What changed in this filing

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Item 1. Financial Statements

2025-08-14 compared with 2025-05-15 · 179 added, 119 removed, 572 unchanged (34% of the section changed)

8 unchanged sentences

Assets held for sale, net (Note 4) 6,488 6,398

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

Other current assets 1,088 2,141

Total current assets 21,193 20,254

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

Finance receivables, net of allowance for credit losses of $ 8,826 and $ 11,249 as of June 30, 2025 and December 31, 2024, respectively

237,604 277,760

3 unchanged sentences

Warrant assets 4,612 4,366

Property and equipment, net 28 48

Other non-current assets 466 3,041

17 unchanged sentences

250,000,000 shares authorized;

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

12,183,906 and 12,213,599 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital 4,418,773 4,419,991

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Finance receivable interest income, including fees $ 8,543 $ 9,986 $ 19,255 $ 21,021

Pharmaceutical development 1,190 804 2,153 1,083

Other 319 57 476 103

Total revenues 10,052 10,847 21,884 22,207

1 unchanged sentence

Provision (benefit) for credit losses 761 4,095 ( 704 ) 9,392

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

Interest expense 1,155 1,119 2,285 2,375

Pharmaceutical manufacturing, research and development expense 645 520 1,403 1,050

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

Depreciation and amortization expense 19 421 38 935

2 unchanged sentences

Other income (expense), net

Unrealized net loss on warrants ( 424 ) ( 95 )

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

Unrealized net gain (loss) on warrants 347 226 ( 77 ) 131

Net gain on exercise and cancellation of warrants — 675 — 444

Loss on sale of assets — — ( 82 ) —

Net loss on marketable investments ( 105 ) ( 231 )

Net gain (loss) on marketable investments 37 ( 19 ) ( 68 ) ( 162 )

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

Gain (loss) on revaluation of finance receivables — 2,495 ( 3,727 ) 2,495

Realized and unrealized foreign currency transaction gains (losses) ( 451 ) 437 ( 138 ) 524

Income before income tax expense 4,562 4,715 10,379 5,412

11 unchanged sentences

(in thousands, except share data)

Three Months Ended March 31, 2025

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

7 unchanged sentences

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

Three Months Ended March 31, 2024

Stock-based compensation — — 301 — 301

Issuance of restricted common stock 11,574 — — — —

Repurchases of common stock in open market ( 58,954 ) — ( 870 ) — ( 870 )

Cash dividends ($ 4.00 per share)

— — — ( 49,078 ) ( 49,078 )

Net settlement for employee taxes on stock options — — ( 89 ) — ( 89 )

Stock options exercised, net 8,764 — — — —

Net income — — — 3,536 3,536

Balances at June 30, 2025 12,183,906 12 4,418,773 ( 4,172,316 ) 246,469

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

9 unchanged sentences

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

Stock-based compensation — — 249 — 249

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

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

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

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

Net income — — — 3,680 3,680

Balances at June 30, 2024

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

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

2 unchanged sentences

Provision (benefit) for credit losses ( 704 ) 9,392

Debt issuance costs ( 41 ) —

Loss on impairment of intangible assets — 5,771

Right-of-use amortization and cease use costs 112 261

1 unchanged sentence

Deferred income taxes, net 2,266 1,239

Unrealized net loss on warrants 424 95

Net loss from exercise and cancellation of warrants — 143

Unrealized net loss (gain) on warrants 77 ( 131 )

Net gain from exercise and cancellation of warrants — ( 444 )

Loss from sale of assets 82 —

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

Foreign currency transaction (gain) loss ( 558 ) 783

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

Loss (gain) on revaluation of finance receivables 3,727 ( 2,495 )

Foreign currency transaction gains ( 614 ) ( 1,587 )

Loss on marketable investments 68 162

6 unchanged sentences

Foreign currency forward contract 915 1,260

Collateral returned for foreign currency forward contract 2,750 —

Other assets 850 ( 150 )

4 unchanged sentences

Proceeds from sale of property and equipment 110 —

Settlement of foreign currency forward contract 1,560 —

Sale of marketable investments — 574

Investment in finance receivables ( 23,500 ) ( 7,446 )

Proceeds from sale of finance receivables 31,678 —

Repayment of finance receivables 33,141 11,693

3 unchanged sentences

Cash flows from financing activities:

Net settlement for employee taxes on stock options ( 89 ) ( 43 )

Net payments on credit facility ( 5,939 ) ( 12,350 )

Cash dividends ( 49,078 ) —

Repurchases of common stock, including fees and expenses ( 1,737 ) ( 1,950 )

4 unchanged sentences

Supplemental non-cash investing and financing activities:

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

Cash paid for interest $ 1,517 $ 875

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

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

See accompanying notes to the unaudited condensed consolidated financial statements.

