segment.
Even if infringement claims against our partner companies are without merit, defending these types of lawsuits takes significant time, is expensive and may divert management attention from other business concerns. 20 Future legislation, and/or regulations and policies adopted by the FDA or other U.S. or foreign regulatory authorities may increase the time and cost required by some of our partner companies to conduct and complete clinical trials for the product candidates that they develop, and there is no assurance that these companies will obtain regulatory approval to market and commercialize their products in the U.S. and in foreign countries.
Future legislation, and/or regulations and policies adopted by the FDA or other U.S. or foreign regulatory authorities may increase the time and cost required by some of our partner companies to conduct and complete clinical trials for the product candidates that they develop, and there is no assurance that these companies will obtain regulatory approval to market and commercialize their products in the U.S. and in foreign countries.
There can be no assurance that another licensee could be found on favorable terms, or at all, or that the licensor will be able to assume marketing, sales and distribution responsibility for its own account. These factors may materially adversely affect any of our future royalty-related assets.
There can be no assurance that another licensee could be found on favorable terms, or at all, or that the licensor will be able to assume marketing, sales and distribution responsibility for its own account.
In addition, directors are only removable by the affirmative vote of holder of at least two-thirds of all classes of voting stock. These factors may further delay or prevent a change of control of the Company.
These provisions, coupled with the provisions of the Delaware General Corporation Law, may delay or impede a merger, tender offer or proxy contest. In addition, directors are only removable by the affirmative vote of holder of at least two-thirds of all classes of voting stock. These factors may further delay or prevent a change of control of the Company.
Aside from any limited audit rights relating to the activities of the licensees that we may have in certain circumstances, we do not have the rights or ability to manage the operations of the licensees.
These factors may materially adversely affect any of our future royalty-related assets. 9 Aside from any limited audit rights relating to the activities of the licensees that we may have in certain circumstances, we do not have the rights or ability to manage the operations of the licensees.
Most of our term loan agreements with partner companies contain a stated minimum value for LIBOR. and utilize the three-month LIBOR rate as the reference rate. As of December 31, 2022, approximately 64% of term loans with our partner companies utilized LIBOR, including a stated minimum of LIBOR, as a reference rate.
Most of our term loan agreements with partner companies contain a stated minimum value for the reference rate. As of December 31, 2023, approximatel y 18% of term loans with our partner companies utilized LIBOR, including a stated minimum of LIBOR, as a reference rate.
Any business interruptions resulting from geopolitical actions, including war and terrorism, adverse public health developments such as COVID-19, or natural disasters including earthquakes, typhoons, floods and fires, and Enteris’ or its licensees’ inability to identify and validate alternate suppliers and contract manufacturers, could further affect supply chains.
Current licensees of Enteris’ technology generally rely, and future licensees are expected to rely, on third party suppliers and contract manufacturers to manufacture drug products that utilize Enteris’ technology as well. 13 Any business interruptions resulting from geopolitical actions, including war and terrorism, adverse public health developments such as COVID-19, or natural disasters including earthquakes, typhoons, floods and fires, and Enteris’ or its licensees’ inability to identify and validate alternate suppliers and contract manufacturers, could further affect supply chains.
Our ceasing to not be deemed an investment company or to qualify for an exemption from registration as an investment company could materially and adversely affect the value of our common stock.
Our ceasing to not be deemed an investment company or to qualify for an exemption from registration as an investment company could materially and adversely affect the value of our common stock. In addition, we could be subject to legal actions by regulatory authorities and others and could be forced to dissolve.
The Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S. dollar LIBOR with a benchmark rate based on the Secured Overnight Financing Rate (“SOFR”) for contracts governed by U.S. law that have no or ineffective fallback, and in December 2022, the Federal Reserve Board adopted related implementing rules.
The Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S. dollar LIBOR with a benchmark rate based on the Secured Overnight Financing Rate (“SOFR”) for contracts governed by U.S. law that have no or ineffective fallback, and in December 2022, the Federal Reserve Board adopted related implementing rules. 10 SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
Further, the performance of our Finance Receivables segment is substantially dependent upon the underlying performance of the companies in our portfolio, each of which is subject to the risks and factors discussed above. To the extent these companies are adversely impacted by developments in the financial services industry, the performance of our Finance Receivables segment would also be adversely impacted.
Further, the performance of our Finance Receivables segment is substantially dependent upon the underlying performance of the companies in our portfolio, each of which is subject to the risks and factors discussed above.
We are dependent upon our key management personnel for our future success. We depend on the diligence, skill and network of business contacts of our senior management and their access to the investment professionals and the information and deal flow generated by these investment professionals in the course of their investment and portfolio management activities.
We depend on the diligence, skill and network of business contacts of our senior management and their access to the investment professionals and the information and deal flow generated by these investment professionals in the course of their investment and portfolio management activities. Our senior management team evaluates, negotiates, structures, closes, monitors and services our investments.
In the event that we are unable to find suitable third parties to co-invest with us or if such third party fails to close, we may not be able to invest in an otherwise attractive opportunity, which could materially impact our results of operations. 8 Our quarterly and annual operating results are subject to fluctuation as a result of the nature of our business, and if we fail to achieve our investment objective, the market price of our common stock may decline.
In the event that we are unable to find suitable third parties to co-invest with us or if such third party fails to close, we may not be able to invest in an otherwise attractive opportunity, which could materially impact our results of operations.
Companies in the life science industry may also have a limited number of suppliers of necessary components or a limited number of manufacturers for their products, and therefore face a risk of disruption to their manufacturing process if they are unable to find alternative suppliers when needed.
The commercial success of such products and services could be compromised if governmental or third-party payors do not provide coverage and reimbursement, breach, rescind or modify their contracts or reimbursement policies or delay payments for such products and services. 6 Companies in the life science industry may also have a limited number of suppliers of necessary components or a limited number of manufacturers for their products, and therefore face a risk of disruption to their manufacturing process if they are unable to find alternative suppliers when needed.
Additional human testing must be conducted on our partners’ product candidates before they can be approved for commercial sale and such testing requires the investment of significant resources.
Additional human testing must be conducted on our partners’ product candidates before they can be approved for commercial sale and such testing requires the investment of significant resources. Any delay in receiving, or failure to receive, these approvals would adversely affect Enteris’ ability to generate product revenues.
