SWKHL 10-K & 10-Q changes, risk factors and insider trading

An investment in our common stock involves significant risks. You should carefully consider the risks and uncertainties, the risk factors set forth in the documents and reports previously filed with the SEC, and the risks described below before you make an investment decision regarding our common stock. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations.

Most of the assets of our Finance Receivables segment are, and are expected to continue to be, royalty streams or debt backed by royalty streams or revenue interests paid by small and middle-market life sciencesciences businesses, which are highly speculative and involve a high degree of risk of credit loss. In addition, we own royalties or invest in debt backed by royalties or revenue interests that are derived by pharmaceutical and biologic products that are early in their commercial launch, face intense competition or are subject to other risks, which similarly involve a high degree of risk of principal loss. If the underlying products do not generate anticipated revenues, we may suffer a loss of our investment.

In addition, the smallsmall- and middle-market companies that we target to advance debt are subject to a number of other significant risks, including:

•these companies may have limited financial resources and maypotential be unableinability to meet their obligations under their financial instruments that we hold, which may be accompanied by a deterioration in the value of their assets or of any collateral with respect to any financial obligations and a reduction in the likelihood of our realization of any guarantees we may have obtained in connection with our investment;

•they may havepotentially shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;

•higher likelihood that they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our partner company, and in turn, on us;

•they may have less predictable operating results, may from time to time be parties to litigation, and may be engaged in changing businesses with products subject to a risk of obsolescenceobsolescence, andthus may requirerequiring substantial additional capital to support their operations, finance expansion or maintain their competitive position;

•they operate in the life sciencesciences industry, which is both highly competitive and subject to extensive regulatory oversight, and their products may be recalled or displaced by new products, or they may lose regulatory approval altogether;

Healthcare and life sciencesciences industries are subject to extensive government regulation, litigation risk, reimbursement risk and certain other risks particular to those industries.

We have invested and plan to continue investing in cash flow streams produced by life sciencesciences products that are subject to extensive regulation by the U.S. Food and Drug Administration ("“FDA"”), similar foreign regulatory authorities, and to a lesser extent, other federal and state agencies. If any of these products and the companies which manage such products fails to comply with applicable regulations, they could be subject to significant penalties and claims that could materially and adversely affect their sales levels and operations. Medical devices and drugs are subject to the expense, delay and uncertainty of the regulatory approval process in order to reach the market and, even if approved, these products may not be accepted in the marketplace. In addition, governmental budgetary constraints affecting the regulatory approval process, new laws, regulations or judicial interpretations of existing laws and regulations might adversely affect a partner company or product in this industry.

Companies in the life sciencesciences industry may also have a limited number of suppliers of necessary components or a limited number of manufacturers for their products, and therefore face a risk of disruption to their manufacturing process if they are unable to find alternative suppliers when needed.

Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For instance, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.

Enteris’MOD3's technology or products could give rise to product liability claims.

While EnterisMOD3 does not have a commercial product, Enteris’MOD3 business exposes us to the risk of product liability claims from human testing and the manufacturing of pharmaceutical tablets currently used in clinical trials. The administration of drugs to humans, whether in clinical trials or commercially, can result in product liability claims, even if Enteris’MOD3 or Enteris’MOD3 partners’ products are not actually at fault for causing an injury. Furthermore, Enteris’MOD3 products may cause, or may appear to cause, adverse side effects or potentially dangerous drug interactions that we may not learn about or understand fully until the drug is actually manufactured and sold. Product liability claims can be expensive to defend and may result in large judgments against us. Even if a product liability claim is not successful, the adverse publicity, time and expense involved in defending such a claim may interfere with our business. We may not have sufficient resources to defend against or satisfy these claims. While we currently maintain product liability insurance coverage, the amount of coverage may not be sufficient to protect us against losses or may be unavailable in the future on acceptable terms, if at all.

Because EnterisMOD3 is a biopharmaceutical company, its operations are subject to extensive government regulation.

Our research, development and production activities, as well as those of our collaborators and licensees, are subject to significant regulation by federal, state, local and foreign governmental authorities. The regulatory approval process for a pharmaceutical product requires substantial resources and may take many years. Our partners’ inability to obtain approvals or delays in obtaining approvals would adversely affect our ability to manufacture products, and to receive revenue from milestone payments, product sales or royalties. Enteris’MOD3 present and future business is, and will continue to be, subject to various other laws, rules and/or regulations applicable to us as a result of our domestic and international business.

