Good morning, and welcome to SWK Holdings third quarter financial results conference call. [Operator Instructions] Please note that this event is being recorded. Now I'd like to turn the conference over to Mr. Jason Rando, Tiberend Strategic Advisors. Please go ahead.

Good morning, everyone, and thank you for joining SWK Holdings Third Quarter 2020 Financial and Corporate Results Call. Friday afternoon, SWK Holdings issued a press release detailing its financial results for the 3 months ended September 30, 2020. Press release can be found in the Investor Relations section of swkhold.com under News Releases. Before beginning today's call, I would like to make the following statement regarding forward-looking statements. Today, we'll be making forward-looking statements about future expectations, plans, events and circumstances, including statements about our strategy, future operations and the development of our consumer and drug product candidates; plans for future potential product candidates and studies and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to risks and uncertainties, including those detailed in the Risk Factors section of SWK Holdings 10-K filed with the SEC and other filings we make with the SEC from time to time. SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. Joining me on today's call is Winston Black, Chairman and CEO of SWK Holdings, who will provide an update on SWK's third quarter 2020 corporate and financial results. Winston, go ahead.

Thank you, Jason and everyone for joining our third quarter conference call. The third quarter of 2020 continued what has been a very strong year for SWK, underscored by an improved quarter-over-quarter performance that was driven by both returns of our specialty finance business and our subsidiaries, Enteris BioPharmas, earning of a milestone payment related to its Peptelligence technology licensee, Cara Therapeutics. We believe this combination is reflective of the potential of SWK's business model and our ultimate focus on monetizing life science products and associated intellectual property. We believe industry dynamics will remain favorable for our specialty finance business throughout the remainder of 2020 and into 2021. And we anticipate this momentum will enable us to not only generate consistent returns from our current finance receivables portfolio, but to also enhance our position as we go to specialty financing firm for small- and mid-sized commercial stage life science companies and need capital to fund their growth strategies. Before I discuss our third quarter results and achievements, I'd like to provide a brief update on the ongoing COVID-19 situation, our capital position in our subsidiary, Enteris BioPharma. As we've communicated previously, SWK as a business has been mainly impacted by the COVID-19 outbreak. We remain in regular contact with the individual management teams of our portfolio companies. We are pleased to recently report the impressive advances our partner companies have made over the past several months in this challenging environment. Collectively, the progress we witnessed from our partner companies demonstrates the soundness of our focus on investing differentiated companies with strong intellectual property, producing commercial products that fill demand within the health care system. This remains the foundation of our business and we believe will drive our business going forward, even amidst the challenges impacting the broader U.S. economy and…

[Operator Instructions] First question comes from Kyle Bauser, Colliers Security.

Thanks for all the updates here. A really nice milestone with the Cara partnership. And I think you recognized $2.5 million, but you said $1 million of that is to be distributed to the sellers of Enteris. Was that distribution recognized in Q3? Or is that more of a Q4 event?

Yes, that's a good question. So the milestone was recognized during the quarter, and the payment was received in October. And then the payment of the sale was also made during October. So you'll see the receivable on the balance sheet, and then that's -- it'll work through in the fourth quarter.

Got it. Great. And so this is the first milestone from Cara. And I think the next milestone would be a payment of 25%. This first one was 60%. Can you talk about what the next milestone is that we're looking for? I think it's a development one versus regulatory. But just kind of any color on what the cadence is of these and what they are?

Sure. Great question. I wish I could answer with complete transparency. But unfortunately, as you know, the milestones and the Cara agreement have been redacted in terms of what they're actually for and the amounts. So the -- I think as we talked before, the only thing I can probably share is that this agreement is pretty typical for other formulation-type agreements, where there's various milestones that happen along the way during development. So yes, I think it's far safe to say there'll be additional milestone payments that occur as the program continues to advance.

Got it. Yes. No, that's fair. And also, I didn't catch it, but regarding AIMT's acquisition by Nestle, I think you were able to record $4.4 million. So nice exit there. Will that be recognized as revenue in Q4 as well?

