What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-20 compared with 2025-03-20 · 81 added, 121 removed, 155 unchanged (57% of the section changed)

7 unchanged sentences

We undertake no duty to update any forward-looking statements made herein after the date of this Annual Report.

We have organized our operations into two segments:

Finance Receivables and Pharmaceutical Development.

These segments reflect the way we evaluate our business performance and manage our operations.

Please refer to Part I, Item 1, Business and Part II, Item 8, Financial Statements , Notes 1 and 13 of the notes to the consolidated financial statements for further information regarding segment information.

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 strategic partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing good manufacturing practice (GMP) manufacturing and clinical supply services through Phase 1 and 2 to third parties, subject to certain exclusions.

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

As of December 31, 2024, Enteris is classified as held for sale as the Option is expected to be exercised within the next 12-months.

Please refer to Part II, Item 8, Financial Statements , Note 13 and Note 7 of the notes to the consolidated financial statements for further information regarding the Option and Asset Purchase Agreement with the strategic partner and held for sale classification.

For the year ended December 31, 2025, the Company operated two reportable segments, Pharmaceutical Development and Finance Receivables.

During the third quarter of 2025, the Company sold substantially all of the assets of the Pharmaceutical Development Segment, after which the Company’s operations were primarily attributable to the Finance Receivables segment.

Please refer to Part II, Item 8, Financial Statements , Notes 1 and 12 of the notes to the consolidated financial statements for further information regarding segment information.

Finance Receivables Portfolio Overview

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Ophthalmic antibiotic $ 6,000 $ — $ 59

Forfivo XL® (5)

Depressive disorder treatment 6,000 — 506

Coflex®/Kybella® (5)

Spinal stenosis/submental fullness 4,350 — 48

NSAID migraine treatment 8,500 — 98

Duo Royalty (5)

Japanese Women's health/cystic fibrosis 15,353 — 591

Immune Globulin (5)

Immune Globulin Therapeutics 14,100 — 443

Rare Disease Portfolio 7,701 — 336

Best ABT, Inc.

Oncology diagnosis 5,784 1,755 —

Coflex®/Kybella® Spinal stenosis/submental fullness 4,350 3,053 246

NSAID migraine treatment 8,500 — 420

Duo Royalty Japanese Women's health/cystic fibrosis 15,353 11,231 2,346

Flowonix Medical, Inc.

(2), (3), (4)

Drug delivery device

Forfivo XL® Depressive disorder treatment 6,000 1,267 1,239

12,455 5,875 —

Ideal Implant, Inc.

Aesthetics 4,025 2,286 —

Immune Globulin Immune Globulin Therapeutics 14,100 11,685 1,729

Diabetic macular edema 16,501 — 519

Relief Rare Disease Portfolio 7,701 8,005 490

Veru, Inc (7)

Women's health 10,000 — 582

Term Loans Type Maturity Date Principal GAAP Balance Rate Revenue Recognized

First lien 12/31/27 $ 19,486 $ 23,533 12.8% $ 4,299

First lien 3/21/27 8,478 8,635 11.2 % 1,895

BIOLASE, Inc.

Advanced Oxygen Therapy Inc.

("AOTI") First lien 02/15/29 19,478 19,679 10.9% 2,055

First lien 08/10/27 — — 11.0% 4,188

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CDMO Manufacturer First lien 09/13/27 5,000 5,600 13.3% 809

First lien 8/10/27 21,045 23,944 12.0 % 3,767

Epica International, Inc.

First lien 7/23/24 — — 11.5 % 957

eTon Pharmaceuticals, Inc.