The FDA and other regulatory agencies may inspect the EnterisMOD3 production facility at any time to ensure compliance with current good manufacturing practice guidelines. These guidelines require that EnterisMOD3 conduct its production operations in strict compliance with established rules for manufacturing and quality controls. Any of these agencies can suspend production operations and product sales if they find significant or repeated deviations from these guidelines. A suspension would likely cause EnterisMOD3 to incur additional costs or delays in product development and manufacturing.

EnterisMOD3 relies on third parties to supply most of the necessary raw materials and supplies for the products we manufacture on behalf of our customers and our inability to obtain such raw materials or supplies may adversely impact our business, financial condition, and results of operations.

We may seek growth opportunities through strategic acquisitions as well as evaluate our segments for potential divestitures to optimize our business footprint. The success of these transactions will depend on our ability to integrate or separate, as applicable, assets and personnel in these transactions and to cooperate with our strategic partners. We may encounter difficulties in integrating acquisitions with our operations as well as separating divested segments, and in managing strategic investments. Furthermore, we may not realize the degree, or timing, of benefits we anticipate when we first enter into a transaction. For example, with an effective date of January 1, 2024, we entered into an exclusive Option and Asset Purchase Agreement with a strategic partner which granted the strategic partner an exclusive option to acquire certain of Enteris’ assets related to its business of providing contract manufacturing, formulation and development services. The strategic partner must exercise its Option by or before January 1, 2026. As of December 31, 2024, Enteris is classified as held for sale as the Option is expected to be exercised within the next 12 months. There is a possibility that the strategic partner may not exercise its Option in the anticipated timeframe or at all. Additionally, the existence of the Option may deter future potential opportunities to monetize certain Enteris assets. Any of the foregoing could adversely affect our business and results of operations.

Changes in our management may cause uncertainty in, or be disruptive to, our business. Certain of our directors and management team members have been with us in those capacities for only a short time.

Our success depends upon the continued services of executive officers and other key personnel, as well as their ability to effectively transition to their successors. We have experienced changes in our senior leadership in 2024, including the appointment of a new Chief Financial Officer in July 2024, following the resignation of our former Chief Financial Officer in February 2024. In addition, Marcus Pennington resigned from our Board in September 2024. Although we have endeavored to implement any management and director transition in a non-disruptive manner, such transitions might impact our business, and give rise to uncertainty among our customers, investors, vendors, employees and others concerning our future direction and performance, which may materially and adversely affect our business, financial condition, results of operations and cash flows, and our ability to execute our business model.

Because entities affiliated with Carlson controlsCapital, L.P. (“Carlson”) control a majority of our common stock, we are a “controlled company” within the meaning of the Nasdaq Capital Market ("“Nasdaq"”) listing standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance requirements, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, and (3) the requirement that the board have a compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. However, our Board of Directors is currently comprised of a majority of independent directors and we currently have a Nominating and Corporate Governance Committee and the majority of the members of such committee are independent directors. If we were to fully avail ourselves of the controlled company rules, you do not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

As of December 31, 2024, funds affiliated with2025, Carlson owned in the aggregate 68.7%75.1% of our combined issued and outstanding common stock and unvested restricted stock. Due to the large percentage of ownership by funds affiliated with Carlson, they have the ability to control or exert significant influence over our management and policies, such as the election of our directors, the appointment of new management and the approval of any other action requiring the approval of our stockholders, including any amendments to our certificate of incorporation, a sale of all or substantially all of our assets or a merger or other significant transaction. The investment objectives of Carlson and its affiliates may from time to time be different than or conflict with those of our other stockholders.

In addition, pursuant to the terms of a Stockholders’ Agreement entered into on February 27, 20232023, between the Company and Carlson (as amended, the “Stockholders’ Agreement”), funds affiliated with Carlson havehas the right to approve specific transactions, including the incurrence of indebtedness over specified amounts, the sale of assets over specified amounts, declaration of dividends, loans, capital contributions to or investments in any third party over specified amounts, changes in the size of the board of directors and repurchases of common stock.

The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers, employees, and significant stockholders including funds associated with Carlson. Funds associated with Carlson own an aggregate of 68.7%75.1% (8,393,0889,078,719 common shares). Pursuant to the Stockholders’ Agreement entered into on February 27, 2023, as amended, and a Registration Rights Agreement entered into on September 6, 2013, between the Company and Carlson (the “Rights Agreement”), we filed a Registration Statement on Form S-3 with the SEC on February 3, 2020, which became effective on February 19, 2020, to register all of the common stock owned by funds associated with Carlson for sale freely in the public market from time to time.

Additionally, the Rights Agreement is intended to protect our ability to utilize our NOL carryforwards and contains provisions that make it difficult for a third party to acquire a significant number of shares of our common stock.

