What changed in this filing

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Item 1. Financial Statements

2025-05-15 compared with 2024-11-14 · 206 added, 346 removed, 485 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except par value and share data)

September 30,

2025 December 31,

1 unchanged sentence

Cash and cash equivalents $ 29,809 $ 5,927

Restricted cash — 733

Interest, accounts receivable and other receivables, net 4,676 5,788

Assets held for sale, net (Note 4) 6,409 6,398

Finance receivables and related interest receivable held for sale (Note 4) 33,990 —

Other current assets 1,054 2,141

Total current assets 75,938 20,254

Finance receivables, net of allowance for credit losses of $ 14,343 and $ 13,901 as of September 30, 2024 and December 31, 2023, respectively

Finance receivables, net of allowance for credit losses of $ 8,785 and $ 11,249 as of March 31, 2025 and December 31, 2024, respectively

223,076 277,760

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Warrant assets 4,245 4,366

Intangible assets, net 220 6,487

Property and equipment, net 28 48

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Accounts payable and accrued liabilities $ 2,045 $ 2,810

Liabilities held for sale (Note 4) 1,325 1,255

Deferred income 3,349 1,500

Total current liabilities 6,719 5,565

Contingent consideration payable — 4,900

Unsecured senior notes, net 31,567 31,412

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250,000,000 shares authorized;

12,263,982 and 12,497,770 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

12,222,522 and 12,213,599 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 4,419,431 4,419,991

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Finance receivable interest income, including fees $ 10,712 $ 11,035

Pharmaceutical development 963 279

Other 292 39 395 108

Total revenues 11,832 11,360

1 unchanged sentence

Provision (benefit) for credit losses ( 1,465 ) 5,297

Loss on impairment of intangibles assets — — 5,771 —

Interest expense 1,130 1,256

Pharmaceutical manufacturing, research and development expense 758 530

Change in fair value of acquisition-related contingent consideration — — ( 4,900 ) —

Depreciation and amortization expense 19 514

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Other income (expense), net

Unrealized net gain (loss) on warrants 47 ( 162 ) 178 ( 745 )

Unrealized net (loss) gain on marketable investments ( 6 ) — 12 —

Realized gain on sale of marketable investments — — 495 —

Realized loss on sale of assets — — ( 228 ) —

Gain on revaluation of finance receivable — — 2,495 —

Realized and unrealized foreign currency transaction gains (losses) 251 ( 76 ) 775 426

Income before income tax expense (benefit) 4,374 4,088 9,786 14,002

Income tax expense (benefit) 906 ( 386 ) 2,170 959

Unrealized net loss on warrants ( 424 ) ( 95 )

Net loss on exercise and cancellation of warrants — ( 143 )

Loss on sale of assets ( 82 ) —

Net loss on marketable investments ( 105 ) ( 231 )

Realized gain on early payment of finance receivable 1,729 —

Loss on revaluation of finance receivables held for sale ( 3,727 ) —

Realized and unrealized foreign currency transaction gains 313 87

Income before income tax expense 5,817 697

Income tax expense 1,278 229

Net income $ 4,539 $ 468

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(in thousands, except share data)

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Common Stock Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity

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Stock-based compensation — — 307 — 307

Forfeiture of unvested restricted stock ( 6,446 ) — — — —

Issuance of common stock upon vesting of restricted stock 48,918 — — — —

Issuance of restricted common stock 61,260 — — — —

Repurchases of common stock in open market ( 52,337 ) — ( 867 ) — ( 867 )

1 unchanged sentence

Balances at March 31, 2025 12,222,522 12 4,419,431 ( 4,126,774 ) 292,669

12,481,944 12 4,424,216 ( 4,144,333 ) 279,895

Stock-based compensation — — 249 — 249

Issuance of common stock upon vesting of restricted stock 17,323 — — — —

Repurchases of common stock in open market ( 54,667 ) — ( 950 ) — ( 950 )

Net settlement for employee taxes on stock options — — ( 43 ) — ( 43 )

Stock options exercised, net 2,595 — — — —

Net income — — — 3,680 3,680

Balances at June 30, 2024

12,447,195 12 4,423,472 ( 4,140,653 ) 282,831

Stock-based compensation — — 348 — 348

Issuance of common stock upon vesting of restricted stock 7,123 — — — —

Repurchases of common stock in open market ( 190,336 ) — ( 3,216 ) — ( 3,216 )

Net income — — — 3,468 3,468

Balances at September 30, 2024

12,263,982 $ 12 $ 4,420,604 $ ( 4,137,185 ) $ 283,431

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Common Stock Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity

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Stock-based compensation — — 111 — 111

Effect of adoption of ASU 2016-13 — — — ( 9,683 ) ( 9,683 )

Issuance of common stock upon vesting of restricted stock 16,008 — — — —

Issuance of restricted common stock 48,918 — — — —

Forfeiture of unvested restricted stock ( 6,446 ) — — — —

Repurchases of common stock in open market ( 58,298 ) — ( 999 ) — ( 999 )

2 unchanged sentences

12,481,944 12 4,424,216 ( 4,144,333 ) 279,895

Stock-based compensation — — 164 — 164

Issuance of common stock upon vesting of restricted stock 8,612 — — — —

Repurchases of common stock in open market ( 272,492 ) — ( 4,599 ) — ( 4,599 )

Net income — — — 3,934 3,934

Balances at June 30, 2023

12,566,519 12 4,425,991 ( 4,152,119 ) 273,884

Stock-based compensation — — 170 — 170

Issuance of common stock 4,592 — — — —

Repurchases of common stock in open market ( 60,335 ) — ( 963 ) — ( 963 )

Net income — — — 4,474 4,474

Balances at September 30, 2023

12,510,776 $ 12 $ 4,425,198 $ ( 4,147,645 ) $ 277,565

See accompanying notes to the unaudited condensed consolidated financial statements.

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(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Provision (benefit) for credit losses ( 1,465 ) 5,297

Loss on impairment of intangible assets 5,771 —

Right-of-use amortization and cease use costs 80 91

1 unchanged sentence

Deferred income taxes, net 1,265 229

Unrealized net (gain) loss on warrants ( 178 ) 745

Net realized gain on exercise of warrants ( 495 ) —

Realized loss from sale of assets 228 —

Change in fair value of acquisition-related contingent consideration ( 4,900 ) —

Gain on revaluation of finance receivable ( 2,495 ) —

Foreign currency transaction gain ( 459 ) ( 375 )

Unrealized gain on marketable investments ( 12 ) —

Unrealized net loss on warrants 424 95

Net loss from exercise and cancellation of warrants — 143

Loss from sale of assets 82 —

Loss on revaluation of finance receivables held for sale 3,727 —

Foreign currency transaction (gain) loss ( 558 ) 783

Loss on marketable investments 105 231

Loan discount amortization and fee accretion ( 1,487 ) ( 837 )

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Interest, accounts receivable and other receivables ( 1,200 ) ( 1,623 )

Foreign currency forward contract 409 ( 870 )

Other assets 980 ( 283 )

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Cash flows from investing activities:

Sale of finance receivables — 13,942

Investment in finance receivables ( 17,736 ) ( 17,525 )