Our senior management team evaluates, negotiates, structures, closes, monitors and services our investments. Our success depends to a significant extent on the efforts, judgment, business relationships, personal reputations and continued service of our senior management team, and other key personnel.
Our success depends to a significant extent on the efforts, judgment, business relationships, personal reputations and continued service of our senior management team, and other key personnel. The loss of the services of any of our key personnel or damage to their personal reputation could have a material adverse effect on our business.
Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation which would materially adversely affect our business and results of operations. Risks Associated with Investments in the Health Care and Life Sciences Industries Public health epidemics, pandemics or outbreaks, including COVID-19, could adversely affect our and our partner companies’ businesses.
Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation which would materially adversely affect our business and results of operations.
In order to utilize the NOLs, the Company must generate taxable income that can offset such carryforwards. 13 The Internal Revenue Service (“IRS”) has not audited our tax returns for any of the years during the carryforward period. We cannot assure you that we would prevail if the IRS were to challenge the availability of the NOLs.
The U.S. federal NOL carryforwards, if not offset against future income, will expire by 2037. We may recognize additional NOLs in the future. In order to utilize the NOLs, we must generate taxable income that can offset such carryforwards. The Internal Revenue Service (“IRS”) has not audited our tax returns for any of the years during the carryforward period.
Consequently, we may not be successful in attracting, motivating and retaining such personnel, and our failure to do so could have a negative effect on our business including our ability to successfully develop, introduce, and market our products which may adversely impact our operating results, or financial condition. 15 Because we are relying on the exemptions from corporate governance requirements as a result of being a “controlled company” within the meaning of the Nasdaq listing standards, you do not have the same protections afforded to stockholders of companies that are subject to such requirements.
Consequently, we may not be successful in attracting, motivating and retaining such personnel, and our failure to do so could have a negative effect on our business including our ability to successfully develop, introduce, and market our products which may adversely impact our operating results, or financial condition.
To the extent Enteris is unable to protect its patents and patent applications, or similar or superior technologies are developed, our investment in our technologies may not yield the benefits that we expect. 12 If Enteris encounters issues with its suppliers or if its licensees encounter issues with their contract manufacturers, Enteris may need to qualify alternative manufacturers or suppliers, which could impair Enteris’ and its licensees’ ability to sufficiently and timely manufacture and supply pharmaceutical products.
If Enteris encounters issues with its suppliers or if its licensees encounter issues with their contract manufacturers, Enteris may need to qualify alternative manufacturers or suppliers, which could impair Enteris’ and its licensees’ ability to sufficiently and timely manufacture and supply pharmaceutical products.
There has also been an increased political and regulatory focus on healthcare laws in recent years, and new legislation could have a material effect on the business and operations of some of our partner companies. 21 We also anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system.
We also anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system.
Under Section 382 of the Internal Revenue Code (the “Code”), a corporation that undergoes an “ownership change” may be subject to limitations on its ability to utilize its pre-change NOL carryforward amounts to offset future taxable income.
If the IRS were successful in challenging our NOLs, all or some portion of the NOLs would not be available to offset any future consolidated income which would negatively impact our results of operations and cash flows. 14 Under Section 382 of the Internal Revenue Code (the “Code”), a corporation that undergoes an “ownership change” may be subject to limitations on its ability to utilize its pre-change NOL carryforward amounts to offset future taxable income.
We currently have no plans to issue preferred stock. 17 Additionally, the Rights Agreement is intended to protect our ability to utilize our NOL carryforwards and make it difficult for a third party to acquire a significant number of shares of our common stock.
Additionally, the Rights Agreement is intended to protect our ability to utilize our NOL carryforwards and make it difficult for a third party to acquire a significant number of shares of our common stock. 19 Our certificate of incorporation and bylaws include provisions that may deter an unsolicited offer to purchase us.
Any delay in receiving, or failure to receive, these approvals would adversely affect Enteris’ ability to generate product revenues. 11 Current and future legislation may increase the difficulty and cost for Enteris or its partners to obtain marketing approval of and the commercialization of their product candidates.
Current and future legislation may increase the difficulty and cost for Enteris or its partners to obtain marketing approval of and the commercialization of their product candidates. This could affect the timing as well as the amount of royalty income Enteris may earn as a result.
Our use of leverage may limit our operational flexibility and increase our overall risk, which may adversely affect our business and results of operations.
In the event that we do not receive distributions or other payments from our subsidiaries, we may be unable to make required payments on our indebtedness. Our use of leverage may limit our operational flexibility and increase our overall risk, which may adversely affect our business and results of operations.
As of December 31, 2022, we had $6.2 million of cash and cash equivalents plus $32.6 million available to be borrowed under our credit facility with Cadence Bank. On November 16, 2022, the Company entered into the Fifth Amendment to Loan and Security Agreement (the “Third Amendment”) with Cadence Bank, N.A. as a lender and the administrative agent.
As of December 31, 2023, we had $4.5 million of cash and cash equivalents plus $47.7 million available to be borrowed under our new credit facility with First Horizon Bank.
We may have limited access to information about privately-held royalty streams and companies in which we invest. We invest primarily in privately-held royalties and debt backed by royalties or revenue interests issued by private companies.
To the extent these companies are adversely impacted by developments in the financial services industry, the performance of our Finance Receivables segment would also be adversely impacted. 8 We may have limited access to information about privately-held royalty streams and companies in which we invest.
Removed
Under circumstances where a partner company does not achieve commercial success or achieves lower sales than we anticipate, and the partner company requires additional capital that other stakeholders are not willing or are otherwise unable to provide, we may determine it is in our best interest to advance additional capital to such partner company in order to preserve the partner company’s collateral value and protect our investment.
Added
Our quarterly and annual operating results are subject to fluctuation as a result of the nature of our business, and if we fail to achieve our investment objective, the market price of our common stock may decline.
Removed
The commercial success of such products and services could be compromised if governmental or third-party payors do not provide coverage and reimbursement, breach, rescind or modify their contracts or reimbursement policies or delay payments for such products and services.
Added
To the extent Enteris is unable to protect its patents and patent applications, or similar or superior technologies are developed, our investment in our technologies may not yield the benefits that we expect.
Removed
SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
Added
We cannot assure you that we would prevail if the IRS were to challenge the availability of the NOLs.