Our business operations rely upon information technology systems for data processing, storage, and reporting. Our information technology systems, along with those of the third parties whom we rely on, are potentially vulnerable to a variety of evolving cybersecurity threats that may expose our data to unauthorized persons or otherwise compromise its integrity. These threats may include, but are not limited to, social-engineering attacks (including phishing attacks), business email compromise, online and offline fraud, malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), employee or third party vendor misconduct, denial-of-service attacks, access attacks (such as credential stuffing), ransomware attacks, data breaches, supply-chain attacks, and software bugs as well as cybersecurity failures resulting from human error, catastrophic events (such as fires, floods, hurricanes and tornadoes), loss of data or other information technology assets, and technological errors.errors, and may be enhanced or facilitated by Artificial Intelligence (“AI”). Further, attempts to disrupt or gain unauthorized access to our and our third party vendors’ information systems from malicious third parties or insider threats may incorporate widely varying and frequently changing tactics, which may be enhanced or facilitated by AI. We expend resources trying to protect against cybersecurity threats to our information technology systems. Additionally, certain data privacy and security laws, as well as industry best practice standards, may require us to implement and maintain additional cybersecurity measures.

Cybersecurity threat actors and their techniques change frequently, are often sophisticated in nature, and may not be detected until after a cybersecurity incident has occurred. While we have implemented cybersecurity measures designed to protect our information technology systems as well as the confidential and sensitive data in our possession, there can be no assurance that these measures will be adequate to detect, prevent, or adequately address any cybersecurity incident or data breach that we may face. Additionally, the third-partiesthird parties with whom we do business may be sources or targets of cybersecurity attacks or other technological risks. While we engage in actions to reduce our exposure to third-party risks, we cannot control the cybersecurity plans and systems put in place by these third parties and ongoing threats may result in unauthorized access, loss, exposure or destruction or misuse of data, or other cybersecurity incidents, with increased costs and other consequences, including those described above.

Public health epidemics, pandemics or outbreaks, including COVID-19,outbreaks could adversely affect our and our partner companies’ businesses.

Public health epidemics, pandemics or outbreaks, and the resulting business or economic disruptions resulting therefrom, could adversely impact our and our partner companies’ businesses as well as our ability to raise capital. TheAn impact of COVID-19such hasglobal beenhealth andcrisis willwould likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, ascapital well as businessesmarkets, and capitalsocial, marketseconomic aroundand labor instability in the world.countries in which we or our partner companies operate.

COVID-19A hasglobal impacted,health andcrisis maywould continuelikely to impact,impact the ability of our borrowers and the marketers of products upon which we derive our royalty income to raise capital in order to fund and conduct their operationsoperations. during the pandemic. In certain situations, disruptionsDisruptions to our partner companies, including as a result of global supply chain disruptions, haswould impairedimpair their ability to fulfill their obligations to us and resultedmay result in defaults in obligations to us. As a result, we have entered into amendments with certainImpacts of our borrowers in order to cure defaults. Continuing impacts of the pandemic and supply chain disruptions could continue tomay increase the risk of delinquencies, defaults, declining collateral values associated with our existing loans, and impairments or losses on our loans. Any such impairment couldmay increase our credit risk and adversely affect the assets and results of operations of our Finance Receivables segment.

Any abrupt and substantial change in economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Any sustained disruption in the capital markets from the COVID-19 pandemic could negatively impact our and our partner companies’ ability to raise capital.

WeFor havethe organizedyear ourended December 31, 2025, the Company operated two reportable segments, Pharmaceutical Development and Finance Receivables. During the third quarter of 2025, the Company sold substantially all of the assets of the Pharmaceutical Development Segment, after which the Company’s operations intowere twoprimarily segments:attributable to the Finance Receivables and Pharmaceutical Development. These segments reflect the way we evaluate our business performance and manage our operations.segment. Please refer to Part I, Item 1, Business and Part II, Item 8, Financial Statements, Notes 1 and 1312 of the notes to the consolidated financial statements for further information regarding segment information.

Finance receivables are measured based upon the difference between the recorded investment in each receivable and either the present value of the expected future cash flows discounted at each receivable’s effective interest rate (the receivable’s contractual interest rate adjusted for any deferred fees, costs, discount or premium at the date of origination or acquisition) or if a receivable is collateral dependent, the collateral’s fair value. When impairment is determined to be probable, the measurement will be based on the fair value of the collateral. The determination of impairment involves management’s judgment and the use of market and third-party estimates regarding collateral values. Valuations of impaired receivables and corresponding impairment affect the level of the reserveallowance for credit losses.