Proceeds from sale of property and equipment 110 —

Sale of marketable investments — 258

Investment in finance receivables ( 10,000 ) ( 446 )

Repayment of finance receivables 32,684 9,362

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Cash flows from financing activities:

Net settlement for employee taxes on stock options ( 43 ) —

Net (payments on) proceeds from credit facility ( 12,350 ) 19,555

Payments for financing costs ( 50 ) ( 1,345 )

Net payments on credit facility ( 6,233 ) ( 12,350 )

Repurchases of common stock, including fees and expenses ( 867 ) ( 999 )

Net cash (used in) provided by financing activities ( 17,608 ) 12,117

Net increase in cash, cash equivalents, and restricted cash 11,942 24,878

Cash, cash equivalents, and restricted cash at beginning of period 5,236 6,156

Cash, cash equivalents, and restricted cash at end of period $ 17,178 $ 31,034

Net cash used in financing activities ( 7,100 ) ( 13,349 )

Net increase in cash and cash equivalents 23,882 262

Cash and cash equivalents at beginning of period 5,927 5,236

Cash and cash equivalents at end of period $ 29,809 $ 5,498

Supplemental non-cash investing and financing activities:

Derecognition of right-of-use assets and operating lease liabilities upon termination of lease $ 82 $ —

Fair value of warrants received with finance receivables $ 1,073 $ 822

Transfer of finance receivables and related interest receivable to held for sale $ 33,990 $ —

Cash paid for interest $ 775 $ 173

Fair value of warrants received with investment in finance receivables $ 253 $ —

See accompanying notes to the unaudited condensed consolidated financial statements.

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

The Company is headquartered in Dallas, Texas, and as of September 30, 2024, the Company had 22 full-time employees.

The Company is headquartered in Dallas, Texas, and as of March 31, 2025, the Company had 26 full-time employees.

The Company has net operating loss carryforwards (“NOLs”) and believes that the ability to utilize these NOLs is an important and substantial asset.

As of November 7, 2024, the Company and its partners have executed transactions with 56 different parties under its specialty finance strategy, funding an aggregate of $ 798.5 million in various financial products across the life science sector.

As of May 7, 2025, the Company and its partners have executed transactions with 58 different parties under its specialty finance strategy, funding an aggregate of $ 853.1 million in various financial products across the life science sector.

The Company’s portfolio includes senior and subordinated debt backed by royalties and synthetic royalties paid by companies in the life science sector, and purchased royalties generated by sales of life science products and related intellectual property.

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

Enteris 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.

As of March 13, 2025 the Company changed the name of Enteris to MOD3 Pharma ("MOD3").

MOD3 is a clinical development and manufacturing organization providing development services to pharmaceutical partners.

MOD3 seeks to generate income by providing customers pharmaceutical development, formulation and manufacturing services.

With an effective date of April 21, 2023, we entered into a collaboration agreement with a strategic partner under which we would be the exclusive provider of certain contract development and manufacturing organization ("CDMO") services to its customers.

Fee revenue generated as a result of this agreement is presented as pharmaceutical development revenue on the unaudited condensed consolidated statement of income and is accounted for in accordance with our revenue recognition policy as described under Revenue Recognition below.

With an effective date of January 1, 2024, we entered into an Option and Asset Purchase Agreement with the same strategic partner on March 14, 2024, which granted the partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing CDMO services to third parties, subject to certain exclusions.

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

Fee revenue generated as a result of this agreement is presented as pharmaceutical development revenue on the unaudited condensed consolidated statements of income and is accounted for in accordance with our revenue recognition policy as described under Revenue Recognition below.

Basis of Presentation and Principles of Consolidation

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The Company consolidates its investments in these partnerships or LLCs where the Company, as the general partner or managing member, exercises effective control.

Even though the Company’s ownership may be less than 50 percent, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company.

Even though the Company’s ownership may be less than 50%, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company.

The Company has reviewed each of the underlying agreements to determine if it has effective control.

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Although this would change individual line items within the Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable to the Company.

Reclassification of Prior Period Amounts

Certain prior period financial information has been reclassified to conform to current period presentation.

Unaudited Interim Financial Information

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valuation of warrants and other investments;

contingent consideration;

income taxes;

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The Company earns revenues from its two U.S.-based business segments:

its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies ("Finance Receivable segment"), and its business offering CDMO services to pharmaceutical partners as well as innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence ® platform (“Pharmaceutical Development segment”).

its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies, and its business offering clinical development and manufacturing services to pharmaceutical partners.

Revenue Recognition

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and royalties on net sales of licensed products.

Deferred revenue includes amounts that have been billed per the contractual terms but have not been recognized as revenue.

Correction of Errors in Previously Issued Unaudited Condensed Consolidated Financial Statements

The Company identified certain errors that affected the unaudited condensed consolidated financial statements for the quarters ended March 31, 2024 and June 30, 2024.

The errors corrected revenue recognition for three investments which related to a holdback liability that should not have been recorded to revenue, interest income recognized when no payment was expected in the period, a revaluation write-up that was not factored into the amortization schedule, and royalty forecasted cash flows that did not reflect the most current estimates for the respective periods.

The errors were determined to be immaterial to the prior period's unaudited condensed consolidated financial statements and did not warrant restatement and reissuance of the previously issued unaudited condensed consolidated financial statements.

However, the Company recorded corrections to the prior quarters ended March 31, 2024 and June 30, 2024 and the financial statements will be revised the next time they are presented as comparative information in future filings.

The Company based its qualitative and quantitative analysis on SEC Staff’s Accounting Bulletins Topic 1.M, "Materiality and Topic 1.N, Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial Statements."

The following tables detail the revisions to the line items of our previously issued unaudited condensed financial statements to reflect the correction of the errors (in thousands):

Three Months Ended March 31, 2024 As Reported Adjustment (1)

Finance receivable interest income, including fees $ 11,454 $ ( 419 ) $ 11,035

Pharmaceutical development 279 — 279

Other 46 — 46

Total revenues 11,779 ( 419 ) 11,360

Provision for credit losses $ 5,323 $ ( 26 ) $ 5,297

Net income $ 861 $ ( 393 ) $ 468

Basic net income per share $ 0.07 $ ( 0.03 ) $ 0.04

Diluted net income per share $ 0.07 $ ( 0.03 ) $ 0.04

Finance receivables, net of allowance for credit losses $ 261,285 $ ( 393 ) $ 260,892

Total assets $ 322,350 $ ( 393 ) $ 321,957

Stockholders' equity:

Accumulated deficit $ ( 4,143,940 ) $ ( 393 ) $ ( 4,144,333 )

Total stockholders' equity $ 280,288 $ ( 393 ) $ 279,895

(1) Consists of two error corrections, one which was identified during the three months ended June 30, 2024 and one which was identified during the three months ended September 30, 2024.