Removed
This could affect the timing as well as the amount of royalty income Enteris may earn as a result.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our corporate headquarters and the location of our Finance Receivables segment are in Dallas, Texas, where we lease approximately 2,400 square feet of space. The Pharmaceutical Development segment’s headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space. We believe these facilities are adequate for our business requirements.
Biggest changeITEM 2. PROPERTIES Our corporate headquarters and the location of our Finance Receivables segment are in Dallas, Texas, where we lease two office spaces totaling approximately 6,850 square feet of space. The Pharmaceutical Development segment’s headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space.
Added
We believe these facilities are adequate for our business requirements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe table below summarizes information about our purchases of common stock during the three months ending December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares That May Yet Be Purchased Under the Plan October 1, 2022 - October 31, 2022 14,902 $ 17.64 14,902 664,921 November 1, 2022 - November 30, 2022 7,968 19.02 7,968 656,953 December 1, 2022 - December 31, 2022 6,568 18.74 6,568 650,385 29,438 $ 18.26 29,438 As of December 31, 2022, the Company has repurchased 63,901 shares under the share repurchase program at a total cost of $1.1 million, or $17.78 per share.
Biggest changeThe purchase period for the New Repurchase Program is May 16, 2023 through May 16, 2024. 26 The table below summarizes information about our purchases of common stock during the three months ending December 31, 2023 (in thousands, except per share data): 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 October 1, 2023 - October 31, 2023 7,104 $ 15.75 7,104 $ 4,694 November 1, 2023 - November 30, 2023 1,283 16.10 1,283 4,673 December 1, 2023 - December 31, 2023 5,846 17.37 5,846 4,571 14,233 $ 16.45 14,233 As of December 31, 2023, the Company has repurchased an aggregate of 113,639 shares under the Prior Repurchase Program and an aggregate of 326,088 shares under the New Repurchase Program at a total cost of $7.5 million, or $16.97 per share.
The actual timing, number and value of shares repurchased under the 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 trading plan.
The actual timing, number and value of shares repurchased under the New 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 New Repurchase Program.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . Market Information Since January 22, 2020, our common stock has been listed on the Nasdaq Capital Market, under the symbol “SWKH.” Holders of Record There were approximately 90 stockholders of record of our common stock as of February 27, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . Market Information Since January 22, 2020, our common stock has been listed on the Nasdaq Capital Market, under the symbol “SWKH.” Holders of Record There were approximately 88 stockholders of record of our common stock as of February 27, 2024.
Issuer Purchases of Equity Securities O n May 31, 2022, the board of directors of the Company (the “Board”) authorized a share repurchase program under which the Company was authorized to repurchase up to $10.0 million of the Company’s outstanding shares of common stock from time to time until May 15, 2023, through a Rule 10b5-1 trading plan in compliance with all applicable laws and regulations, including Rule 10b-18 of the Securities Exchange Act.
Issuer Purchases of Equity Securities On May 31, 2022, the Board authorized a share repurchase program under which the Company was previously authorized to repurchase up to $10.0 million of the Company’s outstanding shares of common stock from time to time until May 15, 2023, through a Rule 10b5-1 trading plan in compliance with all applicable laws and regulations, including Rule 10b-18 of the Exchange Act (the “Prior Repurchase Program”).
Our Board may also suspend or discontinue the repurchase program at any time, in its sole discretion. The purchase period is July 1, 2022 through May 15, 2023.
Our Board may also suspend or discontinue the New Repurchase Program at any time, in its sole discretion.
As of December 31, 2022, the maximum number of shares that may yet be purchased under the plan was approximately $8.9 million, or 650,385 shares of common stock.
As of December 31, 2023, the maximum dollar value of shares that may yet be purchased under the New Repurchase Program was approximately $4.6 million shares of common stock. No shares are available for repurchase under the Prior Repurchase Program, which expired on May 15, 2023.
Added
The purchase period for the Prior Repurchase Program was July 1, 2022 through May 15, 2023.
Added
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 “New Repurchase Program”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther (expense) income, net for the year ended December 31, 2022 also includes a $0.2 million loss from the remeasurement of foreign currency transactions into our functional currency, net of changes in fair value of the foreign currency forward contract. 32 Other income, net for the year ended December 31, 2021 reflected a net fair market value gain of $0.3 million on the change in fair value of our warrant assets and a net fair market value gain of $1.8 million on the change in fair value of our Misonix and Bioventus common stock.
Biggest changeAdditionally, a realized loss $0.2 million was reflected on the sale of our Bioventus and Harrow common stock, in addition to a $0.2 million loss from the remeasurement of foreign currency transactions into our functional currency, net of changes in fair value of the foreign currency forward contract.
We review our finance receivables periodically to determine the probability of loss, and record charge-offs after considering such factors as delinquencies, the financial condition of obligors, the value of underlying collateral, as well as third party credit enhancements such as guarantees. The process of determining the level of the allowance for loan losses requires a high degree of judgment.
We review our finance receivables periodically to determine the probability of loss, and record charge-offs after considering such factors as delinquencies, the financial condition of obligors, the value of underlying collateral, as well as third-party credit enhancements such as guarantees. The process of determining the level of the allowance for credit losses requires a high degree of judgment.
Other administrative service revenues are recognized when contractual obligations are fulfilled or as services are provided. Pharmaceutical Development Segment Our 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.
Other administrative service revenues are recognized when contractual obligations are fulfilled or as services are provided. 32 Pharmaceutical Development Segment Our 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.
Our financial instruments not required to be adjusted to fair value on a recurring basis consist principally of cash and restricted cash, accounts and finance receivables, accounts payable, and accrued expenses. We believe the carrying amount of cash and cash equivalents, accounts and finance receivable, accounts payable and accrued expenses approximate fair value due to their relatively short maturities.
Our financial instruments not required to be adjusted to fair value on a recurring basis consist principally of cash, cash equivalents, and accounts and finance receivables, accounts payable, and accrued expenses. We believe the carrying amount of cash and accounts and finance receivable, accounts payable and accrued expenses approximate fair value due to their relatively short maturities.
Allowance for Loan Losses The allowance for loan losses is reviewed for adequacy based on portfolio collateral values and credit quality indicators, including non-performing assets, evaluation of portfolio diversification and concentration as well as economic conditions to determine the need for a qualitative adjustment.
