SWK Holdings CorpSWKH
SWK Holdings Corp Commitments Disclosure
Commitments and Contingencies
Lease Obligations
Topic 842, Leases, establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company's leases consist of operating leases for office space. The Company determines if an arrangement is a lease at inception. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
All the Company’s material leases are operating leases. Right-of-use ("ROU") assets related to operating leases are included on the consolidated balance sheets in other non-current assets. Operating lease cost is recognized over the lease term on a straight-line basis and is recorded within general and administrative expenses on the consolidated statements of income. In March of 2023, the Company entered into a new lease for office space in Dallas, Texas on Sherry Lane. 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 $3 thousand for the year ended December 31, 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. Total rent expense recognized under the lease was $0.3 million for both the years ended December 31, 2024 and 2023. The office lease expires in December 2029 with an option to renew for an additional five years.
Cash paid for amounts included in the measurement of operating lease liabilities was $0.5 million and $0.4 million for the years ended December 31, 2024 and 2023 and right-of-use assets obtained in exchange for new operating lease obligations was $0.5 million and $0.6 million.
The components of lease cost is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating lease cost | $ | 474 | $ | 472 | |||||||
| Variable lease cost | 63 | 49 | |||||||||
| Total lease cost | $ | 537 | $ | 521 | |||||||
Supplemental balance sheet information related to operating leases is as follows (in thousands):
| December 31, | |||||||||||||||||
| Balance Sheet Location | 2024 | 2023 | |||||||||||||||
| Other non-current assets | $ | 518 | $ | 2,085 | |||||||||||||
| Other current liabilities | 130 | 367 | |||||||||||||||
| Operating lease liabilities, non-current | Other non-current liabilities | 468 | 1,863 | ||||||||||||||
| $ | 598 | $ | 2,230 | ||||||||||||||
(1) As of December 31, 2024 operating lease right-of-use assets exclude $1.2 million that are included in assets held for sale, net, on the consolidated balance sheet. See Note 7. | |||||||||||||||||
(2) As of December 31, 2024 total operating lease liabilities exclude $1.3 million that are included in liabilities held for sale on the consolidated balance sheet. See Note 7. | |||||||||||||||||
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Weighted-average remaining lease term (years) | 3.7 | 5.3 | |||||||||
| Weighted-average discount rate | 7.1 | % | 6.3 | % | |||||||
Future minimum rent on the Company's operating leases is as follows (in thousands):
| 2025 | 179 | ||||
| 2026 | 183 | ||||
| 2027 | 188 | ||||
| 2028 | 128 | ||||
Total future lease payments (1) | $ | 678 | |||
(1) As of December 31, 2024, total future lease payments exclude $1.4 million of lease payments related to held for sale leases, of which $0.3 million are due in 2025. | |||||
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 year ended December 31, 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 year ended December 31, 2024, and is included in the "Change in fair value of acquisition-related contingent consideration" caption of our consolidated statements of income.
Unfunded Commitments
As of December 31, 2024, the Company's unfunded commitments were as follows (in millions):
| MedMinder Systems, Inc. | $ | 2.5 | ||||||
| Relief | 3.3 | |||||||
| Total unfunded commitments | $ | 5.8 | ||||||
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.
Litigation
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. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material impact on the Company’s results of operations, balance sheets and cash flows due to defense costs, and divert management resources. The Company cannot predict the timing or outcome of these claims and other proceedings. As of December 31, 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.
Indemnification
As permitted by Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving in such capacity, or in other capacities at the Company’s request. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any such amounts. 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 December 31, 2024 and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 20, 2025 | Showing above |
| 2020 | Mar 31, 2021 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.