Three Months Ended June 30, 2024 As Reported Adjustment As Revised

Finance receivable interest income, including fees $ 10,680 $ ( 694 ) $ 9,986

Pharmaceutical development 804 — 804

Other 57 — 57

Total revenues $ 11,541 $ ( 694 ) $ 10,847

Provision for credit losses $ 4,074 $ 21 $ 4,095

Net income $ 4,395 $ ( 715 ) $ 3,680

Basic net income per share $ 0.35 $ ( 0.06 ) $ 0.29

Diluted net income per share $ 0.35 $ ( 0.06 ) $ 0.29

Finance receivables, net of allowance for credit losses $ 265,470 $ ( 373 ) $ 265,097

Total assets $ 321,374 $ ( 373 ) $ 321,001

Stockholders' equity:

Accumulated deficit $ ( 4,140,280 ) $ ( 373 ) $ ( 4,140,653 )

Total stockholders' equity $ 283,204 $ ( 373 ) $ 282,831

Six Months Ended June 30, 2024 As Reported Adjustment As Revised

Finance receivable interest income, including fees $ 21,399 $ ( 378 ) $ 21,021

Pharmaceutical development 1,083 — 1,083

Other 103 — 103

Total revenues 22,585 ( 378 ) 22,207

Provision for credit losses $ 9,397 $ ( 5 ) $ 9,392

Net income $ 4,521 $ ( 373 ) $ 4,148

Basic net income per share $ 0.36 $ ( 0.03 ) $ 0.33

Diluted net income per share $ 0.36 $ ( 0.03 ) $ 0.33

Finance receivables, net of allowance for credit losses $ 265,470 $ ( 373 ) $ 265,097

Total assets $ 321,374 $ ( 373 ) $ 321,001

Stockholders' equity:

Accumulated deficit ( 4,140,280 ) ( 373 ) ( 4,140,653 )

Total stockholders' equity $ 283,204 $ ( 373 ) $ 282,831

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred income in the Company’s consolidated balance sheets.

Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current deferred income.

Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred income, net of current portion.

Intangible Assets

As of March 31, 2025 and December 31, 2024, net book value of intangible assets of $ 0.2 million is included in assets held for sale.

There was no amortization expense related to intangible assets during the three months ended March 31, 2025.

Amortization expense related to intangible assets was $ 0.3 million for the three months ended March 31, 2024.

Research and Development

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Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met.

These transactions include:

(i) contract modifications, (ii) hedging relationships, and (iii) sales or transfers of debt securities classified as held-to-maturity.

ASU 2020-04 was effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024.

The Company has identified existing loans that reference London Inter-Bank Offered Rate (“LIBOR”) and is in the process of evaluating alternatives in each situation.

The Company expects that it will elect to apply some of the expedients and exceptions provided in ASU 2020-04 and does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures," which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

Public entities are required to adopt the changes retrospectively, recasting each prior-period disclosure for which a comparative income statement is presented in the period of adoption.

The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update ("ASU") 2023-09, " Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ." The standard is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components.

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The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses." The ASU enhances disclosures related to income statement expenses to further disaggregate expenses in the footnotes to the consolidated financial statements.

The standard requires disaggregation of any relevant expense caption presented on the face of the income statement that contains the following expense categories:

purchases of inventory, employee compensation, depreciation (including amortization of leasehold improvements), intangible asset amortization, and depletion expense.

Further, the standard requires disclosure of the total amount and the entity's definition of selling expenses.

The ASU is effective for fiscal years beginning with its annual financial statements for the year ended December 31, 2027.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

Net Income Per Share

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 4,539 $ 468

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Diluted net income per share $ 0.37 $ 0.04

For the three months ended September 30, 2024 and 2023, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 160,000 and 127,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive.

For the nine months ended September 30, 2024 and 2023, outstanding options to purchase shares of common stock and outstanding shares of restricted stock in an aggregate of approximately 161,000 and 121,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive.

For the three months ended March 31, 2025 and 2024, outstanding options to purchase shares of common stock in an aggregate of approximately 38,000 and 47,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive.

Finance Receivables

Finance receivables are reported at their determined principal balances net of any unearned income, cumulative write offs charged against the allowance for credit losses, and unamortized deferred fees and costs.

Finance receivables

Finance receivables exclusive of finance receivables held for sale ("Finance Receivables"), are reported at their determined principal balances net of any unearned income, cumulative write offs charged against the allowance for credit losses, and unamortized deferred fees and costs.

Unearned income and deferred fees and costs are amortized to interest income based on all cash flows expected using the effective interest method.

For details on Finance receivables held for sale see Note 4.

The carrying values of finance receivables were as follows (in thousands):

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

$ 219,042 $ 224,073

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The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses.

The Company adopted ASU 2016-13, as amended, on January 1, 2023 using the modified retrospective approach method.

The implementation of ASU 2016-13 also impacted the Company's ACL on unfunded loan commitments, as the ACL now represents expected credit losses over the contractual life of commitments not identified as unconditionally cancellable by the Company.

The reserve for unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment.

The funding rate represents management's estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data.

On January 1, 2023, the Company recorded an adjustment for unfunded commitments of $ 0.4 million for the adoption of ASU 2016-13.

As of September 30, 2024 and December 31, 2023 the Company has a $ 0.2 million liability for credit losses on off-balance sheet exposures related to unfunded commitments, with this liability included in accounts payable and accrued liabilities on the condensed consolidated balance sheets.

As of March 31, 2025 and December 31, 2024, the Company had a $ 0.1 million liability for credit losses on off-balance sheet exposures related to unfunded commitments with this liability included in accounts payable and accrued liabilities on the condensed consolidated balance sheets.

Please refer to Note 7 for further information on the Company's unfunded commitments.

Allowance for Credit Losses - methodology update during the three months ended June 30, 2024

Allowance for Credit Losses

During the three months ended June 30, 2024, the Company revised its methodology for calculating the allowance for credit losses to be more directly tied to the individual risk ratings, as determined by management, of finance receivables.

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Term Loans and Royalties.

After the change in methodology effective for the quarter ended June 30, 2024, these pools are further broken down into individual risk ratings applied to each investment to allow for a more precise method for calculating the allowance for credit losses.

After the change in methodology these pools are further broken down into individual risk ratings applied to each investment to allow for a more precise method for calculating the allowance for credit losses.

The following table details the changes in the allowance for credit losses by Term Loans and Royalties (in thousands):

Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Term Loans Royalties Total Term Loans Royalties Total

Allowance at beginning of period $ 7,158 $ 4,091 $ 11,249 $ 9,731 $ 4,170 $ 13,901

Effect of adoption of ASU 2016-13 — — — 8,900 2,886 11,786

Provision (benefit) for credit losses ( 296 ) ( 1,169 ) ( 1,465 ) 5,547 ( 250 ) 5,297

1 unchanged sentence

Allowance at end of period $ 6,862 $ 1,923 $ 8,785 $ 9,278 $ 3,920 $ 13,198

(1) Reversal of finance receivable-specific ACL recognized in prior periods.

No impact to unaudited condensed consolidated statement of income for the nine months ended September 30, 2023.

Non-Accrual Finance Receivables

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The following table presents nonaccrual and performing finance receivables by portfolio pool, net of allowance for credit losses (in thousands) as of:

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Nonaccrual Performing Total Nonaccrual Performing Total

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Total carrying value $ 10,896 $ 212,180 $ 223,076 $ 12,755 $ 265,005 $ 277,760

As of September 30, 2024, the Company had six finance receivables in nonaccrual status:

(1) the term loan to Trio Healthcare Ltd.