Allowance for Credit Losses The allowance for credit losses is reviewed for adequacy based on portfolio collateral values and credit quality indicators, including non-performing assets, evaluation of portfolio diversification and concentration as well as economic conditions to determine the need for a qualitative adjustment.
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. 28 Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
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 The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
Discussion of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Discussion of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, refer to Note 1 of the notes to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data . 30 Results of Operations This section of this Annual Report generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, refer to Note 1 of the notes to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data . 33 Results of Operations This section of this Annual Report generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Other (Expense) Income, Net Other expense, net for the year ended December 31, 2022 reflected a net fair market value gain of $0.4 million on the change in fair value of our warrant assets and a net fair market value loss $0.5 million on the change in fair value of our Bioventus and Harrow common stock.
Other income, net for the year ended December 31, 2022 reflected a net aggregate fair market value gain of $0.4 million on our warrant derivatives and a net fair value loss $0.5 million on the change in fair value of our Bioventus and Harrow common stock.
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 .
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; and 4.
The federal research credits begin to expire in 2023 and will fully expire by 2042. Liquidity and Capital Resources As of December 31, 2022, we had $6.2 million in cash and cash equivalents, compared to $42.9 million in cash and cash equivalents as of December 31, 2021.
The federal federal research credits begin to expire in 2023 and will fully expire by 2042. Liquidity and Capital Resources As of December 31, 2023, we had $5.2 million in cash, cash equivalents and restricted cash, compared to $6.2 million as of December 31, 2022.
The valuation allowance against deferred tax assets was $6.7 million and $16.3 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022, we believe it is more likely than not that we will realize approximately $24.5 million of benefit from the U.S. federal and state deferred tax assets in the future.
The valuation allowance against deferred tax assets was $0 and $6.7 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023, we believe it is more likely than not that we will realize approximately $28.3 million of benefit from the U.S. federal and state deferred tax assets in the future.
Change in Fair Value of Contingent Consideration We recognized a $5.2 million loss in change in fair value of acquisition-related contingent consideration during the year ended December 31, 2022 and recognized a $0.3 million gain in 2021.
Change in Fair Value of Contingent Consideration We recognized a $6.3 million gain from the change in fair value of acquisition-related contingent consideration during the year ended December 31, 2023 and recognized a $5.2 million loss in 2022.
TBD (8) — — — Yes DxTerity Diagnostics, Inc. 2,019,231 (8) — — — Yes Epica International, Inc.
TBD — — — DxTerity Diagnostics, Inc. 2,019,231 — — — Epica International, Inc.
As of December 31, 2022, we had $11.9 million of unfunded commitments. Please refer to Part II, Item 8, Financial Statements , Note 7 of the notes to the consolidated financial statements for further information regarding the Company’s commitments and contingencies. 34
As of December 31, 2023, we had $5.0 million of unfunded commitments. Please refer to Part II, Item 8, Financial Statements , Note 7 of the notes to the consolidated financial statements for further information regarding the Company’s commitments and contingencies. 37
Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes the results of our operations for the years ended December 31, 2022 and 2021: (in millions) For the Year Ended December 31, 2022 2021 Change Revenues $ 41.5 $ 56.2 $ (14.7 ) Provision for credit losses 3.5 — 3.5 Interest expense 0.3 0.4 (0.1 ) Pharmaceutical manufacturing, research and development expense 7.0 7.3 (0.3 ) Change in fair value of acquisition-related contingent consideration 5.2 (0.3 ) 5.5 Depreciation and amortization expense 2.6 4.1 (1.5 ) General and administrative expense 13.0 13.6 (0.6 ) Other (expense) income, net (0.3 ) 2.0 (2.3 ) Income tax (benefit) expense (4.0 ) 7.1 (11.1 ) Net income 13.5 25.9 (12.4 ) Revenues We generated revenues of $41.5 million and $56.2 million for the years ended December 31, 2022 and 2021, respectively.
Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes the results of our operations for the years ended December 31, 2023 and 2022: (in millions) For the Year Ended December 31, 2023 2022 Change Revenues $ 37.8 $ 41.5 $ (3.7 ) Allowance for credit losses 1.9 3.5 (1.6 ) Interest expense 1.8 0.3 1.5 Impairment of goodwill 8.4 — 8.4 Pharmaceutical manufacturing, research and development expense 3.4 7.0 (3.6 ) Increase (decrease) in fair value of acquisition-related contingent consideration (6.3 ) 5.2 (11.5 ) Depreciation and amortization expense 2.6 2.6 — General and administrative expense 11.2 13.0 (1.8 ) Other (expense) income, net — (0.5 ) 0.5 Income tax expense (1.3 ) (4.0 ) 2.7 Net income 15.9 13.5 2.4 Revenues We generated revenues of $37.8 million and $41.5 million for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2022, we had NOLs for federal income tax purposes of $124.5 million. The federal NOL carryforwards, if not offset against future income, will expire by 2037. Approximately $4.0 million of the $124.5 million can be carried forward indefinitely. We also had federal research credit carryforwards of $2.9 million.
As of December 31, 2023, we had NOLs for federal income tax purposes of $87.7 million. The federal NOL carryforwards, if not offset against future income, will expire by 2037. Approximately $6.9 million of the $87.7 million can be carried forward indefinitely. We also had federal research credit carryforwards of $3.0 million.
The $14.7 million decrease in revenue for the year ended December 31, 2022, consisted of a $10.9 million decrease in Pharmaceutical Development segment revenue and a $3.8 million decrease in Finance Receivables segment revenue.
The $3.7 million decrease in revenue for the year ended December 31, 2023, consisted mainly of a $4.3 million decrease in Pharmaceutical Development segment revenue and a $0.9 million increase in Finance Receivables segment revenue.
Based on historical and expected future operating performance, we concluded that it was more likely than not that we will not be able to realize the full benefit of the U.S. federal and state deferred tax assets in the future.
As of December 31, 2023 and 2022, our cumulative gross deferred tax assets were $28.4 million and $33.1 million, respectively. Based on historical and expected future operating performance, we concluded that it was more likely than not that we will not be able to realize the full benefit of the U.S. federal and state deferred tax assets 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 2022.
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 2023.
