SWK Holdings Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA SWK HOLDINGS CORPORATION INDEX TO FINANCIAL STATEMENTS Contents Page Report of Independent Registered Public Accounting Firm (PCAOB ID # 207 ) 36 Financial Statements Consolidated Balance Sheets 38 Consolidated Statements of Operations 39 Consolidated Statements of Stockholders’ Equity 40 Consolidated Statements of Cash Flows 41 Notes to the Consolidated Financial Statements 43 35 Report Of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of SWK Holdings Corporation Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of SWK Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Finance Receivables and Related Finance Receivable Interest Income As described in Note 4 to the consolidated financial statements, the Company’s consolidated finance receivables were carried at $218.6 million as of December 31, 2025, which is net of the allowance for credit losses of $7.3 million. The Company generated $38.4 million of finance receivable interest income, including fees, for the year ended December 31, 2025. As explained in Note 1 to the consolidated financial statements, the Company’s finance receivables are stated at amortized cost, net of unamortized origination fees, if any, and an allowance for credit losses. Interest income on the finance receivables is recorded on an accrual basis, using the effective interest rate method to the extent that the Company expects to collect such amounts. The Company evaluates the collectibility of both interest and principal for each finance receivable to determine whether it is impaired. A finance receivable is considered to be impaired when, based on current information and events, the Company determines it is probable that it will be unable to collect amounts due according to existing contractual terms. When a finance receivable is considered to be impaired, the amount of loss is calculated by comparing the carrying value of the finance receivable to the value determined by discounting the expected future cash flows. If actual cash flows were to be substantially lower than estimated, there could be a significant adverse impact on the carrying value of the Company’s finance receivables, related finance receivable interest income, and the Company’s results of operations. 36 The principal considerations for our determination that performing procedures relating to valuation of the finance receivables and related finance receivable interest income is a critical audit matter include the overall impact on the consolidated financial statements and the significant judgment by management in developing assumptions related to expected future cash flows, and the intent and ability to continue to hold the finance receivables for investment. As a result, significant auditor judgment, subjectivity, and effort were required in performing audit procedures and evaluating audit evidence related to these assumptions. Additionally, for certain finance receivables, there may be limited historical data with which to evaluate the expected future cash flows. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating management’s process and valuation method for developing the estimate of expected cash flows of its finance receivables and potential credit losses; (ii) testing the completeness and accuracy of the underlying data used in the estimate; (iii) evaluating management’s assumptions used to estimate future cash flows, and (iv) evaluating management’s intent and ability to continue to hold the finance receivables for investment. Evaluating management’s assumptions used to estimate future cash flows for reasonableness involved (i) considering historical cash flows from the Company’s finance receivable portfolio; (ii) comparing prior period estimates to actual results of the same period; (iii) publicly available information which supports or is to the contrary of the estimated future cash flows and; (iv) determining whether the estimated cash flows used were consistent with evidence obtained in other areas of the audit. /s/ BPM LLP We have served as the Company’s auditor since 2006. San Francisco, California March 20, 2026 37 SWK HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) As of December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 42,763 $ 5,927 Interest, accounts receivable, and other receivables 3,860 5,788 Assets held for sale, net (Note 6) — 6,398 Other current assets 163 2,141 Total current assets 46,786 20,254 Finance receivables, net of allowance for credit losses of $ 7,278 and $ 11,249 as of December 31, 2025 and 2024, respectively 218,627 277,760 Collateral on foreign currency forward contract — 2,750 Marketable investments 184 580 Deferred tax assets, net 912 23,484 Warrant assets 5,913 4,366 Other non-current assets, net — 3,041 Total assets $ 272,422 $ 332,235 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 4,974 $ 2,810 Liabilities held for sale, net (Note 6) — 1,255 Deferred income — 1,500 Total current liabilities 4,974 5,565 Unsecured senior notes, net 32,110 31,412 Revolving credit facility — 6,233 Other non-current liabilities 240 335 Total liabilities 37,324 43,545 Commitments and contingencies (Note 8) Stockholders' equity: Preferred stock, $ 0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.001 par value; 250,000,000 shares authorized; 12,095,979 and 12,213,599 shares issued and outstanding as of December 31, 2025 and 2024, respectively 12 12 Additional paid-in capital 4,418,010 4,419,991 Accumulated deficit ( 4,182,924 ) ( 4,131,313 ) Total stockholders' equity 235,098 288,690 Total liabilities and stockholders' equity $ 272,422 $ 332,235 See accompanying notes to the consolidated financial statements. 38 S WK HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2025 2024 Revenues: Finance receivable interest income, including fees $ 38,439 $ 40,787 Pharmaceutical development 2,153 3,616 Other 865 584 Total revenues 41,457 44,987 Costs and expenses: Provision for (benefit from) credit losses ( 924 ) 12,756 Loss on impairment 641 5,771 Loss on disposal of inventory 314 — Interest expense 4,797 4,685 Pharmaceutical manufacturing, research and development expense 1,551 2,203 Change in fair value of acquisition-related contingent consideration — ( 4,900 ) Depreciation and amortization expense 40 1,399 General and administrative expense 14,763 11,487 Income from operations 20,275 11,586 Other income (expense), net Unrealized net gain on warrants 775 2,406 Net gain on exercise and cancellation of warrants — 445 Loss on sale of assets ( 82 ) — Gain on sale of business 1,601 — Net loss on marketable investments ( 384 ) ( 266 ) Realized gain on early payment of finance receivables 1,729 1,065 Gain (loss) on revaluation of finance receivables ( 3,727 ) 2,495 Realized and unrealized foreign currency transaction gains (losses) ( 71 ) 641 Income before income tax expense 20,116 18,372 Income tax expense 22,649 4,884 Net income (loss) $ ( 2,533 ) $ 13,488 Net income (loss) per share Basic $ ( 0.21 ) $ 1.09 Diluted $ ( 0.21 ) $ 1.09 Weighted average shares outstanding Basic 12,162 12,369 Diluted 12,162 12,383 See accompanying notes to the consolidated financial statements. 39 SWK HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity Shares Amount Balances at December 31, 2023 12,497,770 $ 12 $ 4,425,104 $ ( 4,144,801 ) $ 280,315 Stock-based compensation — — 944 — 944 Issuance of restricted common stock 73,364 — — — — Forfeiture of unvested restricted stock ( 6,446 ) — — — — Net settlement for employee taxes on stock options — — ( 43 ) — ( 43 ) Stock options exercised, net 2,595 — — — — Repurchases of common stock in open market ( 353,684 ) — ( 6,014 ) — ( 6,014 ) Net income — — — 13,488 13,488 Balances at December 31, 2024 12,213,599 12 4,419,991 ( 4,131,313 ) 288,690 Stock-based compensation — — 1,175 — 1,175 Issuance of restricted common stock 72,834 — — — — Repurchases of common stock in open market ( 199,218 ) — ( 3,067 ) — ( 3,067 ) Net settlement for employee taxes on stock options — — ( 89 ) — ( 89 ) Cash dividends ($ 4.00 per share) — — — ( 49,078 ) ( 49,078 ) Stock options exercised, net 8,764 — — — — Net loss — — — ( 2,533 ) ( 2,533 ) Balances at December 31, 2025 12,095,979 12 4,418,010 ( 4,182,924 ) 235,098 See accompanying notes to the consolidated financial statements. 40 SWK HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS ( In thousands) Year Ended December 31, 2025 2024 Cash flows from operating activities: Net income (loss) $ ( 2,533 ) $ 13,488 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for (benefit from) credit losses ( 695 ) 12,756 Loss on sale of assets 82 — Loss on impairment 641 5,771 Right-of-use amortization 143 415 Amortization of debt issuance costs 1,351 1,054 Deferred income taxes, net 22,573 4,807 Unrealized net gain on warrants ( 775 ) ( 2,406 ) Loss on disposal of inventory 314 — Net gain on exercise and cancellation of warrants — ( 445 ) Gain on sale of business ( 1,476 ) — 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 ( 681 ) ( 1,414 ) Loss on marketable investments 384 266 Loan discount amortization and fee accretion ( 2,225 ) ( 3,918 ) Interest paid-in-kind ( 1,785 ) ( 2,807 ) Stock-based compensation 1,175 944 Depreciation and amortization expense 40 1,399 Changes in operating assets and liabilities: Interest, accounts receivable and other receivables 1,929 ( 1,059 ) Derivative assets and liabilities, net 915 1,229 Collateral on foreign currency forward contract 2,750 — Other assets, net 1,343 199 Accounts payable, accrued expenses, and other non-current liabilities 1,589 ( 1,326 ) Deferred income ( 1,500 ) 1,491 Net cash provided by operating activities 27,286 23,049 41 Year Ended December 31, 2025 2024 Cash flows from investing activities: Proceeds from sale of property and equipment 110 — Settlement of foreign currency forward contract 1,560 — Proceeds from sale of assets and liabilities held for sale 6,790 — Sale of marketable investments — 574 Investment in finance receivables ( 28,500 ) ( 63,706 ) Proceeds from sale of finance receivables 31,678 — Repayment of finance receivables 56,911 53,109 Corporate debt securities principal payments 21 27 Purchases of property and equipment ( 512 ) ( 138 ) Net cash provided by (used in) investing activities 68,058 ( 10,134 ) Cash flows from financing activities: Net settlement for employee taxes on stock options ( 89 ) ( 43 ) Net payments on from credit facility ( 6,233 ) ( 6,117 ) Cash dividends ( 49,078 ) — Payments on financing costs ( 41 ) ( 50 ) Repurchases of common stock, including fees and expenses ( 3,067 ) ( 6,014 ) Net cash used in financing activities ( 58,508 ) ( 12,224 ) Net increase in cash and cash equivalents 36,836 691 Cash and cash equivalents at beginning of period 5,927 5,236 Cash and cash equivalents at end of period 42,763 5,927 Supplemental non-cash investing and financing activities: Derecognition of right-of-use assets and operating lease liabilities upon termination of lease — 82 Cash paid for interest $ 2,967 $ 3,082 Fair value of warrants received with finance receivables $ 537 $ 1,241 See accompanying notes to the consolidated financial statements. 