(“Trio”), with a carrying value of $ 1.5 million;

(2) the term loan to Exeevo, Inc (“Exeevo”), with a carrying value of $ 4.5 million;

(3) the term loan to BIOLASE, Inc ("BIOLASE"), with a carrying value of $ 15.8 million;

As of March 31, 2025, the Company had three finance receivables in nonaccrual status:

(1) the Flowonix Medical, Inc.

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(“Ideal”) royalty, with a carrying value of $ 3.0 million.

As of September 30, 2024 Trio was considered impaired by $ 8.1 million and Exeevo was impaired by $ 2.2 million with the impairments recognized as a reduction in the allowance for credit losses on the unaudited condensed consolidated statements of income for the nine months ended September 30, 2024.

The Company collected $ 2.6 million and $ 2.3 million on its nonaccrual finance receivables for the nine months ended September 30, 2024 and 2023 , respectively .

The Company collected $ 2.2 million and $ 0.7 million on its nonaccrual finance receivables for the three months ended March 31, 2025 and 2024 , respectively .

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company adopted the provisions of ASU 2022-02 "Troubled Debt Restructuring ("TDRs") and Vintage Disclosures (Topic 326)", which eliminated the accounting for TDRs while expanding loan modification and vintage disclosure requirements.

The update specifically required additional disclosures on loan modifications to borrowers experiencing financial difficulties that involved an interest rate reduction, other-than-insignificant payment delay, a term extension, principal forgiveness or a combination thereof.

The Company evaluates the carrying value of each finance receivable for impairment.

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On an ongoing basis, the Company monitors the performance of modified loans to their restructured terms.

Revaluation of Finance Receivable

During the three months ended June 30, 2024, the Company revalued its royalty for Iluvien as a result of entering into an amendment during the quarter.

Pursuant to the amendment, the forecast of cash flows to be received over the life of the financial royalty was revised resulting in a revaluation gain of $ 2.5 million and corresponding mark-up to the carrying value which is included in the "Gain on revaluation of finance receivable" caption on our unaudited condensed consolidated statements of income for the nine months ended September 30, 2024.

Credit Quality of Finance Receivables

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Borrower performing in excess of Company expectations, and loan-to-value is better than at time of origination.

The Company uses an internal credit rating system which rates each Royalty on a color scale of Green to Red, with Green typically indicative of a Royalty that is exceeding base underwritten case, Yellow indicates a Royalty performing in-line with underwritten plan, and Red reflective of underperformance relative to plan.

The Company uses an internal credit rating system which rates each Royalty on a color scale of Green to Red, with Green typically indicative of a Royalty that is exceeding base underwritten case, Yellow indicates a royalty is performing in-line with underwritten plan, and Red reflective of underperformance relative to plan.

Royalties rated as Red are generally classified as non-accrual.

The following table summarizes the carrying value of Finance Receivables by origination year, grouped by risk rating as of September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024

The following table summarizes the gross carrying value of Finance Receivables by origination year, grouped by risk rating (in thousands):

March 31, 2025

2025 2024 2023 2022 2021 Prior Total

3 unchanged sentences

2 — — 5,499 — 14,876 — 20,375

1 — — 4,538 1,473 — — 15,846 21,857

Subtotal - Term Loans $ 9,675 $ 7,967 $ 61,903 $ 55,850 $ 31,261 $ 52,386 $ 219,042

Green $ 7,839 $ 11,689 $ 12,652 $ — $ 16,038 $ — $ 1,285 $ 49,503

Yellow — — — — 3,117 — 3,290 6,407

Red — — — — 3,039 9,780 12,819

14 unchanged sentences

Total Finance Receivables, gross $ 15,934 $ 73,011 $ 66,584 $ 46,107 $ 27,351 $ 60,022 $ 289,009

Intangible Assets

As of September 30, 2024 and December 31, 2023, the gross book value, accumulated amortization, net book value and estimated useful life of acquired intangible assets were as follows (in thousands, except estimated useful life data):

September 30, 2024

Gross Book Value Accumulated Amortization Net Book Value Estimated Useful Life

Trade names and trademarks $ 210 $ 107 $ 103 10

Customer relationships 240 123 117 10

Total intangible assets $ 450 $ 230 $ 220

Assets Held For Sale

Finance receivables held for sale

The Company generally holds its finance receivables as long-term investments, however, the Company occasionally classifies some of its finance receivables as held for sale.

Finance receivables held for sale are recorded at the lower of fair value or amortized cost.

On the date of transfer into the held for sale category, any previously recorded allowance for credit losses is reversed in earnings and the finance receivables are recorded at amortized cost.

If the amortized cost basis exceeds the finance receivables’ carrying value on the date of transfer, a valuation allowance is established equal to the difference between amortized cost basis and fair value.

Deferred fees and costs related to finance receivables held for sale are deferred upon transfer to the held for sale category and are included in the carrying value of finance receivables held for sale on the consolidated balance sheets.

The Company recognizes the full amount of deferred fees and costs at the time of sale as a component of the gain or loss on sale.

On March 19, 2025, the Company entered into a definitive agreement with Soleus Capital (“Soleus”) for the sale of the majority of its finance receivables segment royalty portfolio for approximately $ 34.0 million in cash ("the Transaction"), which approximated the fair value of the finance receivables held for sale as of March 31, 2025.

At that time, the amortized cost basis of the royalty portfolio was $ 37.7 million, inclusive of interest receivables of $ 2.3 million.

As a result of the Transaction, the Company performed a lower-of-cost-or-market analysis in the aggregate resulting in a loss of $ 3.7 million which is included in the "Loss on revaluation of finance receivables" caption on the Company's unaudited condensed consolidated statements of income for the three months ended March 31, 2025.

The transaction closed subsequent to March 31, 2025 on April 10, 2025.

In conjunction with the closing, the Company's Board of Directors declared a special cash dividend of $ 4.00 per share, payable to all holders of record of the Company’s common stock as of April 24, 2025, with a payment date of May 8, 2025.

During neither the three months ended March 31, 2025, there was not a strategic shift for the Company, and accordingly, the finance receivable segment does not meet the criteria to be classified as a discontinued operation.

The following table shows the net income before taxes for finance receivables and related interest receivable held for sale (in thousands):

Three Months Ended March 31,

Net income before taxes $ 2,022 $ 1,804

MOD3 Exclusive Option and Asset Purchase Agreement

With an effective date of January 1, 2024, the Company entered into an Option and Asset Purchase Agreement with a strategic partner on March 14, 2024, which granted the strategic partner an exclusive option to acquire certain of MOD3 assets related to its business of providing CDMO services to third parties, subject to certain exclusions.

The strategic partner must exercise the Option by or before January 1, 2026.

In exchange for the exclusive purchase option the partner is to provide consideration in the form of an "option fee" and "guaranteed revenue payments."

The option fee is broken into two components:

A low-single digit million fee due within 30 business days of executing the agreement;

and should the option not be exercised by the first anniversary of the effective date, an additional low-single digit million fee will be due at that time.