First lien 12/17/27 30,000 29,909 11.8% 4,556

First lien 7/1/27 — — 12.8 % 8

Journey Medical Corporation First lien 06/27/28 25,000 25,325 12.8% 3,668

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Shield Therapeutics, Plc First lien 09/28/28 20,000 20,070 14.3% 3,297

SKNV First lien 11/15/28 15,997 16,378 12.0 % 2,059

Triple Ring First lien 12/6/28 8,000 7,930 12.0 % 76

SKNV, LLC First lien 11/15/28 15,997 16,437 11.3% 1,970

Triple Ring Technologies First lien 12/06/28 8,000 8,092 12.0% 1,136

ImpediMed LTC First lien 02/05/30 15,000 14,675 13.8% 1,808

Marketable Investments Number of Shares Funded Amount GAAP Balance Change in Fair Value

Secured Royalty Financing (Marketable Investment) (2), (3)

N/A $ 3,000 $ 21 $ —

AOTI Common Stock (8)

AOTI Common Stock 402,634 N/A 149 (336)

50,000 N/A 35 (48)

EyePoint Pharmaceuticals — N/A — (181)

Privately Held Shares Number of Shares

Epica International, Inc 25,000

SKNV, LLC 26,575

MolecuLight, Inc.

Warrants to Purchase Stock Number of Shares Exercise Price per Share GAAP Balance Change in Fair Value

TBD $ — $ — $ —

ImpediMed Tranche 1 12,491,870 $ 0.05 176 (140)

ImpediMed Tranche 2 6,245,935 $ 0.05 88 (93)

Aziyo Biologics, Inc.

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Tranche 2 600,000 $ 0.50 166 3

Biotricity, Inc.

Tranche 3 27,150 $ 2.21 6 (42)

Biotricity, Inc.

Tranche 4 27,150 $ 2.21 6 (43)

Biotricity, Inc.

Tranche 5 120,000 $ 0.37 34 (4)

CDMO Manufacturer 211,442 $ 1.42 — —

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Tranche 3 289,736 $ 5.32 3,941 932

EyePoint Pharmaceuticals, Inc.

40,910 11.00 — 127

EyePoint Pharmaceuticals, Inc.

7,773 19.30 — 22

Nicoya Lifesciences, Inc.

276,630 C$ 1.81 — —

Nicoya Lifesciences, Inc.

117,305 C$ 6.26 — —

Shield Warrant 8,910,540 $ 0.14 695 355

8,910,540 0.14 201 (193)

MedMinder, System, Inc.

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MolecuLight, Inc.

394,322 C$ 0.84 — —

Assets Revenue Recognized

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Total $ 232,002 $ 38,439

(1) US royalty was paid off during the year ended December 31, 2021.

SWK continues to receive insignificant royalties on international sales.

(1) US royalty was paid off in a prior period but the Company continues to receive insignificant royalties on international sales.

(2) Investment considered partially impaired.

(3) Investment on non-accrual.

(4) Carrying value was paid off during the year ended December 31, 2023.

SWK continues to receive royalties on actual sales.

(5) Flowonix Medical assets were sold to a medical device company during the year ended December 31, 2023.

In exchange for releasing its lien, SWK received cash at close and is expected to receive royalties on sales of two products.

The finance receivable is now classified as a royalty.

(6) In July 2023, Ideal Implant assets were sold to an aesthetics company, which is expected to pay SWK a mid-single digit, capped royalty on implant sales.

(7) The Veru royalty was repaid during the year ended 2024.

(8) AOTI warrants exercised and converted to shares.

(9) Investment paid off during the year ended December 31, 2024.

(10) Exercise price is converted from 0.111 British Pound per share.

(4) Flowonix Medical assets were sold to a medical device company in a prior period.

In exchange for releasing its lien, SWK received cash at close and receives royalties on sales of two products.

(5) Royalties were sold as of December 31, 2025

(6) Investment was paid off during the year ended December 31, 2025

Unless otherwise specified, our senior secured debt assets generally are repaid by a revenue interest that is charged on a company’s quarterly net sales and royalties.

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The determination of impairment involves management’s judgment and the use of market and third-party estimates regarding collateral values.

Valuations of impaired receivables and corresponding impairment affect the level of the reserve for credit losses.

Valuations of impaired receivables and corresponding impairment affect the level of the allowance for credit losses.

Revenue Recognition

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Other administrative service revenues are recognized when contractual obligations are fulfilled or as services are provided.