42 SWK HOLDINGS CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. SWK Holdings Corporation and Summary of Significant Accounting Policies Nature of Operations October 9, 2025, SWK Holdings Corporation (the “Company,” “we,” or “us”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Runway Growth Finance Corp., a Maryland corporation (“Runway Growth Finance”), RWAY Portfolio Holding Corp., a Delaware corporation and a direct wholly owned subsidiary of Runway Growth Finance (“Intermediary Sub”), RWAY Portfolio Corp., a Delaware corporation and a direct wholly owned subsidiary of Intermediary Sub, and Runway Growth Capital LLC, a Delaware limited liability company (collectively “Runway”). Pursuant to the Merger Agreement, and subject to its terms and conditions, the Company will merge with and into Runway through a series of mergers (the “Merger”). The closing of the Merger remains subject to certain other customary closing conditions, including the adoption of the Merger Agreement by the Company’s stockholders. Completion of the Merger is expected to occur in the first half of 2026. Prior to entering into the Merger Agreement, we operated as a specialty finance and asset management business focused on the life sciences sector. We evaluated and invested in a broad range of healthcare-related companies and products with innovative intellectual property, including the biotechnology, medical device, medical diagnostics and related tools, animal health and pharmaceutical industries. We allocated capital within our finance receivables portfolio to generate income derived from third-party sales of life science products and related earned-income sources. Following completion of the Merger, the Company will cease operating as an independent specialty finance and asset management platform. The Company was originally incorporated in California in July 1996 and reincorporated in Delaware in September 1999. The Company is headquartered in Dallas, Texas, and had 9 full-time employees. as of December 31, 2025. As of March 7, 2026, the Company and its partners have executed transactions with 58 different parties under its specialty finance strategy, funding an aggregate of $ 876.1 million in various financial products across the life science sector. The Company’s portfolio includes senior and subordinated debt backed by royalties and synthetic royalties paid by companies in the life science sector, and purchased royalties generated by sales of life science products and related intellectual property. During 2019, we commenced our Pharmaceutical Development segment with the acquisition of Enteris BioPharma, Inc. (“Enteris”). As of March 13, 2025 the Company changed the name of Enteris to MOD3 Pharma ("MOD3"). MOD3 is a clinical development and manufacturing organization providing development services to pharmaceutical partners. MOD3 seeks to generate income by providing customers pharmaceutical development, formulation and manufacturing services. During the three months ended September 30, 2025, the Company sold MOD3, which was considered a disposition of a business but did not represent a strategic shift for the Company. Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. The Company consolidates a variable interest entity (“VIE”) when it possesses both the power to direct the activities of the VIE that most significantly impact its economic performance and the Company is either obligated to absorb the losses that could potentially be significant to the VIE or the Company holds the right to receive benefits from the VIE that could potentially be significant to the VIE, after elimination of intercompany accounts and transactions. The Company owns interests in various partnerships and limited liability companies, or LLCs. The Company consolidates its investments in these partnerships or LLCs, where the Company, as the general partner or managing member, exercises effective control, even though the Company’s ownership may be less than 50%, the related governing agreements provide the Company with broad powers, and the other parties do not participate in the management of the entities and do not effectively have the ability to remove the Company. The Company has reviewed each of the underlying agreements to determine if it has effective control. If circumstances change and it is determined this control does not exist, any such investment would be recorded using the equity method of accounting. Although this would change individual line items within the Company’s consolidated financial statements, it would have no effect on its operations and/or total stockholders’ equity attributable to the Company. Reclassification of Prior Period Amounts Certain prior period financial information has been reclassified to conform to current period presentation. 43 Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition; stock-based compensation; valuation of accounts receivable; impairment of finance receivables; long-lived assets; property and equipment; intangible assets; goodwill; valuation of warrants and other investments; contingent consideration; income taxes; and contingencies and litigation, among others. Some of these judgments can be subjective and complex, and consequently, actual results may differ from these estimates. The Company’s estimates often are based on complex judgments, probabilities and assumptions that it believes to be reasonable but that are inherently uncertain and unpredictable. For any given individual estimate or assumption made by the Company, there may also be other estimates or assumptions that are reasonable. The Company regularly evaluates its estimates and assumptions using historical experience and other factors, including the economic environment. 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, 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. Those changes generally will be reflected in our consolidated financial statements on a prospective basis unless they are required to be treated retrospectively under the relevant accounting standard. It is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Segment Information For the years ended December 31, 2025 and 2024, the Company earned revenues from its two U.S.-based business segments: its specialty finance and asset management business offering customized financing solutions to a broad range of life-sciences companies, and its business offering clinical development and manufacturing services to pharmaceutical partners. Following the sale of substantially all assets of the Pharmaceutical Development Segment in the third quarter of 2025, the Finance Receivables segment became the Company’s primary operating segment. Intangible Assets Finite-lived intangible assets are amortized over their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the Company. For the year ended December 31, 2024, the Company identified indicators of impairment for identifiable finite-lived intangible assets due to the lowering of financial expectations for the License Agreement with Cara, and concluded an impairment was required. See Note 3 for further information. Property and Equipment, Net Property and equipment are recorded at cost less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred. In addition, we capitalize interest on borrowings during the active construction period of capital projects. Capitalized interest is added to the cost of the assets and depreciated over the estimated useful lives of the assets. Leased property meeting certain criteria is capitalized and the present value of the related lease payments is recorded as a liability and included in current liabilities. Depreciation is recorded over the estimated useful lives of the assets involved using the straight-line method. Leasehold improvements and capitalized lease assets are amortized over the estimated useful life of the asset or the respective lease term used in determining lease classification, whichever is shorter. The range of estimated useful lives is as follows: Asset Estimated Useful Life Leasehold improvements Lesser of lease term or useful life Furniture, fixtures and equipment 3 to 15 years Deferred Income Deferred income includes amounts that have been billed per the contractual terms but have not been recognized as income. The Company classifies as current the portion of deferred income that is expected to be recognized within one year from the balance sheet date. 44 Research and Development Research and development expenses include the costs associated with internal research and development and research and development conducted for the Company by third parties. These costs primarily consist of salaries, pre-clinical and clinical trials, outside consultants, and supplies. All research and development costs discussed above are expensed as incurred. Third-party expenses reimbursed under research and development contracts, which are not refundable, are recorded as a reduction to pharmaceutical manufacturing research and development expense in the consolidated statements of operations. Finance Receivables The Company extends credit to customers through a variety of financing arrangements, including revenue interest term loans. The amounts outstanding on loans are referred to as finance receivables and are included in finance receivables in the consolidated balance sheets. It is the Company’s expectation that the loans originated will be held for the foreseeable future or until maturity. In certain situations, for example to manage concentrations and/or credit risk, some or all of certain exposures may be sold. Loans for which the Company has the intent and ability to hold for the foreseeable future or until maturity are classified as held for investment (“HFI”). If the Company no longer has the intent or ability to hold loans for the foreseeable future, then the loans are transferred to held for sale (“HFS”). Loans entered into with the intent to resell are classified as HFS. As of December 31, 2025 and 2024, the Company had no loans classified as HFS. If it is determined that a loan should be transferred from HFI to HFS, then the balance is transferred at the lower of amortized cost or fair value. At the time of transfer, a write-down of the loan is recorded as an impairment when the carrying amount exceeds fair value and the difference relates to credit quality. Otherwise the write-down is recorded as a reduction in finance receivable interest income, and any credit loss reserve is reversed. Once classified as HFS, the amount by which the carrying value exceeds fair value is recorded as a valuation allowance and is reflected as a reduction to finance receivable interest income. If it is determined that a loan should be transferred from HFS to HFI, the loan is transferred at the lower of cost or fair value on the transfer date, which coincides with the date of change in management’s intent. The difference between the carrying value of the loan and the fair value, if lower, is reflected as a loan discount at the transfer date, which reduces its carrying value. Subsequent to the transfer, the discount is accreted into earnings as an increase to finance revenue interest income over the life of the loan using the effective interest method. The Company accounts for its finance receivables at amortized cost, net of unamortized origination fees, if any. Related fees and costs are recorded net of any amounts reimbursed, and interest is accreted or accrued to interest revenue using the effective interest method. When and if supplemental payments are received from these long-term receivables, an adjustment to the estimated effective interest rate is affected prospectively. The Company evaluates the collectibility of both interest and principal for each loan to determine whether it is impaired. A loan is considered to be impaired when, based on current information and events, the Company determines it is probable that it will be unable to collect amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the carrying value of the financial asset to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the estimated fair value