The terms of these arrangements typically include payment to us 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. 29 In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Please refer to Part I, Item 1, Business and Part II, Item 8, Financial Statements , Notes 1 and 11 of the notes to the consolidated financial statements for further information regarding segment information. 25 Finance Receivables Portfolio Overview The table below provides an overview of our outstanding transactions as of, and for the year ended, December 31, 2022 (in thousands, except rate, share and per share data): Royalty Purchases Licensed Technology Footnote Funded Amount GAAP Balance Revenue (Loss) Recognized Active Investment as of 12/31/22 Beleodaq® Oncology treatment (1) $ 7,600 $ — $ 799 No Besivance® Ophthalmic antibiotic (2) 6,000 — 24 Yes Best ABT, Inc.
Please refer to Part II, Item 8, Financial Statements , Note 13 of the notes to the consolidated financial statements for further information regarding the Option and Asset Purchase Agreement with Aptar. 28 Finance Receivables Portfolio Overview The tables below provide an overview of our outstanding transactions as of, and for the year ended, December 31, 2023 (in thousands, except rate, share and per share data): Royalty Purchases Licensed Technology Footnote Funded Amount GAAP Balance Revenue (Loss) Recognized Besivance® Ophthalmic antibiotic (1) $ 6,000 $ — $ 23 Best ABT, Inc.
Pharmaceutical Manufacturing, Research and Development Expense Pharmaceutical manufacturing, research and development expense decreased from $7.3 million for the year ended December 31, 2021 to $7.0 million for the year ended December 31, 2022. The $0.3 million decrease was primarily due to a decrease in expenses related to internal pipeline programs.
Pharmaceutical Manufacturing, Research and Development Expense Pharmaceutical manufacturing, research and development expense decreased from $7.0 million for the year ended December 31, 2022 to $3.4 million for the year ended December 31, 2023. The $3.6 million decrease was primarily due to a reduction in headcount, as well as a reduction in research and development and clinical trial expenditures.
The carrying amount of the liability may fluctuate significantly, and actual amounts paid may be materially different from the estimated value of the liability. Depreciation and Amortization The $1.5 million decrease in depreciation and amortization expense for the year ended December 31, 2022 primarily consists of a decrease in amortization expense related to the intangible assets of Enteris.
The carrying amount of the liability may fluctuate significantly, and actual amounts paid may be materially different from the estimated value of the liability. Depreciation and Amortization Depreciation and amortization expense for the year ended December 31, 2023 and 2022 was $2.6 million. Amortization expense is aligned with the expected future cash flows of the intangible assets.
(“Harrow”) Common Stock — (7) N/A — 6 No Epica International, Inc. 25,000 N/A — — Yes Sincerus Pharmaceuticals, Inc. 26,575 N/A — — Yes Warrants to Purchase Stock Number of Shares Footnote Exercise Price per Share GAAP Balance Change in Fair Value Active Investment as of 12/31/22 4Web, Inc.
First lien (3) 07/01/26 9,152 9,128 12.5 % 749 29 Marketable Investments Number of Shares Footnote Funded Amount GAAP Balance Change in Fair Value Active Investment as of 12/31/23 Secured Royalty Financing (Marketable Investment) N/A (2), (3) $ 3,000 $ 48 $ — Yes Epica International, Inc. 25,000 N/A — — Yes Sincerus Pharmaceuticals, Inc. 26,575 N/A — — Yes Warrants to Purchase Stock Number of Shares Footnote Exercise Price per Share GAAP Balance Change in Fair Value 4Web, Inc.
The decrease in Pharmaceutical Development segment revenue included $5.0 million of milestone revenue related to Enteris’ non-exclusive commercial license agreement (the “ License Agreement”) with Cara Therapeutics, Inc. (“Cara”) received during the year ended December 31, 2022, compared to $15.0 million of milestone revenue for the same period of 2021.
The decrease in Pharmaceutical Development segment revenue was primarily due to $5.0 million of milestone revenue related to Enteris’ license agreement ("License Agreement") with Cara Therapeutics, Inc. ("Cara") received during the year ended December 31, 2022, and no similar milestone revenue was recognized during year end December 31, 2023.
Income Tax (Benefit) Expense During the year ended December 31, 2022 and 2021, we recognized income tax benefit of $4.0 million and income tax expense of $7.1 million, respectively.
Income Tax (Benefit) Expense During the years ended December 31, 2023 and 2022, we recognized income tax benefit of $1.3 million and $4.0 million, respectively. The $2.7 million decrease in income tax benefit is mainly the result of releasing the valuation allowance against deferred tax assets.
Provision for Credit Losses and Impairment Expense We recognized provision for credit loss expense of $3.5 million on our cost method investment during the year ended December 31, 2022 (please refer to Part II, Item 8, Financial Statements and Supplementary Data , Note 3 of the notes to the consolidated financial statements for further information on provision for credit losses).
We recognized Allowance for credit loss expense of $1.9 million and $3.5 million during the years ended December 31, 2023 and 2022, respectively (please refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 3 of the notes to the consolidated financial statements for further information on the allowance for credit losses). 34 Interest Expense Interest expense consists of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027 (“Notes”), unused line of credit and maintenance fees, as well as amortization of debt issuance costs.
We expect these assets to generate positive cash flows in 2023. However, 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 with a LIBOR-based interest rate floor.
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.
TBD $ — $ — $ — Yes AOTI, Inc. 92,490 — — — Yes Acer Therapeutics, Inc. 150,000 2.46 297 70 Yes Acer Therapeutics, Inc. 100,000 1.51 210 118 Yes Acerus Pharmaceuticals Corporation 7,764,004 (1) 0.053 CAD 5 (97 ) Yes Aziyo Biologics 157,895 6.65 517 (263 ) Yes Aziyo Biologics 30,075 6.65 99 16 Yes BIOLASE, Inc. 22,039 0.39 5 (178 ) Yes Biotricity, Inc. 57,536 6.26 9 (165 ) Yes CeloNova BioSciences, Inc.