Sure. Yes. So that was -- that's going to be a fourth quarter transaction or event in the financials. And that $4.4 million isn't all gain, of course, because the principal, we paid back, but that was the quantum cash that we received, which was both for principal and interest and royalty payment fees.

Okay. Okay. Got it. And then on the specialty finance side of things, just lastly here, obviously, steady results, and you've been very active in adding new assets. I think you mentioned you have about $12 million in cash with access to an additional $20 million on your revolver. I'm guessing that's plenty of capital to be able to continue seeking out additional assets despite COVID ramping up again and wanting some buffer for your portfolio companies. But is that fair to say that you'll continue to kind of make additional investments in the specialty finance business in the balance of the year? And...

Yes, I mean -- yes, that's -- yes, that's right. So in addition to this roughly $32 million, put those 2 numbers together, plus the portfolio flows, we'll continue to reinvest in the opportunities as they come along. We're extremely active on looking at new opportunities. And so we hope to land some additional ones here in the near future. And then, of course, we'll evaluate additional share repurchases and other uses of the capital, we'll do it. The goal is to remain great stewards of our shareholders' capital and putting it to the best risk-adjusted return use that we can.

[Operator Instructions] Next question comes from Steve Hale of Hale Partnership.

Good quarter. You mentioned a couple of things that are related questions, though. The company does not have debt like most BDCs. The company also does not have kind of a stated systematic return of capital via dividend or share repurchase. And you mentioned that the repurchase expired September 30. Great that you bought back 3% of shares. That repurchase kind of turned on and turned off multiple times over the last 12 months. Does the company have any plans to kind of say, here's how we return capital to be more in line with other financial-related entities? Or what does that look like?

Appreciate the question, Steve. Yes, that's obviously something that we've spoken about before. And you're right, we don't have a stated goal in terms of what amount of portfolio cash flow that we intend to redeploy into either the stock or if we buy back some dividends versus executing additional transactions. As we've -- yes, that's one thing that the Board has agreed to discuss. And yes, I think to some extent, it depends on the opportunities that remain before the company in terms of where to deploy capital. I continue to believe that repurchasing stock is a great use of our capital. It's particularly investing in things that we know in our own portfolio. And that -- I wish I had a concrete update to give you on that, but that -- yes, that remains something that the Board is discussing. And hopefully, we'll have additional updates in the future about that.

Terrific. And if I can do one more, Winston. You mentioned not having leverage. You guys have obviously -- you've executed well, cleaning up the portfolio, growing the portfolio, the uplisting. Very happy with your work in the chief executive seat. When you think about that -- the credit facility, and you mentioned you guys don't have credit facility, obviously, that served you well during COVID when everything was uncertain, not being levered. And obviously, COVID is still not gone. She's still around, although the vaccines are looking good. But when you think about the balance sheet and having levers like other financial entities, is that something where you guys are on principal thinking that you remain unlevered? Is that how we think about long-term SWK, right, outside of just right now or during COVID?

That's a great question, Steve. And yes, I think there's -- yes, I hate to say -- use the term [ bully lots ] for that. But yes, I think we can definitely deploy or take on more leverage to continue to grow the portfolio. And I think as we -- where we sit today with the kind of the more kind of constant performance and I appreciate your comments on the portfolio being cleaned up over time, I certainly would agree. I think we definitely can take on some leverage, and that's something that we continue to evaluate. Yes, the current revolver is $20 million, and then it expires at the end of June of 2021. So that will -- that time will be here pretty quickly. So it's probably safe to say we're evaluating what the kind of opportunities are to refinance that or to end up with a near-line potentially larger, and that's something that we will definitely look at executing.

This concludes our question-and-answer session. Now I'd like to turn the conference back over to Mr. Winston Black for any closing remarks. Please go ahead.

Thank you. In closing, I appreciate your time and attention and look forward to future updates as we continue to advance SWK Holdings. I'd like to also extend my sincerest wishes of good health to all. Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.