9 unchanged sentences

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 March 31, 2025, the Company had 26 full-time employees.

The Company is headquartered in Dallas, Texas, and as of June 30, 2025, the Company had 29 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 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.

As of August 7, 2025, the Company and its partners have executed transactions with 58 different parties under its specialty finance strategy, funding an aggregate of $ 866.6 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.

3 unchanged sentences

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.

With an effective date of April 21, 2023, we entered into a collaboration agreement with AptarGroup, Inc ("Aptar") 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 statements of income and is accounted for in accordance with our revenue recognition policy as described under Revenue Recognition below.

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As future events and their effects cannot be determined with precision, the Company’s estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause changes to those estimates and assumptions.

Market conditions, such as illiquid credit markets, health crises such as the COVID-19 global pandemic, volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates and assumptions.

Market conditions, such as illiquid credit markets, health crises, volatile equity markets, and economic downturns, can increase the uncertainty already inherent in the Company’s estimates and assumptions.

The Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change.

5 unchanged sentences

Revenue Recognition

The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with strategic partners, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties.

The Company’s Pharmaceutical Development segment enters into collaboration and licensing agreements with Aptar, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties.

The terms of these arrangements typically include payment to the Company of one or more of the following:

4 unchanged sentences

and royalties on net sales of licensed products.

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

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

1 unchanged sentence

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.

As of June 30, 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 and six months ended June 30, 2025.

Amortization expense related to intangible assets was $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2024.

Research and Development

19 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Net income $ 3,536 $ 3,680 $ 8,075 $ 4,148

4 unchanged sentences

Diluted net income per share $ 0.29 $ 0.30 $ 0.66 $ 0.33

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.

There were no outstanding options to purchase shares of common stock for the six months ended June 30, 2025.

For the three and six months ended June 30, 2024, outstanding options to purchase shares of common stock in an aggregate of approximately 37,000 and 42,000 , respectively, have been excluded from the calculation of diluted net income per share, as such securities were anti-dilutive.

Finance Receivables

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.

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):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

$ 234,118 $ 224,073

19 unchanged sentences

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.

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.

As of June 30, 2025 and December 31, 2024, the Company had $ 0.3 million and $ 0.1 million, respectively, of liabilities for credit losses on off-balance sheet exposures related to unfunded commitments with these liabilities 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

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.

4 unchanged sentences

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

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

Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

Term Loans Royalties Total Term Loans Royalties Total

13 unchanged sentences

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Nonaccrual Performing Total Nonaccrual Performing Total

4 unchanged sentences

Total carrying value $ 10,465 $ 227,139 $ 237,604 $ 12,755 $ 265,005 $ 277,760

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

As of June 30, 2025, the Company had three finance receivables in nonaccrual status:

(1) the Flowonix Medical, Inc.

4 unchanged sentences

(“Ideal”) royalty, with a carrying value of $ 2.8 million.

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 .

The Company collected $ 2.2 million and $ 0.7 million on its nonaccrual finance receivables for the six months ended June 30, 2025 and 2024 , respectively .

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

5 unchanged sentences

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

Revaluation of Finance Receivables

On April 10, 2025, the Company completed the sale of the majority of its finance receivables segment royalty portfolio to Soleus Capital (“Soleus”) for approximately $ 34.0 million in cash ("the Transaction"), which approximated the fair value of those royalties.

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 "Gain (loss) on revaluation of finance receivables" caption on the Company's unaudited condensed consolidated statements of income for the three and six months ended June 30, 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 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 (loss) on revaluation of finance receivable" caption on our unaudited condensed consolidated statements of income for the three and six months ended June 30, 2024.

Credit Quality of Finance Receivables

16 unchanged sentences

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

March 31, 2025

June 30, 2025

2025 2024 2023 2022 2021 Prior Total

20 unchanged sentences

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

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.

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

Assets and Liabilities Held For Sale

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.

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

Aptar 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."

10 unchanged sentences

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.

There was $ 0.2 million guaranteed revenue recognized during the three and six months ended June 30, 2025 and $ 0.4 million guaranteed revenue recognized during the three and six months ended June 30, 2024 .

As the Company expected Aptar 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 as of June 30, 2025, 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.

1 unchanged sentence

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Inventory $ 374 $ 354

6 unchanged sentences

Total liabilities held for sale $ 1,278 $ 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.