of the underlying collateral, less costs to sell, if the loan is collateralized and the Company expects repayment to be provided solely by the collateral. Impairment assessments require significant judgments and are based on significant assumptions related to the borrower’s credit risk, financial performance, expected sales, and estimated fair value of the collateral. Held for Sale The Company classifies long-lived assets or disposal groups as held for sale in the period when all of the following conditions have been met: • we have approved and committed to a plan to sell the assets or disposal group; • the asset or disposal group is available for immediate sale in its present condition; • an active program to locate a buyer and other actions required to complete the sale have been initiated; • the sale of the asset or disposal group is probable and expected to be completed within one year; • the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and • it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company measures a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell (“FVLCTS”) and recognizes any loss in the period in which the held for sale criteria are met. Gains, if any, are not recognized until the date of sale. We cease depreciation and amortization of a long-lived asset, or assets within a disposal group, upon their designation as held for sale and subsequently assess FVLCTS of the long-lived assets at each reporting period until the asset or disposal group is no longer classified as held for sale. On October 9, 2025, upon execution of the Merger Agreement, management concluded that all held‑for‑sale criteria were met. Accordingly, the Company designated the SWK disposal group as held for sale as of that date. 45 Although the disposal group met the held‑for‑sale criteria under ASC Subtopic 360-10, Property, Plant, and Equipment-Overall-10, the Company does not present the assets and liabilities of the disposal group as separate “assets held for sale” and “liabilities held for sale” on the consolidated balance sheet. Because the Merger involves the disposition of substantially all of the Company’s net assets, separate classification would not provide meaningful information. The Company continues to present all assets and liabilities within their existing line items. Additional information regarding the disposition is provided in Note 6. Discontinued Operations Under ASC Subtopic 205‑20, Presentation of Financial Statements-Discontinued Operations, a disposal group is classified as a discontinued operation when all of the following criteria in ASC 205‑20 are met: (1) the disposal group represents a component of an entity whose operations and cash flows can be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the Company; (2) the component meets the held‑for‑sale criteria described above; and (3) the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results. Although the Merger represents a strategic shift, the disposal group does not meet the definition of a component of an entity because the operations being disposed of were not clearly distinguishable from the rest of the Company. Therefore, the disposal does not qualify for discontinued operations presentation, and all related revenues, expenses, gains, and losses remain included within income from continuing operations for all periods presented. Provision for Credit Losses The allowance for credit losses is intended to provide for credit losses inherent in the finance receivables portfolio and is periodically reviewed for adequacy considering credit quality indicators, including expected and historical losses and levels of and trends in past due loans, non-performing assets and impaired loans, collateral values and economic conditions. The allowance for credit losses is determined based on specific allowances for loans that are impaired, based upon the value of underlying collateral or projected cash flows. Changes to the allowance for credit losses are recorded in the provision for loan credit losses in the consolidated statements of operations. Marketable Investments The Company’s marketable investment portfolio includes debt and equity securities as of December 31, 2025. The debt security is classified as an available-for-sale security, which is reported at fair value with unrealized gains or losses recorded in other income, net of applicable income taxes. Equity securities that have a readily determinable fair value are stated at fair value. The Company records changes in fair value of its equity securities in other income (expense), net in its consolidated statement of operations. Foreign Currency Transactions The Company uses the U.S. dollar as its functional currency. Monetary assets and liabilities and transactions denominated in currencies other than an entity’s functional currency are remeasured into its functional currency using current exchange rates, whereas nonmonetary assets and liabilities are remeasured using historical exchange rates. The Company recognizes gains and losses from such remeasurements within other income (expense), net in the consolidated statements of operations in the period of occurrence. Other Receivables As of December 31, 2024, the Company had collateral receivable of $ 2.8 million with the counterparties on its foreign currency exchange contract and is recorded as collateral on foreign currency forward contract in the consolidated balance sheet. Derivatives All derivatives held by the Company are recognized in the consolidated balance sheets at fair value. Changes in fair value for derivatives that do not meet the criteria for hedge accounting, or for which the Company has not elected hedge accounting are recorded in the consolidated statements of operations. If a derivative is recorded using hedge accounting, then depending on its nature, changes in its fair value will be either offset against change in the fair value of hedged assets or liabilities through the consolidated statements of operations or recorded in other comprehensive income. The Company had no derivatives designated as hedges as of December 31, 2025 and 2024. The Company holds warrants issued to the Company in conjunction with term loan investments discussed in Note 4. These warrants meet the definition of a derivative and are included in warrant assets in the consolidated balance sheets. The Company also 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 discussed in Note 10 is not designated as a hedging instrument, and changes in fair value are recognized in earnings. 46 Revenue Recognition Finance Receivables Segment The Company’s Finance Receivables segment records interest income on an accrual basis based on the effective interest rate method to the extent that it expects to collect such amounts. The Company recognizes investment management fees when clients invest in our recommended transactions as earned over the period the services are rendered. Incentive fees, if any, are recognized when earned at the end of the relevant performance period, pursuant to the underlying contract. The Company did not recognize any management or incentive fees in 2025 or 2024. Other service revenues are recognized when contractual obligations are fulfilled or as services are provided. Pharmaceutical Development Segment 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 terms of these arrangements typically include payment to the Company 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, the Company performs 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. The Company 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 the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current deferred 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. The Company evaluates collaboration agreements with respect to the Financial Accounting Standards Board ("FASB") ASC Topic 808, Collaborative Arrangements , considering the nature and contractual terms of the arrangement and the nature of its business operations to determine the classification of the transactions. When the Company is an active participant in the activity and exposed to significant risks and rewards dependent on the commercial success of the collaboration, it will record its transactions on a gross basis in the consolidated financial statements and describe the rights and obligations under the collaborative arrangement in the notes to the consolidated financial statements. Exclusive Licenses If the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner; the retention of any key rights by the Company; and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company exercises judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development and licensing agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods. 47 Customer Options If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised. Research and Development Services The promises under the Company’s collaboration agreements may include research and development services to be performed by the Company on behalf of the partner. Payments or reimbursements resulting from the Company’s research and development efforts are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts. Reimbursements from and payments to the partner that are the result of a collaborative relationship with the partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction to research and development expense. Milestone Payments At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Royalties For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity date of three months or less at the date of purchase to be cash equivalents. There were no such investments at December 31, 2025 or 2024, as all of our cash was held in checking, savings and brokerage accounts. As of December 31, 2025, cash was deposited in financial institutions and consisted of immediately available fund balances. The Company maintains its cash deposits with well-known and stable financial institutions but balances may exceed stated federally insured limits. Interest and Accounts Receivable The Company records interest receivable on an accrual basis and recognizes it as earned in accordance with the contractual terms of the loan agreement, to the extent that such amounts are expected to be collected. When management does not expect that principal, interest, and other obligations due will be collected in full, the Company will generally place the loan on nonaccrual status and cease recognizing interest income on that loan until all principal and interest due has been paid or the Company believes the partner company has demonstrated the ability to repay the Company’s current and future contractual obligations. Any uncollected interest related to prior periods is reversed from income in the period that collection of the interest receivable is determined to be doubtful. However, the Company may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection. The Company did not recognize any provision for interest receivable credit losses in 2025 and 2024. Accounts receivable from management fees and pharmaceutical development revenue is recorded at the aggregate unpaid amount less any allowance for credit losses. The Company determines an account receivable’s delinquency status based on its contractual terms. Interest is not charged on outstanding balances. Accounts are written-off only when all methods of recovery have been exhausted. As of December 31, 2025 and 2024, there was no allowance for credit losses on interest and accounts receivable. 