The first option fee was paid in April 2024 and the second option fee was paid in February 2025.

Option fee payments will be included in deferred income until the earlier of term expiration or exercise of the purchase option.

Should the partner exercise the purchase option, any option fee payments made will be applied towards the purchase price.

The guaranteed revenue payments include two components:

A mid-single digit million guaranteed revenue payment in 2024 and a mid-single digit million guaranteed revenue payment in 2025.

The revenue is to be derived by the partner under an existing collaboration agreement, and the partner is to pay the difference should the minimum amount not be met each year.

Each year's guaranteed revenue amount is to be paid in two installments semi-annually each year.

Should revenue exceed the 2024 or 2025 guaranteed revenue amounts after receiving a difference payment in the first half of the year, we must repay the partner the amount of such overpayment.

There was no guaranteed revenue recognized during the three months ended March 31, 2025 and 2024 .

As the Company expects the strategic partner to exercise the Option within 12 months from December 31, 2024, certain assets and liabilities of the MOD3 business were classified as held for sale as of December 31, 2024.

The assets and liabilities held for sale represent the major operating assets and liabilities of the MOD3 business (i.e.

the majority of the Pharmaceutical Development segment) and as such, when the Option is exercised, this segment of the business will no longer exist and only the specialty finance business will remain.

The decision to enter into the Option and Asset Purchase Agreement was made to align with the overall strategy to focus on the specialty finance business.

The following table summarizes the assets and liabilities held for sale:

March 31, 2025 December 31, 2024

Inventory $ 354 $ 354

Property & equipment, net 4,696 4,635

Intangible assets, net 209 209

Other non-current assets 1,150 1,200

Total assets held for sale, net $ 6,409 $ 6,398

Accounts payable & accrued liabilities $ 298 $ 268

Other non-current liabilities 1,027 987

Total liabilities held for sale $ 1,325 $ 1,255

During neither the three months ended March 31, 2025 nor the year ended December 31, 2024, there was not a strategic shift for the Company, and accordingly, the Pharmaceutical Development segment does not meet the criteria to be classified as a discontinued operation.

As a result, we will continue to report our operational results for the Pharmaceutical Development segment until the sale.

The following table shows the net loss before taxes for MOD3 (in thousands):

Three Months Ended March 31,

Net loss before taxes $ ( 536 ) $ ( 1,453 )

Marketable Investments

Investments in corporate debt and equity securities consist of the following (in thousands):

March 31, 2025 December 31, 2024

Corporate debt securities $ 13 $ 21

Equity securities 442 559

Total marketable investments $ 455 $ 580

The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities are as follows (in thousands):

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

March 31, 2025 $ 13 $ — $ — $ 13

December 31, 2024 $ 21 $ — $ — $ 21

Gross Book Value Accumulated Amortization Net Book Value Estimated Useful Life

Licensing Agreement (1)

$ 29,400 $ 23,167 $ 6,233 10

Trade names and trademarks 210 92 118 10

Customer relationships 240 104 136 10

Total intangible assets $ 29,850 $ 23,363 $ 6,487

(1) Prior to the Company's acquisition of Enteris, Enteris entered into the License Agreement with Cara Therapeutics, Inc.

("Cara"), for oral formulation rights to Enteris’ Peptelligence® technology to develop and commercialize Oral KORSUVA TM in any indication worldwide, excluding South Korea and Japan.

Cara is obligated to pay Enteris certain development, regulatory and tiered commercial milestone payments, as well as low single-digit royalties based on net sales in the licensed territory.

During the three months ended June 30, 2024, the Company concluded that the milestones and royalties pursuant to the License Agreement would not be realized as a result of non-viability of product covered by the License Agreement.

The Company has recognized a full impairment on the license of its remaining net book value of $ 5.8 million which is included in the "Loss on impairment of intangible assets" section of our unaudited condensed consolidated statements of income for the nine months ended September 30, 2024.

Amortization expense was $ 11.3 thousand for the three months ended September 30, 2024 and $ 0.4 million for the three months ended September 30, 2023 , and was recognized within depreciation and amortization expense on the unaudited condensed consolidated statements of income.

Amortization expense related to intangible assets was $ 0.5 million and $ 1.3 million for the nine months ended September 30, 2024 and 2023 , respectively.

Based on amounts recorded at September 30, 2024 , the Company will recognize acquired intangible asset amortization as follows (in thousands):

Remainder of 2024 $ 11

Thereafter 29

Equity Securities

On June 30, 2024, the Company exercised its right to purchase AOTI, Inc ("AOTI") restricted stock.

Upon exercise, the Company received 402,634 shares of AOTI restricted stock with a fair value of $ 0.7 million, or $ 1.68 per share.

The restricted stock can be converted into publicly traded common shares one year after the exercise date.

The following table presents gains and losses on equity securities as prescribed by ASC 321, Investments - Equity Securities (in thousands):

Three Months Ended March 31,

Unrealized loss on equity securities held at the end of the period $ ( 105 )

Revolving Credit Facility

3 unchanged sentences

The revolving credit period will be followed by a one-year amortization period, with the final maturity date of the Credit Agreement occurring on June 28, 2027.

The outstanding principal balance of the Credit Agreement will bear interest at a rate per annum equal to the sum of (i) Term Secured Overnight Financing Rate, or SOFR (as defined in the Credit Agreement) plus (ii) 3.75 percent at all times prior to the Commitment Termination Date.

The outstanding principal balance of the revolving credit facility will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined in the Credit Agreement) plus (ii) 4.25 percent at all times on and after the Commitment Termination Date.

The outstanding principal balance of the Credit Agreement will bear interest at a rate per annum equal to the sum of (i) Term Secured Overnight Financing Rate, or SOFR (as defined in the Credit Agreement) plus (ii) 3.75 % at all times prior to the Commitment Termination Date.

The outstanding principal balance of the revolving credit facility will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined in the Credit Agreement) plus (ii) 4.25 % at all times on and after the Commitment Termination Date.

Under the terms of the Credit Agreement, all accrued and unpaid interest shall be due and payable, in arrears, on the first business day of each calendar month.

The Credit Agreement contains customary affirmative and negative covenants, in addition to financial covenants specifying that, as of the end of each calendar month, (i) the consolidated leverage ratio of Borrower will not exceed 1.00 to 1.00, (ii) the consolidated interest coverage ratio of Borrower will not be less than 4.00 to 1.00, (iii) the cash collection rate in relation to Borrower’s portfolio of loan assets will not be less than 4.5 percent for such calendar month, (iv) the net charge-off percentage in relation to Borrower’s portfolio of loan assets will not exceed 3 percent for such calendar month, (v) the weighted average risk rating in relation to Borrower portfolio of loan assets will not be less than 3.00 , and (vi) the Company's cumulative share repurchases will not exceed $ 5 million in value in any 12-month period.