During neither the six months ended June 30, 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

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,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Net loss before taxes $ 18 $ ( 1,736 ) $ ( 518 ) $ ( 3,192 )

On July 15, 2025, the Company, MOD3, and Aptar closed the asset purchase agreement (the "Purchase Agreement") for the sale and assignment of the Assets to Aptar (the "Asset Sale") for an aggregate purchase price of approximately $ 6.9 million which includes cash previously paid by Aptar in accordance with the Option Agreement.

Marketable Investments

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Corporate debt securities $ 6 $ 21

3 unchanged sentences

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

March 31, 2025 $ 13 $ — $ — $ 13

June 30, 2025 $ 6 $ — $ — $ 6

December 31, 2024 $ 21 $ — $ — $ 21

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.

On May 29, 2025, as part of an amendment to an existing term loan finance receivable agreement with Elutia, Inc ("Elutia") the Company received 50,000 shares of common shares with a fair value of $ 0.1 million, or $ 1.65 per share.

Sale of the shares is restricted until maturity of the term loan finance receivable with Elutia.

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

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

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 )

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Net gain (loss) on equity securities during the period $ 37 $ 656 $ ( 68 ) $ 282

Net gain on warrants exercised or cancelled during the period — ( 444 ) — ( 444 )

Net loss recognized on equity securities sold during the period — 180 — 180

Unrealized gain (loss) on equity securities held at the end of the period $ 37 $ 392 $ ( 68 ) $ 18

Revolving Credit Facility

11 unchanged sentences

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.

As of June 30, 2025 and December 31, 2024, there was $ 0.3 million and $ 6.2 million outstanding under the Credit Agreement, respectively.

During the three and six months ended June 30, 2025, the Company recognized $ 0.2 million and $ 0.5 million, respectively, of interest expense in connection with the Credit Agreement.

During the three and six months ended June 30, 2024, the Company recognized $ 0.2 million and $ 0.6 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):

March 31, 2025 December 31, 2024

June 30, 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):

March 31, 2025

June 30, 2025

Remainder of 2025 $ —

5 unchanged sentences

The Notes are senior unsecured obligations of the Company and rank equal in right of payment with the Company’s existing and future senior unsecured indebtedness.

During the three and six months ended June 30, 2025, the Company recognized $ 0.9 million and $ 1.8 million, respectively, of interest expense in connection with the Notes.

During the three and six months ended June 30, 2024, the Company recognized $ 0.9 million and $ 1.8 million, respectively, of interest expense in connection with the Notes.

The Company evaluated the 2027 Senior Notes for derivatives pursuant to Accounting Standard Codification ("ASC") 815, "Derivatives and Hedging," and identified an embedded derivative that required bifurcation as the feature is not clearly and closely related to the host instrument.

1 unchanged sentence

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 March 31, 2025.

There have been no changes to the Company’s assessment that the fair value of the embedded derivative is immaterial through June 30, 2025.

Commitments and Contingencies

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Operating lease cost $ 110 $ 134 $ 218 $ 259

1 unchanged sentence

Total lease cost $ 126 $ 151 $ 244 $ 291

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

Future minimum rent on the Company's operating leases was as follows as of June 30, 2025 (in thousands):

Remainder of 2025 $ 90

Total future lease payments $ 589

(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.

As of June 30, 2025, total future lease payments exclude $ 1.2 million of lease payments related to held for sale leases, of which $ 0.1 million are due in the remainder of 2025.

Contingent Consideration

During fiscal year 2019 the Company recorded contingent consideration related to the 2019 acquisition of MOD3 and sharing of certain milestone and royalties due to MOD3 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 and six 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.

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

As of June 30, 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 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.

As of June 30, 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 March 31, 2025 and December 31, 2024.

Accordingly, the Company had no liabilities recorded for these agreements as of June 30, 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 for recurring fair value measurements during the three months ended March 31, 2025 and 2024.

There were no transfers between any levels for recurring fair value measurements during the three and six months ended June 30, 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.

2 unchanged sentences

Cash and cash equivalents

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents approximate those assets’ fair values.

Finance Receivables

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

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

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For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3.

The Company uses a foreign currency forward contract to manage the impact of fluctuations in foreign currency denominated cash flows expected to be received from one of its royalty finance receivables denominated in a foreign currency.

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

The foreign currency forward 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):

The Company used a foreign currency forward contract to manage the impact of fluctuations in foreign currency denominated cash flows expected to be received from one of its royalty finance receivables denominated in a foreign currency.

During April 2025, the Company sold the related royalty finance receivable as part of the Transaction (See Note 3).

As a result, the Company terminated its foreign currency forward contract and received a cash payment of $ 1.6 million.

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

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

Prior to the termination of the foreign currency forward contract the Company recognized losses of $ 0.5 million and $ 0.9 million for the three and six months ended June 30, 2025, respectively, due to changes in fair value related to its foreign currency forward contract.