48 Risks and Concentrations Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, interest and accounts receivable, finance receivables and marketable investments. The Company invests its excess cash with major U.S. banks and financial institutions. The Company has not experienced any losses on its cash and cash equivalents. Finance Receivables Segment For the year ended December 31, 2025, the Company had three customers that accounted for 33.9 % of revenues. For the year ended December 31, 2024, the Company had one customer that accounted for 11.6 % of revenues. The Company performs ongoing credit evaluations of its partner companies and generally requires collateral. As of December 31, 2025, four of our business partners accounted for 48.3 % of our interest and accounts receivable. As of December 31, 2024, two of our business partners accounted for 36.6 % of our interest and accounts receivable. Pharmaceutical Development Segment For the year ended December 31, 2025 and 2024, the Company had one customer that accounted for approximately 97.5 % and 96.0 % of pharmaceutical development revenues, respectively. Given the sale of substantially all of the segment assets, the Company does not expect its current or future credit risk exposures to have a significant impact on its operations. However, there can be no assurance that its business will not experience any adverse impact from credit risk in the future. Stock-based Compensation All employee and director stock-based compensation is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the requisite service period. Stock-based compensation expense is reduced for estimated future forfeitures. These estimates are revised in future periods if actual forfeitures differ from the estimates. Changes in forfeiture estimates impact compensation expense in the period in which the change in estimate occurs. For restricted stock, the Company recognizes compensation expense in accordance with the fair value of the Company’s stock as determined on the grant date, amortized over the applicable service period. When vesting of awards is based wholly or in part upon the future performance of the stock price, such terms result in adjustments to the grant date fair value of the award and the derivation of a service period. If service is provided over the derived service period, the adjusted fair value of the awards will be recognized as compensation expense, regardless of whether or not the awards vest. Fair Value of Financial Instruments The recorded values of cash and cash equivalents, interest and accounts receivables, accounts payable, and accrued expenses approximate the fair values due to the short-term nature of the instruments. Income Taxes Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to reduce deferred tax assets to an amount where realization is more likely than not. If the Company ultimately determines that the payment of such a liability is not necessary, then the Company reverses the liability and recognizes a tax benefit during the period in which the determination is made that the liability is no longer necessary. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax benefit in the statements of operations. Comprehensive Income (Loss) The consolidated statements of comprehensive income (loss) have been omitted, as net income (loss) equals comprehensive income (loss) for the years ended December 31, 2025 and 2024. Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures ." The standard is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. On January 1, 2025, the Company adopted the new accounting pronouncement ASU No. 2023-09 in the current period. The adoption of ASU No. 2023-09 did not have any impact on the consolidated financial statements of operations. 49 In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses." The ASU enhances disclosures related to income statement expenses to further disaggregate expenses in the footnotes to the financial statements. The standard requires disaggregation of any relevant expense caption presented on the face of the income statement that contains the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. Further, the standard requires disclosure of the total amount and the entity's definition of selling expenses. The ASU is effective for fiscal years beginning with its annual financial statements for the year ended December 31, 2027. There was no material impact to our consolidated statement of operations as a result of the ASU. 50 Note 2. Net Income (Loss) Per Share Basic net income (loss) per share is computed using the weighted-average number of outstanding shares of common stock. Diluted net income (loss) per share is computed using the weighted-average number of outstanding shares of common stock, and when dilutive, shares of common stock issuable upon exercise of options and warrants deemed outstanding using the treasury stock method. The following table shows the computation of basic and diluted earnings per share for the following (in thousands, except per share amounts): Year Ended December 31, 2025 2024 Numerator: Net income (loss) $ ( 2,533 ) $ 13,488 Denominator: Weighted-average shares outstanding 12,162 12,369 Effect of dilutive securities — 14 Weighted-average diluted shares 12,162 12,383 Basic net income (loss) per share $ ( 0.21 ) $ 1.09 Diluted net income (loss) per share $ ( 0.21 ) $ 1.09 There were no outstanding options to purchase shares of common stock for the year ended December 31, 2025. For the year ended December 31, 2024, outstanding options to purchase shares of common stock in an aggregate of approximately 40,000 have been excluded from the calculation of diluted net income (loss) per share, as such securities were anti-dilutive. 51 Note 3. Intangible Assets Intangible Assets As of December 31, 2024, certain assets of the MOD3 reporting unit were classified as held for sale, including intangible assets net, of $ 0.2 million - see Note 6 for further details. During the year ended December 31, 2025, the Company recorded an impairment of intangible assets of $ 0.2 million in the consolidated statement of operations. Prior to the Company's acquisition of MOD3, MOD3 entered into the License Agreement with Cara, for oral formulation rights to MOD3 technology to develop and commercialize Oral KORSUVA TM in any indication worldwide, excluding South Korea and Japan. Cara is obligated to pay MOD3 certain development, regulatory and tiered commercial milestone payments, as well as low single-digit royalties based on net sales in the licensed territory. During 2024, the Company concluded that the milestones and royalties pursuant to the License Agreement would not be realized as a result of non-viability of product covered by the License Agreement and as a result the Company has recognized a full impairment on the license of its remaining net book value of $ 5.8 million which is included in the " Loss on impairment " section of our consolidated statements of operations. There was no amortization expense related to intangible assets during the year ended December 31, 2025. Amortization expense related to intangible assets was $ 0.5 million for the year ended December 31, 2024. 52 Note 4. Finance Receivables Finance receivables are reported at their determined principal balances net of any unearned income, cumulative charge-offs 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. The carrying values of finance receivables are as follows (in thousands): December 31, 2025 2024 Term loans $ 215,989 $ 224,073 Royalty purchases 9,916 64,936 Total before allowance for credit losses 225,905 289,009 Allowance for credit losses ( 7,278 ) ( 11,249 ) Total carrying value $ 218,627 $ 277,760 Allowance for Credit Losses The allowance for credit losses ("ACL") is management's estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Given the current level of economic uncertainty, the complexity of the ACL estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially, in future periods. Changes in the ACL may result from changes in current economic conditions, our economic forecast, and circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors. Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For finance receivables that do not share similar risk characteristics with other finance receivables, expected credit losses are estimated on an individual basis. Expected credit losses are estimated over the contractual terms of the finance receivables, adjusted for expected prepayments and unfunded commitments, generally excluding extensions and modifications. The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The reserve for unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents management's estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. As of December 31, 2025 and December 31, 2024, the Company has 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 consolidated balance sheets. Please refer to Note 8 for further information on the Company's unfunded commitments. Allowance for Credit Losses - methodology update During the year ended December 31, 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. This resulted in a re-allocation of the existing allowance and did not have a material impact on the total allowance for credit losses amount. Previously, the Company's quarterly assessment of the allowance included two portfolio pools: Term Loans and Royalties. After the change in methodology effective for the quarter ended June 30, 2024, these pools are further broken down into individual risk ratings applied to each investment to allow for a more precise method for calculating the allowance for credit losses. 53 The following table details the changes in the allowance for credit losses by portfolio segment for the respective periods (in thousands): December 31, 2025 December 31, 2024 Term Loans Royalties Total Term Loans Royalties Total Allowance at beginning of period $ 7,158 $ 4,091 $ 11,249 $ 9,731 $ 4,170 $ 13,901 Provision for (benefit from) credit losses ( 1,367 ) 368 ( 999 ) 8,907 ( 79 ) 8,828 Write offs, net of recoveries — ( 2,972 ) ( 2,972 ) ( 11,480 ) — ( 11,480 ) Allowance at end of period $ 5,791 $ 1,487 $ 7,278 $ 7,158 $ 4,091 $ 11,249 Non-Accrual Finance Receivables The Company originates finance receivables to companies primarily in the life sciences sector. This concentration of credit exposes the Company to a higher degree of risk associated with this sector. On a quarterly basis, the Company evaluates the carrying value of its finance receivables. Recognition of income is suspended, and the finance receivable is placed on non-accrual status when management determines that collection of future income is not probable. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. The Company would generally place term loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the term loan is both well-secured and in the process of collection. When placed on nonaccrual, the Company would reverse any accrued unpaid interest receivable against interest income and amortization of any net deferred fees is suspended. Generally, the Company would return a term loan to accrual status when all delinquent interest and principal become current under the terms of the credit agreement. The following table presents nonaccrual and performing finance receivables by portfolio segment, net of credit loss allowance (in thousands): December 31, 2025 December 31, 2024 Nonaccrual Performing Total Nonaccrual Performing Total Term loans $ — $ 215,989 $ 215,989 $ 1,000 $ 223,073 $ 224,073 Royalty purchases 9,916 — 9,916 13,830 51,106 64,936 Total before allowance for credit losses $ 9,916 $ 215,989 $ 225,905 $ 14,830 $ 274,179 $ 289,009 Allowance for credit losses ( 1,487 ) ( 5,791 ) ( 7,278 ) ( 2,075 ) ( 9,174 ) ( 11,249 ) Total carrying value $ 8,429 $ 210,198 $ 218,627 $ 12,755 $ 265,005 $ 277,760 As of December 31, 2025, the Company had three finance receivables in nonaccrual status: (1) the Flowonix Medical, Inc. (“Flowonix”) royalty, with a carrying value of $ 5.9 million; (2) the Best ABT, Inc. (“Best”) royalty, with a carrying value of $ 1.8 million; (3); and the Ideal Implant, Inc. (“Ideal”) royalty, with a carrying value of $ 2.3 million. The Company collected $ 3.1 million and $ 15.9 million on finance receivables in nonaccrual status for the years ended December 31, 2025 and 2024 , respectively . Loan Modifications Made to Borrowers Experiencing Financial Difficulty The Company evaluates the carrying value of each finance receivable for impairment. A term loan is considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect the amounts due according to the loan contract, including scheduled interest payments. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. In certain circumstances, the Company may place a finance receivable on nonaccrual status but conclude it is not impaired. The Company may retain independent third-party valuations on such nonaccrual positions to support impairment decisions. On an ongoing basis, the Company monitors the performance of modified loans to their restructured terms. 54 Revaluation of Finance Receivable 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 consolidated statements of operations for the year ended December 31, 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 year ended December 31, 2024 , the C ompany revalued its royalty for Iluvien as a result of entering into an amendment. Pursuant to the amendment, the forecast of cash flows to be received over the life of the financial royalty was revised resulting in a revaluation gain of $ 2.5 million and corresponding mark-up to the carrying value which is included in the "Gain on revaluation of finance receivables" caption on our consolidated statements of operations for the year ended December 31, 2024. Credit Quality of Finance Receivables The Company evaluates all finance receivables on a quarterly basis and assigns a risk rating based upon management’s assessment of the borrower’s ability and likelihood of repayment. The assessment is subjective and based on multiple factors, including but not limited to, financial strength of borrowers and operating results of the underlying business. The credit risk analysis and rating assignment is performed quarterly in conjunction with the Company's assessment of its allowance for credit losses. The Company uses the following definitions for its risk ratings for Term Loans: 1: Borrower performing well below Company expectations, and the borrower's ability to raise sufficient capital to operate its business or repay debt is highly in question. Finance receivables rated a 1 are on non-accrual and are at an elevated risk for principal impairment. 2: Borrower performing below plan, and the loan-to-value is generally worse than at the time of underwriting. Borrower has limited access to additional capital to operate its business. Finance receivables rated a 2 are generally on non-accrual, and while no loss of impairment is anticipated, there is potential for future principal impairment. 3: Borrower performing in-line-to-modestly below Company expectations, and loan-to-value is similar to slightly worse than at the time of underwriting. Borrower has demonstrated access to capital markets. 4: Borrower performing in-line-to-modestly above Company expectations and loan-to-value similar or modestly better than underwriting case. Borrower has demonstrated access to capital markets. 5: Borrower performing in excess of Company expectations, and loan-to-value is better than at time of origination. The Company uses an internal credit rating system which rates each Royalty on a color scale of Green to Red, with Green typically indicative of a Royalty that is exceeding base underwritten case, Yellow indicates a Royalty performing in-line with underwritten plan, and Red reflective of underperformance relative to plan. Royalties rated as Red are generally classified as non-accrual. 55 The following table summarizes the carrying value of Finance Receivables by origination year, grouped by risk rating (in thousands): December 31, 2025 2025 2024 2023 2022 2021 Prior Total Term Loans 5 $ — $ 29,909 $ 25,325 $ 19,679 $ 16,437 $ — $ 91,350 4 14,675 — 28,992 — — — 43,667 3 — 8,092 5,600 23,082 — 23,533 60,307 2 — — 6,151 — 14,514 — 20,665 1 — — — — — — — Subtotal - Term Loans $ 14,675 $ 38,001 $ 66,068 $ 42,761 $ 30,951 $ 23,533 $ 215,989 Royalties Green $ — $ — $ — $ — $ — $ — $ — Yellow — — — — — — — Red — — — — 2,286 7,630 9,916 Subtotal - Royalties $ — $ — $ — $ — $ 2,286 $ 7,630 $ 9,916 Total Finance Receivables, gross $ 14,675 $ 38,001 $ 66,068 $ 42,761 $ 33,237 $ 31,163 $ 225,905 December 31, 2024 2024 2023 2022 2021 2020 Prior Total Term Loans 5 $ — $ — $ — $ 16,378 $ — $ 28,926 $ 45,304 4 7,929 36,406 55,353 — — — 99,688 3 — 24,920 — 11,930 — 26,482 63,332 2 — — — 14,749 — — 14,749 1 — — — — — 1,000 1,000 Subtotal - Term Loans $ 7,929 $ 61,326 $ 55,353 $ 43,057 $ — $ 56,408 $ 224,073 Royalties Green $ 8,005 $ 11,685 $ 11,231 $ — $ 15,865 $ 1,267 $ 48,053 Yellow — — — — 3,053 — 3,053 Red — — — 3,050 8,433 2,347 13,830 Subtotal - Royalties $ 8,005 $ 11,685 $ 11,231 $ 3,050 $ 27,351 $ 3,614 $ 64,936 Total Finance Receivables, gross $ 15,934 $ 73,011 $ 66,584 $ 46,107 $ 27,351 $ 60,022 $ 289,009 56 Note 5. Marketable Investments Investments in corporate debt and equity securities as of December 31, 2025 and 2024 consist of the following (in thousands): Year Ended December 31, 2025 2024 Corporate debt securities $ — $ 21 Equity securities 184 559 Total marketable investments $ 184 $ 580 The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale debt securities as of December 31, 2025 and 2024, are as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2024 $ 21 $ — $ — $ 21 Equity Securities 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 stock with a fair value of $ 0.1 million, or $ 1.65 per share. Sale of the shares was restricted until maturity of the term loan finance receivable with Elutia. On June 30, 2024, the Company exercised its right to purchase all outstanding shares of AOTI, Inc ("AOTI") common stock. Upon exercise, the Company received 402,634 shares of AOTI stock with a fair value of $ 0.7 million, or $ 1.68 per share. The restricted stock can be converted into publicly traded common stock two years after the exercise date. The following table presents gains and losses on equity securities as prescribed by ASC 321, Investments - Equity Securities during the years ended December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Net loss (gain) on equity securities during the period $ 384 $ ( 180 ) Add: Net gain on warrants exercised or cancelled during the period — $ 445 Add: Net loss recognized on equity securities sold during the period — ( 180 ) Unrealized loss on equity securities held at the end of the period $ 384 $ 85 57 Note 6. Assets and Liabilities Held for Sale Agreement and Plan of Merger On October 9, 2025, the Company entered into a definitive Agreement and Plan of Merger with Runway Growth Finance Corp. (“Runway”) and its affiliated entities. Under the terms of the agreement, Runway will acquire all outstanding equity interests of the Company in a transaction expected to close in the second quarter of 2026, subject to customary closing conditions. Following execution of the Merger Agreement, management undertook actions during the fourth quarter of 2025 to prepare the Company for the transaction, including discontinuing the evaluation of alternative strategic options and initiating activities necessary to complete the merger. As a result, the Company determined that the planned sale of the Company met the criteria for held for sale classification as of December 31, 2025. The Company recorded an impairment charge of approximately $ 0.4 million related to its remaining fixed assets and right of use assets during the quarter, which was recognized within “Loss on impairment” on the consolidated statement of operations for the year ended December 31, 2025. The transaction is expected to be structured as a stock acquisition; therefore, the Company’s finance receivables, which represent a substantial portion of the total assets, will remain within the legal entity and continue to be managed in the ordinary course of business. As a result, the Company’s finance receivables continue to be classified as loans held for investment as of December 31, 2025. In connection with the planned sale, the Company reassessed the realizability of its deferred tax assets, recorded a valuation allowance of $ 17.9 million against its deferred tax asset as of December 31, 2025, and recognized income tax expense of $ 22.6 million for the year ended December 31, 2025. Although the planned sale represents a significant strategic transaction, it does not qualify for discontinued operations presentation as the disposal group represents the remaining operations of the Company and is not a component. The Company’s results of operations and any gains or losses associated with the held for sale classification continue to be reported within income from continuing operations. 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 (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 contract development and manufacturing organizations ("CDMO") services to third parties, subject to certain exclusions. Aptar was required to exercise the Option by or before January 1, 2026. In exchange for the exclusive purchase option the partner provided consideration in the form of an "option fee" and "guaranteed revenue payments." The option fee was broken into two components: A low-single digit million fee due within 30 business days of executing the agreement; and should the option not be exercised by the first anniversary of the effective date, an additional low-single digit million fee will be due at that time. The first option fee was paid in April 2024 and the second option fee was paid in February 2025. Option fee payments were included in deferred income until the earlier of term expiration or exercise of the purchase option. Upon the exercise of the purchase option, the option fee payments were applied towards the purchase price. The guaranteed revenue payments included two components: A mid-single digit million guaranteed revenue payment in 2024 and a mid-single digit million guaranteed revenue payment in 2025. The revenue was to be derived by the partner under an existing collaboration agreement, and the partner was to pay the difference should the minimum amount not be met each year. Each year's guaranteed revenue amount is to be paid in two installments semi-annually each year. Should revenue exceed the 2024 or 2025 guaranteed revenue amounts after receiving a difference payment in the first half of the year, we would be required to repay the partner the amount of such overpayment. There was $ 0.2 million guaranteed revenue recognized during the year ended December 31, 2025 and $ 0.4 million guaranteed revenue recognized during the year ended December 31, 2024 . 