TBD $ — $ — $ — AOTI, Inc. 92,490 — — — Acer Therapeutics, Inc. 150,000 2.46 — (185 ) Acer Therapeutics, Inc. 100,000 1.51 — (132 ) Acer Therapeutics, Inc. 250,000 2.39 — (259 ) Acer Therapeutics, Inc. 500,000 1.00 — 24 Acerus Pharmaceuticals Corporation — — — (5 ) Aziyo Biologics, Inc. 157,895 6.65 283 (232 ) Aziyo Biologics, Inc. 30,075 6.65 54 (45 ) BIOLASE, Inc. 22,039 9.80 — (4 ) Biotricity, Inc. 57,536 6.26 3 (7 ) CDMO Manufacturer 211,442 1.42 — — CeloNova BioSciences, Inc.
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. 33 As of December 31, 2022, our finance receivables portfolio contains $236.6 million of finance receivables and $0.1 million of marketable investments.
To a lesser extent, realizing capital appreciation from equity-related investments in the life science sector. As of December 31, 2023, our finance receivables portfolio contains $274.5 million of net finance receivables and $48,000 of marketable investments. We expect these assets to generate positive cash flows in 2024.
Oncology diagnosis (3), (4) 5,784 2,947 — Yes Coflex®/Kybella® Spinal stenosis/submental fullness 4,350 3,902 503 Yes Cambia® NSAID migraine treatment (3) 8,500 598 (264 ) Yes Forfivo XL® Depressive disorder treatment 6,000 1,401 1,074 Yes Ideal Implant, Inc.
Oncology diagnosis (2), (3) 5,784 2,587 — Coflex®/Kybella® Spinal stenosis/submental fullness 4,350 3,212 (270 ) Cambia® NSAID migraine treatment (4) 8,500 — 100 Duo Royalty Japanese Women’s health/cystic fibrosis 15,488 13,588 2,701 Flowonix Medical, Inc. Drug delivery device (3), (5) 10,433 10,433 — Forfivo XL® Depressive disorder treatment 6,000 1,340 1,053 Ideal Implant, Inc.
Amortization expense is aligned with the expected future cash flows of the intangible assets. General and Administrative General and administrative expenses consist primarily of compensation, including stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses.
General and Administrative General and administrative expenses consist primarily of compensation, including 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 $11.2 million for the year ended December 31, 2023 from $13.0 million for the year ended December 31, 2022.
The $3.8 million decrease in Finance Receivables segment revenue was primarily due to a $5.6 million net decrease in royalty revenue which was the result of the achievement of return premiums that caused a step down in royalty rates, which was partially offset by a net increase of $1.8 million in interest and fees earned on finance receivables.
The increase was partially offset by a net $1.2 million decrease in royalty revenue when compared to the same period of the previous year and an $10.5 million decrease in interest, royalties and fees earned on finance receivables that were paid off in 2022.
First lien 12/21/26 12,364 12,291 11.5 % 1,639 Yes Epica International, Inc. First lien 07/23/24 12,000 12,452 9.5 % 1,506 Yes eTon Pharmaceuticals, Inc. First lien 11/13/24 6,615 6,707 10.0 % 915 Yes Exeevo, Inc. First lien 07/01/27 5,000 4,975 12.0 % 402 Yes Flowonix Medical, Inc.
First lien 12/21/26 12,364 12,493 14.5 % 2,286 CDMO Manufacturer First lien 09/13/27 5,000 5,026 13.3 % 234 Epica International, Inc. First lien 07/23/24 9,750 10,485 9.5 % 1,863 eTon Pharmaceuticals, Inc. First lien 11/13/24 5,460 5,696 10.0 % 972 Exeevo, Inc.
TBD — — — Yes Assets Revenue Recognized Total finance receivables $ 236,555 $ 35,461 Total marketable investments 76 — Cost method investment — — Fair value of warrant assets 1,220 — Total assets/revenues $ 237,851 $ 35,461 27 (1) Finance receivable was paid off during 2022. (2) US royalty was paid off during the year ended December 31, 2021.
TBD — — — 30 Assets Revenue Recognized Total gross finance receivables $ 288,405 $ 36,346 Total marketable investments 48 — Fair value of warrant assets 1,759 — Total gross assets/revenues $ 290,212 $ 36,346 (1) US royalty was paid off during the year ended December 31, 2021. SWK continues to receive insignificant royalties on international sales.
TBD — — — Yes eTon Pharmaceuticals, Inc. 51,238 5.86 41 (54 ) Yes eTon Pharmaceuticals, Inc. 18,141 6.62 15 (19 ) Yes Exeevo, Inc. 930 — — — Yes EyePoint Pharmaceuticals, Inc. 40,910 11.00 20 (257 ) Yes EyePoint Pharmaceuticals, Inc. 7,773 19.30 2 (39 ) Yes Flowonix Medical, Inc. 155,561 (4), (5) — — — Yes Harrow Health, Inc. — (7) — — 1,285 No MedMinder Systems, Inc. 72,324 — — — Yes MolecuLight, Inc.
TBD — — — eTon Pharmaceuticals, Inc. 51,239 5.86 97 53 eTon Pharmaceuticals, Inc. 18,141 6.62 37 20 Exeevo, Inc. 930 — — — EyePoint Pharmaceuticals, Inc. 40,910 11.00 711 690 EyePoint Pharmaceuticals, Inc. 7,773 19.30 125 123 Shield Warrant 8,910,540 — 449 (96 ) MedMinder Systems, Inc. 57,859 — — — MolecuLight, Inc.
The primary driver of the $36.7 million decrease in our cash balance was $95.1 million of investment funding, net of deferred fees and origination expenses and including $2.8 million of collateral on forward currency exchange contract; $21.7 million for payments of accounts payable, payroll and benefits expense, including $2.8 million for Enteris’ internal pipeline projects and capital expenditures; $6.0 million of repayments our credit facility; and $1.1 million to repurchase shares of our common stock on the open market.
The increase in cash and cash equivalents was offset by $74.1 million of investment funding, net of deferred fees and origination expenses; payroll, accounts payable and credit facility closing costs of $18.4 million; and $6.3 million to repurchase shares of the Company’s common stock in the open market.
Please see part II, item 8, footnote 5 of the notes to the consolidated financial statements for further information. (8) Finance receivable was paid off during the year ended December 31, 2021.
Please refer to Part I, Item 1, Business and Part II, Item 8, Financial Statements , Notes 1 and 11 of the notes to the consolidated financial statements for further information regarding segment information.