The Credit Agreement contains customary affirmative and negative covenants, in addition to financial covenants specifying that, as of the end of each calendar month, (i) the consolidated leverage ratio of Borrower will not exceed 1.00 to 1.00, (ii) the consolidated interest coverage ratio of Borrower will not be less than 4.00 to 1.00, (iii) the cash collection rate in relation to Borrower’s portfolio of loan assets will not be less than 4.50 % for such calendar month, (iv) the net charge-off percentage in relation to Borrower’s portfolio of loan assets will not exceed 3.00 % for such calendar month, (v) the weighted average risk rating in relation to Borrower portfolio of loan assets will not be less than 3.00 , and (vi) the Company's cumulative share repurchases will not exceed $ 5 million in value in any 12-month period.

In addition, the Credit Agreement provides that at no time shall the Company permit its consolidated tangible net worth to be less than $ 145.0 million, or its liquidity (as defined in the Credit Agreement) to be less than $ 5.0 million.

The Credit Agreement also contains events of default customary for such financings, the occurrence of which would permit the Agent and Lenders to accelerate the aggregate principal amount due thereunder.

The Credit Agreement refinances the Company’s Loan and Security Agreement dated as of June 29, 2018 (the “Prior Credit Agreement”), as amended, between the Company and Cadence Bank, N.A.

(“Cadence Bank”), as the lender and administrative agent, which was due to expire on September 30, 2025.

The Prior Credit Agreement was terminated by the Company, effective as of June 28, 2023.

On October 10, 2023, the Company entered into an amendment to the Credit Agreement pursuant to which Woodforest National Bank was added as a lender under the Credit Agreement for an aggregate commitment of $ 15.0 million, thereby increasing the aggregate commitments under the Credit Agreement from $ 45.0 million to $ 60.0 million.

On August 29, 2024, the Company entered into an amendment to the Credit Agreement pursuant to which the consolidated interest coverage ratio of Borrower will not be less than 2.00 to 1:00, the net charge-off percentage in relation to Borrower's portfolio of loan assets will not be less than 8 percent for such calendar month, and cumulative share repurchases will not exceed $ 7.0 million in value in any 12-month period.

As of September 30, 2024 there were no amounts outstanding under the new Credit Agreement.

During each of the three months ended September 30, 2024 and 2023, the Company recognized $ 0.2 million, of interest expense relating to the Credit Agreement.

During the nine months ended September 30, 2024 and 2023, the Company recognized $ 0.8 million and $ 0.7 million, respectively, of interest expense in connection with the Credit Agreement and Prior Credit Agreement, respectively.

On August 29, 2024, the Company entered into an amendment to the Credit Agreement pursuant to which the consolidated interest coverage ratio of Borrower will not be less than 2.00 to 1:00, the net charge-off percentage in relation to Borrower's portfolio of loan assets will not be less than 8 % for such calendar month, and cumulative share repurchases will not exceed $ 7.0 million in value in any 12-month period.

As of March 31, 2025 there were no amounts outstanding under the Credit Agreement.

As of December 31, 2024 there was $ 6.2 million outstanding under the Credit Agreement.

During the three months ended March 31, 2025 and 2024, the Company recognized $ 0.2 million and $ 0.3 million, respectively, of interest expense in connection with the Credit Agreement.

Senior Notes Due 2027

6 unchanged sentences

The following table summarizes the outstanding balance of the Notes, net of debt issuance costs (in thousands):

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

2027 Senior Notes $ 32,969 $ 32,969

2 unchanged sentences

The Company’s future principal obligations for the Notes were as follows (in thousands):

September 30, 2024

March 31, 2025

Remainder of 2025 $ —

Total unsecured senior notes, net $ 32,969

Total unsecured senior notes principal $ 32,969

The Company may redeem the Notes for cash in whole or in part at any time (i) on or after September 30, 2025 (the “First Call Date”) and prior to September 30, 2026, at a price equal to the sum of 102 % of their principal amount, and (ii) on or after September 30, 2026 at a price equal to the sum of 100 % of their principal amount, plus (in each case noted above) accrued and unpaid interest to, but excluding, the date of redemption.

6 unchanged sentences

The Company reassesses the feature quarterly to determine if it requires separate accounting.

There have been no changes to the Company’s assessment that the fair value of the embedded derivative is immaterial through September 30, 2024.

There have been no changes to the Company’s assessment that the fair value of the embedded derivative is immaterial through March 31, 2025.

Commitments and Contingencies

5 unchanged sentences

The Company’s corporate office space in Dallas, Texas totals approximately 4,450 square feet.

On June 10, 2024, the Company entered into a lease termination agreement to its Preston Road office lease in Dallas (the “Lease Termination”).

The Lease Termination terminated the Company’s rights and obligations with respect to the leased premises on June 30, 2024.

As such, the ROU assets and operating lease liabilities were written off, and the Company recorded a gain of $ 4 thousand for the nine months ended September 30, 2024 and paid an early termination fee of $ 9 thousand.

The Enteris headquarters is located in Boonton, New Jersey, where Enteris leases approximately 32,000 square feet of space.

The MOD3 headquarters is located in Boonton, New Jersey, where MOD3 leases approximately 32,000 square feet of space.

The office lease expires in December 2029 with an option to renew for an additional five years .

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Operating lease cost $ 108 $ 125

1 unchanged sentence

Total lease cost $ 118 $ 140

Future minimum rent on the Company's operating leases was as follows as of September 30, 2024 (in thousands):

Future minimum rent on the Company's operating leases was as follows as of March 31, 2025 (in thousands):

Remainder of 2025 $ 135

Thereafter 272

Total future lease payments $ 634

Contingent Consideration

During fiscal year 2019 the Company recorded contingent consideration related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to the License Agreement.

Contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in the estimated fair value recognized in earnings.

During the three months ended June 30, 2024, it was determined the milestones and royalties pursuant to the License Agreement would not be realized as a result of non-viability of the product covered by the License Agreement.

Accordingly, the Company concluded that the liability for contingent consideration, previously held at its estimated fair value of $ 4.9 million, should be $ 0 .

The write-off of this contingent consideration liability resulted in a gain of $ 4.9 million during the three months ended June 30, 2024, and is included in the "Change in fair value of acquisition-related contingent consideration" caption of our unaudited condensed consolidated statements of income for the nine months ended September 30, 2024.

(1) As of March 31, 2025, total future lease payments exclude $ 1.3 million of lease payments related to held for sale leases, of which $ 0.2 million are due in the remainder of 2025.

Unfunded Commitments

Per the terms of the royalty purchase or credit agreements, unfunded commitments are contingent upon reaching an established revenue threshold or other performance metrics on or before a specified date or period of time, and in the case of loan transactions, are subject to being advanced as long as an event of default does not exist.

As of September 30, 2024, SWK had $ 39.0 million of unfunded commitments.

As of March 31, 2025, the Company had $ 7.5 million of unfunded commitments.

The Company is involved in, or has been involved in, arbitrations or various other legal proceedings that arise from the normal course of its business.

1 unchanged sentence

The Company cannot predict the timing or outcome of these claims and other proceedings.

As of September 30, 2024, the Company is not involved in any arbitration and/or other legal proceeding that it expects to have a material effect on its business, financial condition, results of operations and cash flows.

As of March 31, 2025, the Company is not involved in any arbitration and/or other legal proceeding that it expects to have a material effect on its business, financial condition, results of operations and cash flows.

Indemnification

4 unchanged sentences

As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is insignificant.