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 "sale of business") for an aggregate purchase price of approximately $ 6.9 million which includes cash previously paid by Aptar in accordance with the Option Agreement. For the year ended December 31, 2025, the Company recognized a net gain on sale of $ 1.6 million for the completion of the sale, which was inclusive of $ 3.3 million in option fees recognized as a component of the gain on sale. The gain was recognized in the "gain on sale of business" line item in our consolidated statement of operations for year ended December 31, 2025. As a result of the option being exercised, Aptar's obligation to continue making guaranteed payments for the period following the closing of the sale of business was terminated. 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 December 31, 2024, represent the major operating assets and liabilities of the MOD3 business (i.e. the majority of the Pharmaceutical Development segment). The decisions to enter into the Option Agreement and the Purchase Agreement were made to align with the overall strategy to focus on the specialty finance business. 58 The following table summarizes the assets and liabilities held for sale: December 31, 2024 Assets: Inventory $ 354 Property & equipment, net 4,635 Intangible assets, net 209 Other non-current assets 1,200 Total assets held for sale, net $ 6,398 Liabilities: Accounts payable & accrued liabilities $ 268 Other non-current liabilities 987 Total liabilities held for sale $ 1,255 During the years ended December 31, 2025 and 2024, the sale of MOD3 to Aptar did not represent a strategic shift for the Company, and accordingly, the Pharmaceutical Development segment does not meet the criteria to be classified as a discontinued operation. As a result, we continued to report our operational results for the Pharmaceutical Development segment until the sale. The following table shows the net income (loss) before taxes for MOD3 (in thousands): December 31, 2025 2024 Net income (loss) before taxes 119 ( 3,718 ) 59 Note 7. Debt Revolving Credit Facility On June 28, 2023, the Company entered into a new Credit Agreement (the “Credit Agreement”) by and among SWK Funding LLC, the Company’s wholly-owned subsidiary (together with the Company, the “Borrower”), the lenders party thereto (“Lenders”), and First Horizon Bank as a Lender and Agent (the “Agent”). The Credit Agreement provides for a revolving credit facility with an initial maximum principal amount of $ 45.0 million. The Credit Agreement provides that the Company may request one or more incremental increases in an aggregate amount not to exceed $ 80.0 million, subject to the consent of the Agent and each Lender, at any time prior to the termination of the revolving credit period on June 28, 2026 (the “Commitment Termination Date”). The revolving credit period will be followed by a one-year amortization period, with the final maturity date of the Credit Agreement occurring on June 28, 2027. The outstanding principal balance of the Credit Agreement will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined in the Credit Agreement) plus (ii) 3.75 % at all times prior to the Commitment Termination Date. The outstanding principal balance of the Revolving Credit Facility will bear interest at a rate per annum equal to the sum of (i) Term SOFR (as defined in the Credit Agreement) plus (ii) 4.25 % at all times on and after the Commitment Termination Date. Under the terms of the Credit Agreement, all accrued and unpaid interest shall be due and payable, in arrears, on the first business day of each calendar month. The Credit Agreement contains customary affirmative and negative covenants, in addition to financial covenants specifying that, as of the end of each calendar month, (i) the consolidated leverage ratio of Borrower will not exceed 1.00 to 1.00, (ii) the consolidated interest coverage ratio of Borrower will not be less than 4.00 to 1.00, (iii) the cash collection rate in relation to Borrower’s portfolio of loan assets will not be less than 4.5 %, for such calendar month, (iv) the net charge-off percentage in relation to Borrower’s portfolio of loan assets will not exceed 3 % for such calendar month, and (v) the weighted average risk rating in relation to Borrower portfolio of loan assets will not be less than 3.00 . In addition, the Credit Agreement provides that at no time shall the Company permit its consolidated tangible net worth to be less than $ 145.0 million, or its Liquidity (as defined in the Credit Agreement) to be less than $ 5.0 million. The Credit Agreement also contains events of default customary for such financings, the occurrence of which would permit the Agent and Lenders to accelerate the aggregate principal amount due thereunder. As of December 31, 2025, the Company was in compliance with all covenants. The Credit Agreement refinances the Company’s Loan and Security Agreement dated as of June 29, 2018 (the “Prior Credit Agreement”), as amended, between the Company and Cadence Bank, N.A. (“Cadence Bank”), as the lender and administrative agent, which was due to expire on September 30, 2025. The Prior Credit Agreement was terminated by the Company, effective as of June 28, 2023. On October 10, 2023, the Company entered into an amendment to the Credit Agreement pursuant to which Woodforest National Bank was added as a lender under the Credit Agreement for an aggregate commitment of $ 15.0 million, thereby increasing the aggregate commitments under the Credit Agreement from $ 45.0 million to $ 60.0 million. On August 29, 2024, the Company entered into an amendment to the Credit Agreement pursuant to which the consolidated interest coverage ratio of Borrower will not be less than 2.00 to 1:00, the net charge-off percentage in relation to Borrower's portfolio of loan assets will not be less than 8 % for such calendar month, and cumulative share repurchases will not exceed $ 7.0 million in value in any 12-month period. On December 4, 2025, the Company and the Lenders entered into a Sixth Amendment to the Credit Agreement (the “Amendment”), which amended the Credit Agreement, dated as of June 28, 2023, in order 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. As of December 31, 2024, there was $ 6.2 million outstanding under the new Credit Agreement. During the years ended December 31, 2025 and 2024, the Company recognized $ 1.1 million and $ 1.1 million, respectively, of interest expense in connection with the Credit Agreement. On February 12, 2026, First Horizon Bank and the financial institutions party thereto entered into a Seventh Amendment to Credit Agreement (the “Amendment”), which amended the Credit Agreement, dated as of June 28, 2023 (as amended by the Amendment, the “Credit Agreement”), by and among the Company, SWK Funding LLC, the lenders party thereto and First Horizon Bank as a lender and agent, in order to, effective as of February 12, 2026, amend the financial covenants and reduce the aggregate commitments thereunder from $ 10.0 million to $ 7.5 million. 60 Senior Notes Due 2027 On October 3, 2023, the Company issued a $ 30.0 million aggregate principal amount of 9.00 % Senior Notes due 2027 ("2027 Senior Notes" or "Notes”) in a registered underwritten public offering. On October 27, 2023, the underwriter exercised in full, its over-allotment option by purchasing an additional approximately $ 3.0 million aggregate principal amount of the 2027 Senior Notes. The interest rates are fixed at 9.00 % per annum and are payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing on December 31, 2023, and until maturity. The Notes will mature on January 31, 2027. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $ 30.6 million. The Company intends to use the net proceeds from the offering for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures, and funding working capital. The following table summarizes the outstanding balance of the Notes, net of debt issuance costs (in thousands): December 31, 2025 December 31, 2024 2027 Senior Notes $ 32,969 $ 32,969 Debt issuance costs ( 859 ) ( 1,557 ) Total Long-term debt, net $ 32,110 $ 31,412 The Company’s future principal obligations for the notes were as follows (in thousands): December 31, 2025 2026 $ — 2027 32,969 Total unsecured senior notes $ 32,969 The Company may redeem the Notes for cash in whole or in part at any time (i) on or after September 30, 2025 (the “First Call Date”) and prior to September 30, 2026, at a price equal to the sum of 102 % of their principal amount, and (ii) on or after September 30, 2026 at a price equal to the sum of 100 % of their principal amount, plus (in each case noted above) accrued and unpaid interest to, but excluding, the date of redemption. At any time prior to the First Call Date, the Company may, at its option, redeem the Notes for cash, in whole at any time or in part from time to time at a redemption price equal to (i) 100 % of the principal amount of Notes redeemed, plus (ii) a Make-Whole Amount (as defined in the Indenture), plus (iii) accrued and unpaid interest, if any, to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Notes. Additionally, upon the occurrence of a Triggering Event (as defined in the Indenture), holders of the Notes will have the right to require the Company to make an offer to repurchase all or any portion of their Notes for cash at a purchase price equal to 100 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase. 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. The Company evaluated the 2027 Senior Notes for derivatives pursuant to 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. The embedded derivative was a default provision, which could require additional interest payments. The Company reassesses the feature annually 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 December 31, 2025. 61 Note 8. 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 operations. 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. Cash paid for amounts included in the measurement of operating lease liabilities was $ 0.4 million and $ 0.5 million for the years ended December 31, 2025 and 2024 and right-of-use assets obtained in exchange for new operating lease obligations was $ 0.4 million and $ 0.5 million. The components of lease cost is as follows (in thousands): December 31, 2025 2024 Operating lease cost $ 278 $ 474 Variable lease cost 54 63 Total lease cost $ 332 $ 537 Supplemental balance sheet information related to operating leases is as follows (in thousands): December 31, Balance Sheet Location 2025 2024 Operating lease right-of-use assets (1) Other non-current assets, net $ — $ 518 Operating lease liabilities, current Other current liabilities 144 130 Operating lease liabilities, non-current Other non-current liabilities 312 468 Total operating lease liabilities (2) $ 456 $ 598 (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 6. As of December 31, 2025, operating lease right-of-use assets totaling $ 0.4 million were presented net of a valuation adjustment on disposal group of $ 0.4 million. (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 6. December 31, 2025 2024 Weighted-average remaining lease term (years) 2.7 3.7 Weighted-average discount rate 7.1 % 7.1 % 62 Future minimum rent on the Company's operating leases is as follows (in thousands): 2026 $ 183 2027 188 2028 128 Total future lease payments $ 499 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 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 operations. Unfunded Commitments As of December 31, 2025, the Company's unfunded commitments were as follows (in millions): MedMinder Systems, Inc. $ 2.5 Total unfunded commitments $ 2.5 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, 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. Merger Litigations On March 6, 2026, in connection with the Mergers, a purported individual shareholder of the Company filed a complaint in New York state court, captioned Eric Brady v. SWK