During the three and six months ended June 30, 2024, the Company recognized gains of $ 0.8 million and $ 1.7 million, respectively, due to changes in fair value related to its foreign currency forward contract.

The following table presents financial assets measured at fair value on a recurring basis as of June 30, 2025 (in thousands):

Sheets Quoted Prices

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Marketable investments 603 597 — 6

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

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 (in thousands):

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

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

The changes in fair value of the warrant assets during were as follows (in thousands):

Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

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

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

Fair value - March 31, 2025

$ 4,245 Fair value - March 31, 2024

Fair value - June 30, 2025

$ 4,612 Fair value - June 30, 2024

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

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Dividend rate range — —

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

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

As of June 30, 2025 the risk-free rate range weighted average was 4.0 %, and had a median of 3.8 %.

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 June 30, 2025 the expected life range weighted average was 5.5 years, and had a median of 4.1 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 June 30, 2025 the expected volatility range weighted average was 70 %, and had a median of 87.0 %.

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

As of June 30, 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 and six months ended June 30, 2025, the Company recognized impairment based on a reduction in carrying value of two royalties, Flowonix and Ideal.

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):

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 June 30, 2025 and December 31, 2024 (in thousands):

Sheets Quoted Prices

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(Level 2) Significant

March 31, 2025

June 30, 2025

$ 12,312 $ — $ — $ 12,312

1 unchanged sentence

$ 14,830 $ — $ — $ 14,830

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

There were no liabilities measured at fair value on a nonrecurring basis as of June 30, 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 March 31, 2025 (in thousands):

The following table presents the fair value of financial assets as of June 30, 2025 (in thousands):

Carrying Value Fair Value Level 1 Level 2 Level 3

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Finance receivables, net $ 237,604 $ 237,604 $ — $ — $ 237,604

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

33,990 33,990 — — 33,990

Marketable investments 603 603 597 — 6

Warrant assets 4,612 4,612 — — 4,612

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):

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

Carrying Value Fair Value Level 1 Level 2 Level 3

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Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Pharmaceutical Development Segment

License Agreement $ — $ 49 $ — $ 49

Pharmaceutical Development 1,190 755 2,153 1,034

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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):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Pharmaceutical Development Segment

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Management uses this measure of profit (loss) to evaluate segment performance because the Company believes this measure is indicative of performance trends and the overall earnings potential of each segment.

The Company does not report assets by reportable segment, as this metric is not used by the Company's CEO in assessing performance or allocating resources to the segments.

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

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

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Other revenue 250 69 — 319

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

Provision for credit losses 761 — — 761

Interest expense 240 4 911 1,155

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Net income (loss) 7,653 18 ( 4,135 ) 3,536

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

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Provision for credit losses 4,095 — — 4,095

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

Interest expense 225 2 892 1,119

Pharmaceutical manufacturing, research and development expense — 520 — 520

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

Depreciation and amortization expense — 400 21 421

General and administrative expense 91 747 2,082 2,920

Other income (expense), net 3,851 — ( 37 ) 3,814

Income tax expense — — 1,035 1,035

Net income (loss) 9,483 ( 1,736 ) ( 4,067 ) 3,680

Six Months Ended June 30, 2025

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

Revenue $ 19,255 $ 2,153 $ — $ 21,408

Other revenue 360 116 — 476

Benefit from credit losses ( 704 ) — — ( 704 )

Interest expense 472 6 1,807 2,285

Pharmaceutical manufacturing, research and development — 1,403 — 1,403

Depreciation and amortization expense — — 38 38

General and administrative expense 127 1,296 4,697 6,120

Other expense, net ( 2,281 ) ( 82 ) — ( 2,363 )

Income tax benefit — — 229 229

Income tax expense — — 2,304 2,304

Net income (loss) 17,439 ( 518 ) ( 8,846 ) 8,075

Six Months Ended June 30, 2024

Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated

Revenue $ 21,021 $ 1,083 $ — $ 22,104

Other revenue 103 — — 103

Provision for credit losses 9,392 — — 9,392

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

Interest expense 590 5 1,780 2,375

Pharmaceutical manufacturing, research and development expense — 1,050 — 1,050

Depreciation and amortization expense — 892 43 935

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

General and administrative expense 169 1,457 3,978 5,604

Other income (expense), net 3,843 — ( 411 ) 3,432

Income tax expense — — 1,264 1,264

Net income (loss) 14,816 ( 3,192 ) ( 7,476 ) 4,148

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-MOD3 corporate employees, which have been included for purposes of reconciling to the consolidated amounts.

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Finance receivables $ 253,459 $ 299,248

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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