Women’s health 10,000 3,511 687 Yes Term Loans Type Footnote Maturity Date Principal GAAP Balance Rate Revenue (Loss) Recognized Active Investment as of 12/31/22 4Web, Inc. First lien 12/31/24 $ 31,022 $ 31,495 16.0 % $ 4,542 Yes AOTI, Inc. First lien 03/21/27 12,000 12,022 11.0 % 1,318 Yes Acer Therapeutics, Inc.
Aesthetics (3), (6) 3,834 3,834 — Iluvien® Diabetic macular edema 16,501 14,650 2,041 Immune Globulin Portfolio Immune Globulin Therapeutics 14,100 14,197 — Veru, Inc. Women’s health 10,000 3,419 526 Term Loans Type Footnote Maturity Date Principal GAAP Balance Rate Revenue (Loss) Recognized 4Web, Inc. First lien 12/31/24 $ 29,411 $ 31,807 12.8 % $ 4,769 AOTI, Inc.
First lien 03/04/24 6,942 7,322 12.0 % 1,476 Yes Acerus Pharmaceuticals Corporation First lien (1) 10/11/23 — — 12.0 % 538 No Aziyo Biologics, Inc. First lien 08/10/27 25,000 24,566 11.5 % 1,219 Yes B&D Dental Corporation First lien (1) 12/10/18 — — 14.0 % 2,401 No BIOLASE, Inc. First lien 05/31/25 13,300 13,836 10.5 % 1,931 Yes Biotricity, Inc.
First lien 03/21/27 12,000 12,104 11.0 % 1,989 Acer Therapeutics, Inc. First lien (7) 03/04/24 — — 12.0 % 1,560 Elutia, Inc. First lien 08/10/27 23,045 24,285 12.0 % 3,992 BIOLASE, Inc. First lien 05/31/25 13,135 14,015 11.3 % 2,263 Biotricity, Inc.
Removed
Environmental, Social and Governance As overseers of risk and stewards of long-term enterprise value, our management and Board play a vital role in assessing, identifying and understanding the potential impact and related risks of environmental, social and governance (“ESG”) issues on the organization’s operating model.
Added
With an effective date of January 1, 2024, we entered into an exclusive option and asset purchase agreement with Aptar on March 14, 2024 which granted Aptar an exclusive option to acquire certain of Enteris’ assets related to its business of providing good manufacturing practice (GMP) manufacturing and clinical supply services through Phase 1 and 2 to third parties, subject to certain exclusions.
Removed
Our management and Board are committed to identifying those ESG issues most likely to impact business operations and growth by focusing our investment strategy around supporting innovative, growth-oriented companies in the life sciences industry that maximize both social and investment value.
Added
Aptar must exercise the option by or before January 1, 2026.
Removed
Among the ESG issues we support within our company, we are committed to recruiting, motivating and developing a diversity of talent. We promote and foster a company culture where every voice is welcome, heard and respected, regardless of age, gender, race, religion, sexual orientation, physical conditions, cultural background or country of origin.
Added
First lien 07/01/27 6,952 6,924 15.0 % 960 Journey Medical Corporation First lien 12/27/27 15,000 14,802 12.8 % 24 MedMinder Systems, Inc. First lien 08/18/27 20,000 20,107 12.9 % 2,849 MolecuLight, Inc. First lien 12/29/26 10,000 10,227 12.8 % 1,867 Nicoya Lifesciences, Inc.
Removed
The nature of our business supports environmental sustainability by being mindful of products we and our business partners use in our businesses. We promote recycling to reduce landfill, and we offer our employees a hybrid work model, which allows employees the flexibility to work remotely, thereby reducing the carbon output from commuting in cars or buses.
Added
First lien 11/30/26 6,000 5,971 12.8 % 221 NeoLight, LLC First lien 02/17/27 5,000 5,016 13.5 % 720 Shield Therapeutics, Plc First lien 09/28/28 20,000 19,325 14.3 % 799 SKNV First lien 05/15/27 13,497 13,734 10.4 % 2,055 Trio Healthcare Ltd.
Removed
Aesthetics (4) 3,000 3,789 402 Yes Iluvien® Diabetic macular edema 16,501 15,543 2,211 Yes Narcan® Opioid overdose treatment (1) 17,500 — 3,921 No Duo Royalty Japanese women’s health/cystic fibrosis 15,488 16,028 — Yes Ostomy Products Royalty Ostomy products (1) 3,900 — 1,927 No Veru, Inc.
Added
(2) Investment considered partially impaired. (3) Investment on non-accrual. (4) Investment was paid off during the year ended December 31, 2023. (5) Flowonix Medical assets were sold to Algorithm Sciences, Inc. during the year ended December 31, 2023.
Removed
First lien (4), (5) 12/23/25 11,942 11,304 14.0 % — Yes Keystone Dental Group First lien (1) 08/01/23 — — 11.5 % 888 No MedMinder Systems, Inc. First lien 08/18/27 20,000 19,902 10.3 % 954 Yes MolecuLight, Inc. First lien 12/29/26 10,000 10,059 12.5 % 1,482 Yes Sincerus Pharmaceuticals, Inc.
Added
In exchange for releasing its lien, the Flowonix estate received $2.5M cash and is expected to receive royalties on sales of two products. The finance receivable is now classified as a royalty.
Removed
First lien 05/15/27 13,497 13,516 10.4 % 1,914 Yes Trio Healthcare Ltd. First lien 07/01/26 8,428 8,389 12.5 % 1,052 Yes 26 Cost Method Investment Licensed Technology Footnote Maturity Date Principal GAAP Balance Rate Revenue (Loss) Recognized Active Investment as of 12/31/22 Tissue Regeneration Therapeutics, Inc.
Added
(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 beginning in 2024. (7) Loan was sold to a third party during the year ended December 31, 2023.
Removed
(“TRT”) Umbilical cord banking (6) N/A $ — $ — N/A — Yes Marketable Investments Number of Shares Footnote Funded Amount GAAP Balance Change in Fair Value Active Investment as of 12/31/22 Secured Royalty Financing (Marketable Investment) N/A (4) $ 3,000 $ 76 $ — Yes Bioventus, Inc.
Added
The terms of these arrangements typically include payment to us 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.
Removed
(“Bioventus”) Common Stock — (7) N/A — (534 ) No Harrow Health, Inc.