Holdings Corp., et al., No. 651394/2026 (N.Y. Sup. Ct., N.Y. Cnty.), naming as defendants the Company and certain members of the Company’s board of directors as of the date of the Merger Agreement (“Brady”). On March 9, 2026, an additional case was filed by a purported individual shareholder of the Company in the same court against the same defendants, captioned Anthony Malone v. SWK Holdings Corp., et al., No. 651422/2026 (N.Y. Sup. Ct., N.Y. Cnty.) (“Malone”). The Brady and Malone cases, and any similar subsequently filed cases involving the Company, RWAY, their respective boards of directors, or any committee thereof and/or any of their directors or officers relating directly or indirectly to the Merger Agreement, the Mergers, or any related transaction, are referred to as the “Merger Litigations.” The Merger Litigations filed to date generally allege that the proxy statement issued on Schedule 14A by the Company on March 3, 2026 is materially incomplete and misleading and assert claims for negligent misrepresentation and concealment and negligence under New York common law. The Merger Litigations seek, among other things, an injunction enjoining consummation of the Mergers, rescission of the Mergers, costs of the actions, including attorneys’ fees and experts’ fees and expenses, and any other relief the court may deem just and proper. In addition, the Company has received multiple demand letters from purported Company stockholders (the “Demand Letters”), alleging that the proxy statement omits material information in violation of federal securities laws and state law disclosure requirements and demanding that the Company provide additional disclosures in an amendment or supplement to the proxy statement. The Company denies all allegations in the Merger Litigations and the Demand Letters, believes that no additional disclosure is required in the proxy statement, and intends to vigorously defend against these and any similar Merger Litigations and Demand Letters. 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 63 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, 2025 and 2024. 64 Note 9. Stockholders' Equity Common Stock The total number of shares of common stock, $ 0.001 par value, that the Company is authorized to issue is 250,000,000 . Issuer Purchases of Equity Securities On May 31, 2022, the Board authorized a share repurchase program under which the Company was previously authorized to repurchase up to $ 10.0 million of the Company’s outstanding shares of common stock. The previous repurchase periods under this program were July 1, 2022 through May 15, 2023, May 16, 2023 through May 15, 2024, and May 16, 2024 through May 16, 2025. (the "Prior Repurchase Programs"). On May 19, 2025, the Company announced that the Board had authorized the Company to repurchase up to $ 10.0 million of the Company’s outstanding shares of common stock from time-to-time until May 16, 2025, through a trading plan established in compliance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act (the “Current Repurchase Program”). The Current Repurchase Program was paused on August 11, 2025. As of December 31, 2025, the Company has repurchased an aggregate of 992,629 shares under the Prior Repurchase Programs and Current Repurchase Program at a total cost of $ 16.5 million, or $ 16.67 per share. Preferred Stock The Company’s Board may, without further action by the stockholders, issue one or more series of preferred stock and fix the rights and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series and the designation of such series. As of December 31, 2025, no shares of preferred stock have been issued. Stock Compensation Plans The Company’s 2010 Stock Incentive Plan (the “2010 Stock Incentive Plan”) provides for options, restricted stock, and other customary forms of equity to be granted to the Company’s directors, officers, employees, and independent contractors. All forms of equity incentive compensation are granted at the discretion of the Board and have a term not greater than 10 years from the date of grant. The calculation of the fair values of our stock-based compensation plans requires estimates that require management’s judgments. Under ASC 718, Compensation - Stock Compensation, the fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. The valuation models require assumptions and estimates to determine expected volatility, expected life and expected risk-free interest rates. The expected volatility was determined using historical volatility of our stock based on the contractual life of the award. The risk-free interest rate assumption was based on the yield on zero-coupon U.S. Treasury strips at the award grant date. There were no options granted in the fiscal years ended December 31, 2025 and 2024. The following table summarizes activities under the 2010 Stock Incentive Plan for the indicated periods: Options Outstanding Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Balances, December 31, 2023 67,500 $ 12.70 5.0 $ 326 Options exercised ( 18,750 ) 12.50 Balances, December 31, 2024 48,750 $ 12.78 3.8 $ 137 Options exercised ( 48,750 ) 12.78 Balances, December 31, 2025 — — — — The company issued an aggregate of 8,764 and 2,595 shares of common stock related to the cashless exercise of stock options during the years ended December 31, 2025 and 2024, respectively. At December 31, 2025, there were approximately 597,401 s hares reserved for issuance under t he 2010 Stock Incentive Plan. There were no outstanding and exercisable options as of December 31, 2025. Employee stock-based compensation expense recognized for time-vesting options for the years ended December 31, 2025 and 2024, uses the Black-Scholes option pricing model for estimating the fair value of options granted under the Company’s equity incentive plans. Risk-free interest rates for the options were taken from the Daily Federal Yield Curve Rates on the grant dates for the expected life of the options as published by the Federal Reserve. The expected volatility was based upon historical data and other relevant factors such as the Company’s changes in historical volatility and its capital structure, in addition to mean reversion. Employee stock-based compensation expense recognized for market performance-vesting options uses a binomial lattice model for estimating the fair value of options granted under the Company’s equity incentive plan. 65 In calculating the expected life of stock options, the Company determines the amount of time from grant date to exercise date for exercised options and adjusts this number for the expected time to exercise for unexercised options. The expected time to exercise for unexercised options is calculated from grant as the midpoint between the expiration date of the option and the later of the measurement date or the vesting date. In developing the expected life assumption, all amounts of time are weighted by the number of underlying options. During the year ended December 31, 2025, 72,834 restricted shares were granted and 44,894 restricted shares vested. During the year ended December 31, 2024, 71,039 restricted shares were granted and 24,013 restricted shares vested. As of December 31, 2025 and 2024, there were 201,979 and 129,145 shares of restricted stock outstanding, respectively. During the years ended December 31, 2025 and 2024 , the Board approved compensation for Board services by granting 11,574 and 19,336 shares, respectively, of common stock as compensation for the non-employee directors. The Company recorded $ 0.2 million and $ 0.4 million in Board stock-based compensation expense during the years ended December 31, 2025 and 2024, respectively. The Company recorded aggregate stock-based compensation expense, including the quarterly and annual Board grants, of $ 1.2 million and $ 0.9 million during the years ended December 31, 2025 and 2024, respectively. The Company had $ 0.6 million of unrecognized stock option expense for time-based awards, which will be recognized through 2028. 66 Note 10. Fair Value Measurements The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price 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). GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels. Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets. Level 3: Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources. 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 years ended December 31, 2025 and 2024. The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in affiliates. Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized. Cash and cash equivalents The carrying amounts reported in the balance sheet for cash, cash equivalents, and restricted cash approximate those assets’ fair values. Securities available for sale Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices). Finance Receivables The fair values of finance receivables are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the finance receivables. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. These receivables are classified as Level 3. Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below. Marketable Investments If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities would be classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly these securities would be classified as Level 2. If market prices are not available and there are no observable inputs, then fair value would be estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes. Such securities would be classified as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company checks the validity of received prices based on comparison to prices of other similar assets and market data such as relevant benchmark indices. Available-for-sale securities are measured at fair value on a recurring basis, while securities with no readily available fair market value are not, but estimates of fair value are reflected below. Derivative Instruments For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3. 