Accordingly, the Company had no liabilities recorded for these agreements as of September 30, 2024 and December 31, 2023.

Accordingly, the Company had no liabilities recorded for these agreements as of March 31, 2025 and December 31, 2024.

Fair Value Measurements

12 unchanged sentences

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred.

There were no transfers between any levels during the nine months ended September 30, 2024 and 2023.

There were no transfers between any levels for recurring fair value measurements during the three months ended March 31, 2025 and 2024.

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying consolidated financial statements and the related market or fair value.

9 unchanged sentences

Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below.

Contingent Consideration

The fair value measurements of the contingent consideration obligations arising from business combinations are classified as Level 3 estimates under the fair value hierarchy, as these items have been valued using unobservable inputs.

These inputs include:

(a) the estimated amount and timing of projected cash flows;

(b) the probability of the achievement of the factors on which the contingency is based;

and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows.

Changes in fair value of this obligation are recorded as income or expense within operating income in our consolidated statements of income.

Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

As noted above in Note 6, the acquisition-related contingent consideration liability was written down to $ 0 during the three months ended June 30, 2024 due to non-viability of the underlying product.

Finance Receivables held for sale

Finance receivable held for sale are measured at fair value on a nonrecurring basis and evaluated using executed purchase agreements or letters of intent.

The fair value is determined using a lower-of-cost-or-market analysis of finance receivables held for sale in the aggregate.

These receivables are classified as Level 3 and estimates of fair value are reflected below.

Marketable Investments

10 unchanged sentences

The foreign currency forward contract is not designated as a hedging instrument, and changes in fair value are recognized in earnings.

The foreign currency forward contract was recorded in other non-current assets in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 and totaled to $ 1.6 million and $ 1.0 million, respectively.

The Company recognized a loss of $ 1.0 million and a gain of $ 0.5 million due to changes in fair value related to its foreign currency forward contract during the three months ended September 30, 2024 and September 30, 2023, respectively.

The Company recognized a $ 0.6 million and $ 2.1 million gain due to changes in fair value related to its foreign currency forward contract for the nine months ended September 30, 2024 and September 30, 2023, respectively.

The following table presents financial assets measured at fair value on a recurring basis as of September 30, 2024 (in thousands):

The foreign currency forward contract was recorded in other non-current assets in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 and totaled to $ 2.1 million and $ 2.5 million, respectively.

The Company recognized a loss of $ 0.4 million and a gain of $ 0.9 million due to changes in fair value related to its foreign currency forward contract during the three months ended March 31, 2025 and 2024, respectively.

The following table presents financial assets measured at fair value on a recurring basis as of March 31, 2025 (in thousands):

Sheets Quoted Prices

15 unchanged sentences

Foreign currency forward contract 2,475 — — 2,475

Financial liabilities:

Contingent consideration payable $ 4,900 $ — $ — $ 4,900

The contingent consideration payable was valued using a discounted cash flow approach and included a significant unobservable input which is the discount rate.

During the nine months ended September 30, 2024 there was a write off of the full balance of contingent consideration liability due to the non-viability of the underlying product.

See Note 6 for further information.

The changes in fair value of the warrant assets during the nine months ended September 30, 2024 and 2023 were as follows (in thousands):

September 30, 2024 September 30, 2023

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Fair value - December 31, 2024 $ 4,366 Fair value - December 31, 2023

2 unchanged sentences

Change in fair value ( 424 ) Change in fair value ( 95 )

Loss on foreign currency transactions $ 2 Loss on foreign currency transactions $ —

Fair value - September 30, 2024

$ 2,026 Fair value - September 30, 2023

Gain on foreign currency transactions 50 Loss on foreign currency transactions ( 70 )

Fair value - March 31, 2025

$ 4,245 Fair value - March 31, 2024

The Company holds warrants issued to the Company in conjunction with certain term loan investments.

2 unchanged sentences

The following ranges of assumptions were used in the models to determine fair value:

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Dividend rate range — —

5 unchanged sentences

The warrant assets are valued using a market approach and include significant unobservable inputs such as risk-free rate, expected life, and expected volatility.

For the nine months ended September 30, 2024 the risk-free rate range weighted average was 4.0 %, and had a median of 4.3 %.

For the year ended December 31, 2023 the risk-free rate range weighted average was 4.3 %, and had a median of 3.8 %.

For the nine months ended September 30, 2024 the expected life range weighted average was 6.0 years, and had a median of 4.5 years.

For the year ended December 31, 2023 the expected life range weighted average was 3.4 years, and had a median of 4.4 years.

For the nine months ended September 30, 2024 the expected volatility range weighted average was 74.3 %, and had a median of 90.8 %.

For the year ended December 31, 2023 the expected volatility range weighted average 124.6 %, and median of 134.4 %.

As of September 30, 2024 and December 31, 2023, the Company had one royalty, Best, that was deemed to be impaired based on reductions in carrying value in prior periods.

As of September 30, 2024, the Company had two loans, Trio Healthcare and Exeevo, that were deemed to be impaired based on reductions in carrying value during the nine months ended September 30, 2024 .

The following table presents this royalty and the loans measured at amortized cost using the effective interest method, which approximates fair value, on a nonrecurring basis as of September 30, 2024 and December 31, 2023 (in thousands):

As of March 31, 2025 the risk-free rate range weighted average was 4.1 %, and had a median of 4.0 %.

As of December 31, 2024, the risk-free rate range weighted average was 4.4 %, and had a median of 4.4 %.

As of March 31, 2025 the expected life range weighted average was 5.7 years, and had a median of 4.4 years.

As of December 31, 2024 the expected life range weighted average was 5.8 years, and had a median of 4.3 years.

As of March 31, 2025 the expected volatility range weighted average was 67 %, and had a median of 88.0 %.

As of December 31, 2024 the expected volatility range weighted average was 65.6 %, and median of 104.3 %.

As of March 31, 2025 and December 31, 2024, the Company had three royalties, Best, Ideal, and Flowonix that were deemed to be impaired based on reductions in carrying value.

During the three months ended March 31, 2025, the Company recognized impairment based on a reduction in carrying value of one royalty, Flowonix.

As of December 31, 2024, the Company had one loan, BIOLASE, that was deemed to be impaired based on reduction in carrying value in prior periods.

The following table presents the royalties and the loan measured at amortized cost using the effective interest method, which approximates fair value, on a nonrecurring basis as of March 31, 2025 and December 31, 2024 (in thousands):

Sheets Quoted Prices

2 unchanged sentences

(Level 2) Significant

September 30, 2024

March 31, 2025

$ 12,819 $ — $ — $ 12,819

1 unchanged sentence

$ 14,830 $ — $ — $ 14,830

There were no liabilities measured at fair value on a nonrecurring basis as of September 30, 2024 and December 31, 2023.

There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2025 and December 31, 2024.

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying unaudited condensed consolidated financial statements and the related market or fair value.

The disclosures include financial instruments and derivative financial instruments measured at fair value on a recurring and non-recurring basis.