Pharmaceutical Development Segment

Our 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 terms of these arrangements typically include payment to us of one or more of the following:

non-refundable, upfront license fees;

reimbursement of certain costs;

customer option exercise fees;

development, regulatory and commercial milestone payments;

and royalties on net sales of licensed products.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, we perform the following steps:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations;

and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

As part of the accounting for these arrangements, the Company must use its judgment to determine:

(a) the number of performance obligations based on the determination under step (ii) above;

(b) the transaction price under step (iii) above;

(c) the stand‑alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above;

and d) the contract term and pattern of satisfaction of the performance obligations under step (v) above.

Management uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below.

The transaction price is allocated to each performance obligation on a relative stand‑alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.

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

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

Fair Value of Financial Instruments

The fair value of our financial instruments reflects the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Our financial instruments not required to be adjusted to fair value on a recurring basis consist principally of cash, cash equivalents, and accounts and finance receivables, accounts payable, and accrued expenses.

We believe the carrying amount of cash and accounts and finance receivable, accounts payable and accrued expenses approximate fair value due to their relatively short maturities.

Our financial instruments not required to be adjusted to fair value on a recurring basis consist principally of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses.

We believe the carrying amount of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their relatively short maturities.

The recognition of certain net deferred tax assets of our reporting entities is dependent upon, but not limited to, the future profitability of the reporting entity, when the underlying temporary differences will reverse, and tax planning strategies.

Further, management’s judgment regarding the use of estimates and projections is required in assessing our ability to realize the deferred tax assets relating to NOL carryforwards, as most of these assets are subject to limited carryforward periods.

Further, management’s judgment regarding the use of estimates and projections is required in assessing the Company’s ability to realize deferred tax assets related to NOL carryforwards, as most of these assets are subject to limited carryforward periods.

In evaluating realizability, management considered the pending merger with a business development company and its potential impact on the availability of future taxable income.

We will continue to assess the need for a valuation allowance on the deferred tax assets by evaluating both positive and negative evidence that may exist at each reporting date.

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Revenues $ 41.5 $ 45.0 $ (3.5)

Provision for credit losses 12.8 1.9 $ 10.9

Loss on impairment of intangible assets 5.8 — $ 5.8

Impairment of goodwill — 8.4 $ (8.4)

Provision for (benefit from) credit losses (0.9) 12.8 $ (13.7)

Loss on impairment 0.6 5.8 $ (5.2)

Loss on disposal of inventory 0.3 — $ 0.3

Interest expense 4.8 4.7 $ 0.1

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General and administrative expense 14.8 11.5 $ 3.3

Other income, net 6.8 — $ 6.8

Income tax expense (benefit) 4.9 (1.3) $ 6.2

Net income 13.5 15.9 $ (2.4)

Revenues increased to $45.0 million for the year ended December 31, 2024 from $37.8 million for the year ended December 31, 2023.

The $7.2 million increase in revenue for the year ended December 31, 2024 consisted of a $4.8 million increase in Finance Receivables segment revenue and a $2.4 million increase in Pharmaceutical Development segment revenue.

The $4.8 million increase in Finance Receivables segment revenue was primarily due to a $8.2 million increase in interest and fees earned due to funding new and existing loans offset by $2.5 million decrease in interest, fees and royalties earned on finance receivables that were paid off during the period.

The increase in the Pharmaceutical Development segment was primarily due to the strategic partner collaboration agreement.

Provision for Credit Losses

Other income (expense), net (0.2) 6.8 $ (7.0)

Income tax expense 22.6 4.9 $ 17.7

Net income (loss) (2.5) 13.5 $ (16.0)

Revenues decreased to $41.5 million for the year ended December 31, 2025, from $45.0 million for the year ended December 31, 2024.

The $3.5 million decrease in revenue for the year ended December 31, 2025, consisted of a $2.1 million decrease in Finance Receivables segment revenue and a $1.4 million decrease in Pharmaceutical Development segment revenue prior to the sale of MOD3.

The $2.1 million decrease in Finance Receivables segment revenue was primarily due to a decrease in interest, fees and royalties earned on finance receivables that were paid off or sold during the period.

Provision for (benefit from) Credit Losses

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 $12.8 million and $1.9 million for the years ended December 31, 2024 and 2023, respectively.