67 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 consolidated balance sheets as of December 31, 2024 and totaled $ 2.5 million. The Company recognized a loss of $ 0.9 million and a gain of $ 1.5 million due to changes in fair value related to its foreign currency forward contract for the years ended December 31, 2025 and December 31, 2024, respectively. The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 (in thousands): Total Carrying Value in Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets Warrant assets $ 5,913 $ — $ — $ 5,913 Marketable investments $ 184 $ 184 $ — $ — Foreign currency forward contract $ — $ — $ — $ — The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 (in thousands): Total Carrying Value in Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets Warrant assets $ 4,366 $ — $ — $ 4,366 Marketable investments $ 580 $ 559 $ — $ 21 Foreign currency forward contract $ 2,475 $ — $ — $ 2,475 The changes on the value of the warrant assets during the years ended December 31, 2025 and 2024 w ere as follows (in thousands): Fair Value - January 1, 2024 $ 1,759 Issuance 1,241 Exercised ( 985 ) Increase in fair value 2,406 Loss on foreign currency transactions ( 55 ) Fair Value - December 31, 2024 4,366 Issuance 537 Exercised — Increase in fair value 775 Gain on foreign currency transactions 235 Fair Value - December 31, 2025 $ 5,913 68 The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the consolidated balance sheets. The fair values for warrants outstanding, which do not have a readily determinable value, are measured using the Black-Scholes option pricing model. The following ranges of assumptions were used in the models to determine fair value: December 31, 2025 December 31, 2024 Dividend rate range — — Risk-free rate range 3.5 % to 4.0 % 4.2 % to 4.5 % Expected life (years) range 0.87 to 7.01 1.9 to 6.9 Expected volatility range 60.1 % to 151.0 % 56.0 % to 177.7 % The warrant assets are valued using a market approach and include significant unobservable inputs such as risk-free rate, expected life, and expected volatility. For the year ended December 31, 2025, the risk-free rate range weighted average was 3.7 %, and had a median of 3.7 %. For the year ended December 31, 2024, the risk-free rate range weighted average was 4.4 %, and had a median of 4.4 %. For the year ended December 31, 2025, the expected life range weighted average was 4.9 years, and had a median of 4.7 years. For the year ended December 31, 2024, the expected life range weighted average was 5.8 years, and had a median of 4.3 years. For the year ended December 31, 2025, the expected volatility range weighted average was 67.0 %, and had a median of 86.0 %. For the year ended December 31, 2024, the expected volatility range weighted average 65.6 %, and median of 104.3 %. As of December 31, 2025, the Company had three royalty investments, Best, Ideal, and Flowonix, that were deemed to be impaired based on reductions in carrying value. As of December 31, 2024, the Company had one term loan, BIOLASE, that was deemed to be impaired based on reductions in carrying value. As of December 31, 2024 , the Company had three royalties, Best, Ideal, and Flowonix, that were deemed to be impaired based on reductions in carrying value. The following table presents these royalty and the loans measured at amortized cost using the effective interest method, which approximates fair value, on a nonrecurring basis (in thousands): Total Carrying Value in Consolidated Balance Sheets Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2025 $ 9,916 $ — $ — $ 9,916 December 31, 2024 $ 14,830 $ — $ — $ 14,830 There were no liabilities measured at fair value on a nonrecurring basis as of December 31, 2025 or 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. 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 December 31, 2025 (in thousands): Carrying Value Fair Value Level 1 Level 2 Level 3 Financial Assets Finance receivables, net $ 218,627 $ 219,681 $ — $ — $ 219,681 Marketable investments 184 184 184 — — Warrant assets 5,913 5,913 — — 5,913 Foreign currency forward contract — — — — — 69 The following table presents the fair value of financial assets and liabilities as of year ended December 31, 2024 (in thousands): Carrying Value Fair Value Level 1 Level 2 Level 3 Financial Assets Finance receivables, net $ 277,760 $ 277,760 $ — $ — $ 277,760 Marketable investments 580 580 559 — 21 Warrant assets 4,366 4,366 — — 4,366 Foreign currency forward contract 2,475 2,475 — — 2,475 Note 11. Revenue Recognition The Company's Pharmaceutical Development segment recognizes revenues received from contracts with its customers by revenue source, as we believe it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow. The Company's Finance Receivables segment does not have any revenues received from contracts with customers. The following table provides the contract revenue recognized by revenue source for the years ended December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Pharmaceutical Development Segment License Agreement $ — $ 49 Pharmaceutical development and other 2,153 3,567 Total contract revenue $ 2,153 $ 3,616 The Company’s contract liabilities represent advance consideration received from customers and are recognized as revenue when the related performance obligation is satisfied. The Company’s contract liabilities are presented as deferred income in the consolidated balance sheets (in thousands): December 31, 2025 Pharmaceutical Development Segment Beginning balance $ 1,500 Additions to deferred income 1,800 Income recognized (1) ( 3,300 ) Ending balance $ — (1) Included as a component on the gain of sale of MOD3 assets The Company did not have any contra ct assets as of December 31, 2025 or December 31, 2024. 70 Note 12. Segment Information Selected financial and descriptive information is required to be provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the Company’s internal organization, focusing on financial information that the Company’s CEO uses to make decisions about the Company’s operating matters. As described in Note 1, SWK Holdings Corporation and Summary of Significant Accounting Policies, the Company has determined it has two reportable segments: Finance Receivables and Pharmaceutical Development, and each are individually managed and provide separate services. Revenues by segment represent revenues earned on the services offered within each segment. The Company does not report results by geographic region, as this metric is not used by the Company’s chief executive officer in assessing performance or allocating resources to the segments. All revenues are generated through external customers. Segment performance is evaluated based on several factors, including income (loss) from continuing operations before income taxes. 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): Year Ended December 31, 2025 Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated Revenue $ 38,439 $ 2,153 $ — $ 40,592 Other revenue 745 116 4 865 Benefit from credit losses ( 924 ) — — ( 924 ) Loss on impairment — 209 432 641 Interest expense 1,115 17 3,665 4,797 Pharmaceutical manufacturing, research and development expense — 1,551 — 1,551 Loss on disposal of inventory — 314 — 314 Depreciation and amortization expense — — 40 40 General and administrative expense 730 1,578 12,455 14,763 Other income (expense), net ( 1,678 ) 1,519 — ( 159 ) Income tax expense — — 22,649 22,649 Net income (loss) 36,585 119 ( 39,237 ) ( 2,533 ) 71 Year Ended December 31, 2024 Finance Receivables Pharmaceutical Development and Other Holding Company and Other Consolidated Revenue $ 40,787 $ 3,616 $ — $ 44,403 Other revenue 553 31 — 584 Provision for credit losses 12,756 — — 12,756 Loss on impairment — 5,771 — 5,771 Interest expense 1,078 8 3,599 4,685 Pharmaceutical manufacturing, research and development expense — 2,203 — 2,203 Depreciation and amortization expense — 1,316 83 1,399 Change in fair value of acquisition-related contingent consideration — ( 4,900 ) — ( 4,900 ) General and administrative expense 449 2,967 8,071 11,487 Other income (expense), net 7,194 — ( 408 ) 6,786 Income tax benefit — — 4,884 4,884 Net income (loss) 34,251 ( 3,718 ) ( 17,045 ) 13,488 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): December 31, 2025 2024 Total Assets (Liabilities) Finance Receivables $ 268,796 $ 299,248 Pharmaceutical Development and Other — 7,786 Holdings Company and Other 3,626 25,201 Total $ 272,422 $ 332,235 Note 13. Income Taxes The components of income before income tax expense are as follows (in thousands): December 31, 2025 2024 U.S. $ 20,116 $ 18,372 72 The Company’s income tax expense was as follows (in thousands): December 31, 2025 2024 Current expense State $ 75 $ 78 Deferred expense Federal 22,401 4,879 State 173 ( 73 ) Total income tax expense $ 22,649 $ 4,884 The components of the income tax expense are as follows (in thousands): December 31, 2025 2024 Federal tax provision at statutory rate $ 4,224 $ 3,858 State taxes, net of federal income tax benefit 120 ( 13 ) Mark-to-market adjustments ( 82 ) ( 476 ) Tax credits ( 54 ) ( 4 ) Contingent consideration revaluation — ( 1,029 ) Other 270 143 Write off of expired deferred tax assets 254 2,405 Change in valuation allowance 17,917 — Total income tax expense $ 22,649 $ 4,884 The Company records deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting standards that address income taxes. Significant management judgment is required in determining whether a valuation allowance against the Company’s deferred tax assets is required. The Company has considered all available evidence, both positive and negative, such as historical levels of income and predictability of future forecasts of taxable income from existing investments, in determining whether a valuation allowance is required. The Company is also required to forecast future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment. The Company focuses on forecasting future taxable income for the investment portfolio that exists as of the balance sheet date. Specifically, the Company evaluated the following criteria when considering a valuation allowance: • the history of tax net operating losses in recent years; • predictability of operating results; • profitability for a sustained period of time; and • level of profitability on a quarterly basis. In connection with the anticipated sale to Runway Growth Finance Corporation expected in the second quarter of 2026, the Company re-evaluated the realizability of its deferred tax assets. Based on all available evidence, the Company concluded it is more likely than not that a portion of its U.S. federal and state deferred tax assets will not be realized. Accordingly, the Company recorded a valuation allowance of $ 17.9 million as of December 31, 2025. As of December 31, 2024, the Company maintained no valuation allowance against its deferred tax assets 73 Deferred tax assets consist of the following (in thousands): December 31, 2025 2024 Deferred tax assets: Credit carryforward $ 2,989 $ 2,899 Provision for credit losses 1,589 2,433 Stock-based compensation 277 230 Impairment 3,352 2,311 Other 720 688 Net operating losses 9,883 13,682 Gross deferred tax assets $ 18,810 $ 22,243 Valuation Allowance ( 17,917 ) — Deferred tax liabilities: Intangible assets 5 1,863 Other 14 ( 622 ) Net deferred tax assets $ 912 $ 23,484 The Tax Reform Act of 1986 limits the use of NOLs and tax credit carryforwards in certain situations where stock ownership changes occur. In the event the Company has had a change in ownership, the future utilization of the Company’s net operating loss and tax credit carryforwards could be limited. As of December 31, 2025, the Company had NOL carryforwards for federal income tax purposes of approximately $ 46.9 million. The federal NOL carryforwards, if not offset against future income, will expire by 2038. Approximately $ 6.9 million can be carried forward indefinitely. The Company also had federal research carryforwards of $ 3.0 million. The federal research credits began to expire in 2025 and will fully expire by 2045. The Company records liabilities, where appropriate, for all uncertain income tax positions and recognizes potential accrued interest and penalties related to unrecognized tax benefits within income tax expense. The adoption of these provisions did not have an impact on the Company's consolidated financial condition, results of operations or cash flows. As of December 31, 2025 and 2024, the Company had approximately $ 0.7 million of unrecognized tax benefit, none of which would impact the effective tax rate if recognized. The Company does not expect the unrecognized tax benefits to change materially over the next twelve months. There are no tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of December 31, 2025. The Company is subject to taxation in the U.S. and various state jurisdictions. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2007 through December 31, 2025 due to carryforward of unutilized net operating losses and research and development credits. The Company does not anticipate significant changes to its uncertain tax positions through December 31, 2025. 74 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.