The following table presents the fair value of financial assets as of September 30, 2024 (in thousands):

The following table presents the fair value of financial assets as of March 31, 2025 (in thousands):

Carrying Value Fair Value Level 1 Level 2 Level 3

1 unchanged sentence

Finance receivables, net $ 223,076 $ 223,076 $ — $ — $ 223,076

Finance receivables and related interest receivable held for sale (1)

33,990 33,990 — — 33,990

Marketable investments 455 455 442 — 13

1 unchanged sentence

Foreign currency forward contract 2,066 2,066 — — 2,066

(1) Non-recurring valuation as of March 19, 2025

The following table presents the fair value of financial assets and liabilities as of year ended December 31, 2024 (in thousands):

5 unchanged sentences

Foreign currency forward contract 2,475 2,475 — — 2,475

Financial liabilities

Contingent consideration payable $ 4,900 $ 4,900 $ — $ — $ 4,900

Revenue Recognition

1 unchanged sentence

The Company's Finance Receivables segment does not have any revenues received from contracts with customers.

The following table provides the contract revenue recognized by revenue source for the three and nine months ended September 30, 2024 and 2023 (in thousands):

The following table provides the contract revenue recognized by revenue source (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Pharmaceutical Development Segment

License Agreement $ — $ — $ 49 $ 10

Pharmaceutical Development 963 279

2 unchanged sentences

The Company’s contract liabilities are presented as deferred income and are included in accounts payable and accrued liabilities in the consolidated balance sheets (in thousands):

September 30,

2024 December 31, 2023

March 31, 2025 December 31, 2024

Pharmaceutical Development Segment

Deferred income $ 2,109 $ 9

Total contract liabilities $ 2,109 $ 9

During the nine months ended September 30, 2024, the Company recognized the full remaini ng balance of $ 9 thousand of 2023 deferred income from satisfaction of performance obligations.

The Company did not have any contra ct assets as of September 30, 2024 or December 31, 2023.

Enteris Exclusive Option and Asset Purchase Agreement

With an effective date of January 1, 2024, we entered into an exclusive option and asset purchase agreement with a strategic partner on March 14, 2024 which granted the partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing clinical manufacturing and development services.

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

In exchange for the exclusive purchase option the partner is to provide consideration in the form of an "option fee" and "guaranteed revenue payments."

The option fee is broken into two components:

A low-single digit million fee due within 30 business days of executing the agreement;

and should the option not be exercised by the first anniversary of the effective date, an additional low-single digit million fee will be due at that time.

The first option fee was paid in April 2024.

Option fee payments will be included in deferred income until the earlier of term expiration or exercise of the purchase option.

Should the partner exercise the purchase option, any option fee payments made will be applied towards the purchase price.

The guaranteed revenue payments include two components:

A mid-single digit million guaranteed revenue payment in 2024 and a mid-single digit million guaranteed revenue payment in 2025.

The revenue is to be derived by the partner under an existing collaboration agreement, and the partner is to pay the difference should the minimum amount not be met each year.

Each year's guaranteed revenue amount is to be paid in two installments semi-annually each year.

Should revenue exceed the 2024 or 2025 guaranteed revenue amounts after receiving a difference payment in the first half of the year, we must repay the partner the amount of such overpayment.

Guaranteed revenue of $ 0.4 million was recognized during the nine months ended September 30, 2024.

Beginning balance $ 1,500 $ 9

Income recognized — ( 9 )

Additions to deferred income 1,849 1,500

Ending balance $ 3,349 $ 1,500

Segment Information

10 unchanged sentences

The following tables present financial information for the Company's reportable segments for the periods indicated (in thousands):

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

1 unchanged sentence

Other revenue 110 47 — 157

Provision for credit losses 1,385 — — 1,385

Benefit from credit losses ( 1,465 ) — — ( 1,465 )

Interest expense 232 2 896 1,130

2 unchanged sentences

General and administrative expense 55 704 2,518 3,277

Other income, net 292 — — 292

Other expense, net ( 2,214 ) ( 82 ) — ( 2,296 )

Income tax expense — — 1,278 1,278

Net income (loss) 9,786 ( 536 ) ( 4,711 ) 4,539

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

9 unchanged sentences

Net income (loss) 4,068 ( 1,453 ) ( 2,147 ) 468

Nine Months Ended September 30, 2024

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

Revenue $ 30,519 $ 1,711 $ — $ 32,230

Other revenue 392 3 — 395

Provision for credit losses 10,777 — — 10,777

Loss on impairment of intangible assets — 5,771 — 5,771

Interest expense 820 7 2,687 3,514

Pharmaceutical manufacturing, research and development — 1,635 — 1,635

Change in fair value of acquisition-related contingent consideration — ( 4,900 ) — ( 4,900 )

Depreciation and amortization expense — 1,106 63 1,169

General and administrative expense 257 2,179 6,164 8,600

Other income (expense), net 4,135 — ( 408 ) 3,727

Income tax expense — — 2,170 2,170

Net income (loss) 23,192 ( 4,084 ) ( 11,492 ) 7,616

Nine Months Ended September 30, 2023

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

Revenue $ 27,146 $ 616 $ — $ 27,762

Other revenue 106 — 2 108

Benefit for credit losses ( 459 ) — — ( 459 )

Interest expense 721 — — 721

Pharmaceutical manufacturing, research and development expense — 2,834 — 2,834

Depreciation and amortization expense — 1,907 30 1,937

General and administrative expense 380 2,282 5,854 8,516

Other expense, net ( 319 ) — — ( 319 )

Income tax expense — — 959 959

Net income (loss) 26,291 ( 6,407 ) ( 6,841 ) 13,043

Included in Holding Company and Other are the expenses of the parent holding company and certain other enterprise-wide overhead costs, including public company costs and non-Enteris corporate employees, which have been included for purposes of reconciling to the consolidated amounts.

Subsequent Events

On November 14, 2024, the Company sold its investment interest in Exeevo to a third-party purchaser.

Consideration received or to be received for the sale consists of (a) $ 3.4 million cash at closing, (b) $ 0.7 million contingent payment on January 2, 2025 with contingency based on third-party purchaser executing a new agreement with an existing key vendor, (c) $ 0.5 million cash on February 1, 2025, and (d) three year earn out consisting of 30 % of the annual increase in SAAS gross margin.

The Company is in the process of completing its accounting for the sale, but does not believe that there is any indication of impairment to the carrying value as of September 30, 2024.

On October 1, 2024, BIOLASE filed for Chapter 11 bankruptcy protection with a third-party stalking horse bidder in place.

The Company agreed to make additional fundings to support the Chapter 11 process through Debtor-in-Possession (“DIP”) Financing.

On October 9, 2024, the Company advanced an additional $ 1.4 million DIP Financing to BIOLASE.

On November 4, 2024, an auction was held for the purchase of the BIOLASE assets and was won by an international third-party bidder with an all-cash bid of $ 20.1 million.

The Company is in the process of completing its accounting for the transaction, but does not believe that there is any indication of impairment to the carrying value as of September 30, 2024.

The following table presents total assets for the Company's reportable segments for the periods indicated (in thousands):

March 31, 2025 December 31, 2024

Finance receivables $ 297,961 $ 299,248

Pharmaceutical development and other 9,013 7,786

Holdings Company and other 24,290 25,201

Total $ 331,264 $ 332,235

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements