SWK Holdings Corp

Previous wording

The table below provides an overview of our outstanding finance receivables transactions as of, and for the three and nine months ended September 30, 2024(in thousands, except rate, share and per share data):

Current wording

The table below provides an overview of our outstanding finance receivables transactions as of and for the three months ended March 31, 2025(in thousands, except rate, share and per share data):

Previous wording

Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the nine months ended September 30, 2024, compared to those discussed in our Annual Report.

Current wording

Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the three months ended March 31, 2025, compared to those discussed in our Annual Report.

Previous wording

Revenues increased to $10.4 million for the three months ended September 30, 2024 from $9.0 million for the three months ended September 30, 2023. The $1.4 million increase in revenue for the three months ended September 30, 2024 was primarily due to a $0.9 million increase in Finance Receivables segment revenue and a $0.3 million increase in Pharmaceutical Development segment revenue. The $0.9 million increase in Finance Receivables segment revenue was primarily due to an increase of $2.1 million in interest and fees earned due to funding new and existing loans offset by $1.2 million decrease in interest, fees and royalties earned on finance receivables that were paid off during the period.

Current wording

Revenues increased to $11.8 million for the three months ended March 31, 2025 from $11.4 million for the three months ended March 31, 2024. The $0.4 million increase in revenue for the three months ended March 31, 2025 was primarily due to a $0.3 million decrease in Finance Receivables segment revenue and a $0.7 million increase in Pharmaceutical Development segment revenue. The increase in Pharmaceutical development revenues was due to the collaboration agreement with a strategic partner.

Previous wording

Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a net provision for credit losses of $1.4 million during the three months ended September 30, 2024 and $0.2 million during three months ended September 30, 2023, respectively. See Note 3 to the unaudited condensed consolidated financial statements for further information on the allowance for credit losses.

Current wording

Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a net benefit for credit losses of $1.5 million during the three months ended March 31, 2025 and a net provision of $5.3 million during three months ended March 31, 2024. The benefit was primarily due to a release of the allowance for credit losses associated with finance receivables held for sale, compared to the same period in the prior year in which there was additional provision recognized on certain receivables.

Previous wording

Interest expense consists of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense increased to $1.1 million for the three months ended September 30, 2024 from $0.2 million for the three months ended September 30, 2023. The $0.9 million increase in interest expense was due to issuing approximately $32.9 million of Notes in an underwritten public offering in October of 2023. See Note 5 for further information on the Notes, new Credit Agreement, and Prior Credit Agreement.

Current wording

Interest expense consists mostly of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense remained flat compared for for the three months ended March 31, 2025 as compared to the same period in the previous period.

Previous wording

Pharmaceutical manufacturing, research and development expense remained consistent for the three months ended September 30, 2024 as compared to the same period in the previous year resulting in an immaterial change in total activity.

Current wording

Pharmaceutical manufacturing, research and development expense remained consistent for the three months ended March 31, 2025 as compared to the same period in the previous year resulting in an immaterial change in total expense.

Previous wording

The $0.5 million decrease in depreciation and amortization expense for the three months ended September 30, 2024 primarily consisted of a decrease in amortization expense related to no longer amortizing intangible assets related to the Cara license as the intangible assets were fully impaired during the three months ended June 30, 2024. Amortization expense is aligned with the expected future cash flows of the intangible assets.

Current wording

The $0.5 million decrease in depreciation and amortization expense for the three months ended March 31, 2025 primarily consisted of a decrease in amortization expense related to no longer amortizing intangible assets related to the Cara license as the intangible assets were fully impaired.

Previous wording

General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses stayed flat at $3.0 million for the three months ended September 30, 2024 and 2023 resulting in an immaterial change in total activity between the periods.

Current wording

General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses increased by $0.6 million for the three months ended March 31, 2025 as compared to 2024. The increase is primarily due to increased compensation costs as well as legal costs associated with the Company's royalty sale.

Previous wording

During the three months ended September 30, 2024 we recognized $0.9 million of income tax expense, for the three months ended September 30, 2023 we recognized an income tax benefit of $0.4 million. Income tax expense increased period over period due to the release of valuation allowance on deferred tax assets of $1.1 million during the three months ended September 30, 2023 and an increase in the Company's effective tax rate, which was 22.8% and 13.6% as of September 30, 2024 and 2023, respectively.

Current wording

During the three months ended March 31, 2025 we recognized $1.3 million of income tax expense, for the three months ended March 31, 2024 we recognized an income tax expense of $0.2 million. Income tax expense increased period over period due to an increase in net income compared to the previous period.

Previous wording

As of September 30, 2024, we had $17.2 million in cash and cash equivalents, compared to $5.2 million as of December 31, 2023. The primary driver of the $12.0 million increase in our cash balance was $57.0 million of interest, fees, principal and royalty payments received on our finance receivables and $3.3 million of cash receipts from pharmaceutical development revenues. The increase in cash and cash equivalents was partially offset by $18.6 million of investment funding, net of deferred fees and origination expenses, a net credit facility payment of $12.4 million, a payroll and benefits expense of $4.3 million, $8.0 million of payments on accounts payable, and share repurchases of $5.2 million.

Current wording

As of March 31, 2025, we had $29.8 million in cash and cash equivalents, compared to $5.9 million as of December 31, 2024. The primary driver of the $23.9 million increase in our cash balance was primarily related to interest fees and principal and royalty payments received on finance receivables. The increase in cash and cash equivalents was partially offset by investment funding, net of deferred fees and origination expenses, net payments of our credit facility, payments for payroll and benefits expense, payments on accounts payable, and share repurchases.

Previous wording

Pharmaceutical development, manufacturing, and licensing activities utilizing the Peptelligence® platform; and

Current wording

Pharmaceutical development, manufacturing, and licensing activities; and

Previous wording

As of September 30, 2024, our finance receivables portfolio contains $255.9 million of net finance receivables and $0.8 million of marketable investments. We expect these assets to generate positive cash flows in 2024. We continuously monitor the short and long-term financial position of our finance receivables portfolio. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates. Changes in interest rates, including the levels of the underlying reference rates may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future.

Current wording

As of March 31, 2025, our finance receivables portfolio contains $223.1 million of net finance receivables and $0.5 million of marketable investments. We expect these assets to generate positive cash flows in 2025. We continuously monitor the short and long-term financial position of our finance receivables portfolio. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates. Changes in interest rates, including the levels of the underlying reference rates may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future.

Previous wording

As of September 30, 2024, we had $39.0 million in unfunded commitments. Please refer to Item 1., Financial Statements, Note 6 of the notes to the unaudited condensed consolidated financial statements for further information regarding the Company’s commitments and contingencies.

Current wording

As of March 31, 2025, we had $7.5 million in unfunded commitments. Please refer to Item 1., Financial Statements, Note 7 of the notes to the unaudited condensed consolidated financial statements for further information regarding the Company’s commitments and contingencies.