Most of the change was related to a $8.1 million impairment on the Trio loan and $2.2 million impairment on the Exeevo loan that were included within the provision for credit losses during the year ended December 31, 2024.

Impairment of Goodwill

We recognized a $8.4 million impairment charge during the year ended December 31, 2023.

As part of the Company's annual goodwill impairment analysis, the Company elected to bypass the qualitative goodwill impairment assessment and proceed directly with a quantitative assessment.

The goodwill impairment test concluded that the fair value of the Company's Pharmaceutical Development reporting unit did not exceed the carrying amount and the Company recognized an impairment.

We recognized a benefit from credit losses of $0.9 million and an expense of $12.8 million for the years ended December 31, 2025 and 2024, respectively.

The $13.7 million decrease was primarily due to impairments included within the provision for credit losses during the year ended December 31, 2024.

Interest Expense

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 $4.7 million for year ended December 31, 2024 from $1.8 million for the year ended December 31, 2023.

The $2.9 million increase in interest expense was mainly due to issuing approximately $32.9 million of Notes in an underwritten public offering in October of 2023.

Interest expense remained consistent for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

Pharmaceutical Manufacturing, Research and Development Expense

Pharmaceutical manufacturing, research and development expense decreased from $2.2 million for the year ended December 31, 2024 to $1.6 million for the year ended December 31, 2025.

The $1.2 million decrease was primarily due to a reduction in research and development and clinical trial expenditures related to cancelled projects during the period.

The $0.6 million decrease was primarily due to the sale substantially all of the assets of MOD3 during the period.

Change in Fair Value of Contingent Consideration

We recognized gains of $4.9 million and $6.3 million from the change in fair value of acquisition-related contingent consideration during the years ended December 31, 2024 and 2023, respectively.

The contingent consideration is the earnout related to the 2019 acquisition of Enteris and sharing of certain milestone and royalties due to Enteris pursuant to a license agreement ("License Agreement") with Cara Therapeutics, Inc.

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

The change in the gain on the fair value of contingent consideration is primarily due to a recognized gain of $4.9 million from the change in fair value of acquisition-related contingent consideration during the year ended December 31, 2024.

The contingent consideration is the earnout related to the 2019 acquisition of MOD3 and sharing of certain milestone and royalties due to MOD3 pursuant to a license agreement ("License Agreement") with Cara Therapeutics, Inc.

("Cara") for oral formulation rights to MOD3 technology to develop and commercialize Oral KORSUVA™ in any indication worldwide, excluding South Korea and Japan.

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.

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Depreciation and Amortization Expense

The $1.2 million decrease in depreciation and amortization expense for the year ended December 31, 2024 primarily consists 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 year.

Amortization expense is aligned with the expected future cash flows of the intangible assets.

See Note 3 for more information on the impairment of the Cara license.

The $1.4 million decrease in depreciation and amortization expense for the year ended December 31, 2025 primarily consists 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 prior year.

In addition, MOD3 was classified as held for sale for the current period resulting in no depreciation on fixed assets classified as held for sale.

General and Administrative Expense

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and corporate governance expenses.

General and administrative expenses increased to $11.5 million for the year ended December 31, 2024 from $11.2 million for the year ended December 31, 2023.

Other Income, Net

Other income, net increased to $6.8 million for the year ended December 31, 2024.

Other income, net was immaterial for the year ended December 31, 2023.

The $6.8 million increase includes a $2.5 million gain on revaluation related to the Iluvien royalty after a contractual re-negotiation, a $2.4 million increase in unrealized gains on warrants, a $1.1 million gain on asset payoff, and a gain of $0.6 million due to foreign currency transactions.

General and administrative expenses increased to $14.8 million for the year ended December 31, 2025 from $11.5 million for the year ended December 31, 2024 primarily due to an increase in compensation costs and legal costs during the period.

Other Income (Expense), Net

Other income (expense), net decreased to an expense of $0.2 million for the year ended December 31, 2025.

Other income, net was $6.8 million for the year ended December 31, 2024.

The $7.0 million change is primarily due to a loss on revaluation of finance receivables compared to a gain on finance receivables in the same period in the prior year.

Income Tax Expense

During the years ended December 31, 2024 and 2023 we recognized $4.9 million income tax expense and $1.3 million of income tax benefit, respectively.

Income tax expense increased period over period due to the release of valuation allowance on deferred tax assets of $6.7 million during the year ended December 31, 2023 and an increase in the Company's effective tax rate to 26.6% as of December 31, 2024 from a benefit of 8.7% for the same period in the prior year.

During the years ended December 31, 2025 and 2024 we recognized $22.6 million and $4.9 million of income tax expense, respectively.

Income tax expense increased period over period due to a reduction in the realizability of the deferred tax assets as of December 31, 2025.

Liquidity and Capital Resources

As of December 31, 2025, we had $42.8 million in cash and cash equivalents, compared to $5.9 million as of December 31, 2024.

The primary driver of the $1.4 million increase in our cash balance was $88.2 million of interest, fees, principal and royalty payments received on our finance receivables and $5.0 million of cash receipts from pharmaceutical development revenues.

The increase in cash and cash equivalents was partially offset by $64.1 million of investment funding, net of deferred fees and origination expenses, a net credit facility payment of $6.2 million, a payroll and benefits expense of $5.4 million, $10.8 million of payments on accounts payable, and share repurchases of $6.0 million.

The primary driver of the $36.9 million increase in our cash balance was primarily related to interest, fees, principal and royalty payments received on finance receivables, and proceeds from the sale and repayment of finance receivables.

The increase in cash and cash equivalents was partially offset by the payment of dividends, 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.

We entered into a $45.0 million revolving credit facility in June 2023 with First Horizon Bank.

The Credit Agreement provides for one or more incremental increases not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior to the Commitment Termination Date.

On October 10, 2023, the Company entered into a First Amendment to 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.

As of December 31, 2024, there was $6.2 million outstanding amount under the new Credit Agreement, and $35.6 million was available for borrowing.

On December 4, 2025, the Company, SWK Funding LLC, First Horizon Bank, and the financial institution party thereto entered into a Sixth Amendment to the Credit Agreement (the “Amendment”), to reduce the aggregate commitments thereunder from $60.0 million to $10.0 million.

As of December 31, 2025, there was no outstanding amount under the new Credit Agreement.

The $10.0 million Credit Agreement contains a $5.0 million liquidity covenant, bringing the total amount available for borrowing to $5.0 million.

On October 3, 2023, the Company completed a registered underwritten public offering of $30.0 million of the Notes.

On October 27, 2023, the underwriters exercised their option to purchase an additional approximately $3.0 million in aggregate principal amount of the Notes.

The Notes will mature on January 31, 2027, unless earlier redeemed, and will bear interest at a rate of 9.00% per annum, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year and at maturity, commencing on December 31, 2023.

The Company received net proceeds after discounts, commissions, expenses and fees, of approximately $30.6 million.

See Note 8 for more information.

Primary Driver of Cash Flow

Our ability to generate cash in the future depends primarily upon our success in implementing our Finance Receivables business model of generating income by providing capital to a broad range of life science companies, institutions and inventors, as well as the success of our Pharmaceutical Development segment.

We generate income primarily from four sources:

During the period presented we generated income primarily from four sources:

Primarily owning or financing through debt investments, royalties generated by the sales of life science products and related intellectual property;

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Realizing capital appreciation from equity-related investments in the life science sector.

As of December 31, 2024, our finance receivables portfolio contains $277.8 million of net finance receivables and $0.6 million of marketable investments.

As of December 31, 2025, our finance receivables portfolio contains $218.6 million of net finance receivables.

We expect these assets to generate positive cash flows in 2026.

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We believe we are well positioned to benefit should market interest rates rise in the future.

We continue to evaluate multiple attractive opportunities that, if consummated, we believe would similarly generate additional income.

Since the timing of any investment is difficult to predict, our Finance Receivables segment may not be able to generate positive cash flow above what our existing assets are expected to produce in 2025.

We anticipate near-term repayments from borrowers, however, no assurances can be given that actual results would not differ materially from the statement above.

Off-Balance Sheet Arrangements

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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-K

Item 7. Management’s Discussion and Analysis