Added
The $0.9 million increase in Finance Receivables segment revenue was primarily due to $9.0 million increase in interest and fees earned due to funding new and existing loans and a $3.8 million increase in interest earned on our finance receivables due to an overall increase in reference rates.
Removed
SWK continues to receive insignificant royalties on international sales. (3) Investment considered impaired. (4) Investment on nonaccrual. (5) Flowonix is evaluating strategic alternatives for the business. (6) A provision for credit losses was recognized during the fourth quarter of 2022. (7) Marketable investment was sold during the fourth quarter of 2022.
Added
Allowance for Credit Losses Our allowance 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.
Removed
We did not recognize any credit loss provision or impairment expense for the year ended December 31, 2021. 31 Interest Expense Interest expense consists of interest accrued on our revolving line of credit, unused line of credit and maintenance fees, as well as amortization of debt issuance costs.
Added
Interest expense increased to $1.8 million for the year ended December 31, 2023 from $0.3 million for the year ended December 31, 2022. This increase in interest expense was mainly due to issuing approximately $32.9 million of Notes in an underwritten public offering in October of 2023.
Removed
Interest expense decreased to $0.3 million for the year ended December 31, 2022 from $0.4 million for the year ended December 31, 2021. This slight decrease in interest expense was due to a lower average outstanding balance on our credit facility during the year ended December 31, 2022 when compared to the year ended December 31, 2021.
Added
Additionally, during the year ended December 31, 2023 there was acceleration of debt issuance costs related to the Prior Credit Agreement with Cadence Bank, as well as interest expense incurred on both the Prior Credit Agreement and the new Credit Agreement with First Horizon Bank.
Removed
General and administrative expenses decreased to $13.0 million for the year ended December 31, 2022 from $13.6 million for the year ended December 31, 2021.
Added
See Note 6 for further information on the Notes, new Credit Agreement, and Prior Credit Agreement. Impairment of Goodwill We recognized a $8.4 million impairment charge during the year ended December 31, 2023. As part of the Company’s annual goodwill impairment analysis, the Company elected to bypass the qualitative goodwill impairment assessment and proceed directly with a quantitative assessment.
Removed
The $0.6 million decrease was primarily due to a $1.4 million decrease in corporate strategic planning and related special committee board fees, as well as a $0.7 million decrease in stock-based compensation expense related to the forfeiture of stock-options held by former employees and board members upon their departure in 2022.
Added
The goodwill impairment test concluded that the fair value of the Company’s Pharmaceutical Development reporting unit did not exceed the carrying amount and the Company recognized an impairment charge of $8.4 million and reduced the goodwill balance to $0. Refer to Note 2 for further information.
Removed
The decrease was partially offset by a $1.3 million increase in audit and legal fees related to amending the Company’s Articles of Incorporation and Bylaws and other corporate governance, financing and strategic matters.
Added
The $1.8 million decrease was primarily driven by a one-time severance payment of $1.1 million paid to the former CEO during the three months ended September 30, 2022; a $0.8 million decrease in one-time professional fees and other expense related to corporate strategic planning; and a net $0.5 million decrease in Pharmaceutical Development segment operational expenses due to a reduction in headcount and business development expense.
Removed
During the year ended December 31, 2022, we exercised our right to purchase Harrow common stock. Upon exercise, we received 306,347 shares of Harrow common stock with a fair value of $3.7 million, or $11.97 per share.
Added
The decrease was partially offset by a $0.6 million increase in salaries and wages for the Finance Receivables segment due to additional headcount and annual pay increases. 35 Other (Expense) Income, Net Other expense, net for the year ended December 31, 2023 was approximately $36.9 thousand which consisted of a realized loss of $0.8 million from the write off of warrants and a net aggregate fair market value loss of approximately $54.4 thousand on our warrant derivatives.
Removed
During the year ended December 31, 2022, we sold our shares of Harrow and Bioventus common stock and received proceeds of $3.7 million and $0.5 million, respectively. Other expense, net for the year ended December 31, 2022 reflected a realized loss of $0.2 million on the sale of our Bioventus and Harrow common stock.
Added
This was offset by a $0.8 million gain from the remeasurement of foreign currency transactions into our functional currency.
Removed
During the year ended December 31, 2021, we tendered our Misonix common stock and received $1.9 million in cash and 71,361 shares of Bioventus common stock and recognized a $0.1 million loss on the tender of the Misonix common stock.
Added
The primary driver of the $0.9 million decrease in our cash balance was $55.8 million of interest, fees, principal and royalty payments received on our finance receivables, a $9.9 million net increase on our credit facility, a $0.9 million increase in Enteris revenue receipts, and $33.0 million cash received from the issuance of Senior Notes.
Removed
The $11.1 million decrease in income tax expense is a result of lower taxable income for the year ended December 31, 2022 when compared to the same period of the prior year. As of December 31, 2022 and 2021, our cumulative gross deferred tax assets were $33.1 million and $38.9 million, respectively.
Added
We entered into a new $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.
Removed
The decrease was partially offset by $75.9 million of interest, fees, principal and royalty payments received on our finance receivables and a net $3.4 million of payments generated by our Pharmaceutical Development segment (the net $3.4 million includes $5.0 million of payments related to the completion of milestones under the License Agreement less $2.5 million paid to the seller of Enteris, pursuant to the provisions of the merger agreement related to such sale).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs 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 LIBOR 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.
Biggest changeAs 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, 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the year ended December 31, 2022, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at December 31, 2022, approximated its carrying value.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the year ended December 31, 2023, our cash and cash equivalents were deposited in accounts at well capitalized financial institutions. The fair value of our cash and cash equivalents at December 31, 2023, approximated its carrying value.
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. 35
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. 38
Removed
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. The standard deposit insurance amount is up to $250,000 per depositor, per insured bank, for each account ownership category.
Removed
In addition, on March 10, 2023, the Bank of England (the “BOE”) announced that it intended to seek the placement of Silicon Valley Bank UK Limited (“SVBUK”), an affiliate of SVB, into a Bank Insolvency Procedure, and on March 13, 2023, HSBC announced the acquisition of SVBUK. We maintain no deposit or other accounts with SVB or SVBUK.

Other SWKH 10-K year-over-year comparisons