Our financial instruments not required to be adjusted to fair value on a recurring basis consist principally of cash, cash equivalents, and accounts and finance receivables,receivable, accounts payable, and accrued expenses. We believe the carrying amount of cash, cash andequivalents, accounts and finance receivable, accounts payablepayable, and accrued expenses approximate fair value due to their relatively short maturities.

The recognition of certain net deferred tax assets of our reporting entities is dependent upon, but not limited to, the future profitability of the reporting entity, when the underlying temporary differences will reverse, and tax planning strategies. Further, management’s judgment regarding the use of estimates and projections is required in assessing ourthe Company’s ability to realize the deferred tax assets relatingrelated to NOL carryforwards, as most of these assets are subject to limited carryforward periods. In evaluating realizability, management considered the pending merger with a business development company and its potential impact on the availability of future taxable income.

Revenues increaseddecreased to $41.5 million for the year ended December 31, 2025, from $45.0 million for the year ended December 31, 20242024. fromThe $37.8$3.5 million for the year ended December 31, 2023. The $7.2 million increasedecrease in revenue for the year ended December 31, 20242025, consisted of a $4.8$2.1 million increasedecrease in Finance Receivables segment revenue and a $2.4$1.4 million increasedecrease in Pharmaceutical Development segment revenue.revenue prior to the sale of MOD3. The $4.8$2.1 million increasedecrease in Finance Receivables segment revenue was primarily due to a $8.2 million increase in interest and fees earned due to funding new and existing loans offset by $2.5 million decrease in interest, fees and royalties earned on finance receivables that were paid off or sold during the period. The increase in the Pharmaceutical Development segment was primarily due to the strategic partner collaboration agreement.

Provision for (benefit from) Credit Losses

Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a netbenefit provision forfrom credit losses of $12.8$0.9 million and $1.9an expense of $12.8 million for the years ended December 31, 20242025 and 2023,2024, respectively. MostThe of$13.7 themillion changedecrease was relatedprimarily due to a $8.1 million impairment on the Trio loan and $2.2 million impairment on the Exeevo loan that wereimpairments included within the provision for credit losses during the year ended December 31, 2024.

Interest expense consists of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense increasedremained to $4.7 million for year ended December 31, 2024 from $1.8 millionconsistent for the year ended December 31, 2023.2025, Theas $2.9 million increase in interest expense was mainly duecompared to issuingthe approximatelyyear $32.9ended millionDecember of31, Notes in an underwritten public offering in October of 2023.2024.

Pharmaceutical manufacturing, research and development expense decreased from $3.4 million for the year ended December 31, 2023 to $2.2 million for the year ended December 31, 2024.2024 to $1.6 million for the year ended December 31, 2025. The $1.2$0.6 million decrease was primarily due to athe reductionsale insubstantially researchall andof developmentthe andassets clinicalof trial expenditures related to cancelled projectsMOD3 during the period.

WeThe change in the gain on the fair value of contingent consideration is primarily due to a recognized gainsgain of $4.9 million and $6.3 million from the change in fair value of acquisition-related contingent consideration during the yearsyear ended December 31, 2024 and 2023, respectively.2024. The contingent consideration is the earnout related to the 2019 acquisition of EnterisMOD3 and sharing of certain milestone and royalties due to EnterisMOD3 pursuant to a license agreement ("License Agreement") with Cara Therapeutics, Inc. ("Cara") for oral formulation rights to Enteris'MOD3 technology to develop and commercialize Oral KORSUVA™ in any indication worldwide, excluding South Korea and Japan. During the year ended December 31, 2024, it was determined the milestones and royalties pursuant to the License Agreement would not be realized as a result of non-viability of the product covered by the License Agreement. 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 $1.2$1.4 million decrease in depreciation and amortization expense for the year ended December 31, 20242025 primarily consists of a decrease in amortization expense related to no longer amortizing intangible assets related to the Cara license as the intangible assets were fully impaired during the prior year. AmortizationIn expenseaddition, isMOD3 alignedwas withclassified as held for sale for the expectedcurrent futureperiod cashresulting flowsin ofno thedepreciation intangibleon assets.fixed Seeassets Noteclassified 3as held for more information on the impairment of the Cara license.sale.

General and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses increased to $14.8 million for the year ended December 31, 2025 from $11.5 million for the year ended December 31, 2024 fromprimarily $11.2due millionto foran increase in compensation costs and legal costs during the year ended December 31, 2023.period.

Other Income,Income (Expense), Net

During the years ended December 31, 20242025 and 20232024 we recognized $4.9$22.6 million income tax expense and $1.3$4.9 million of income tax benefit,expense, respectively. Income tax expense increased period over period due to a reduction in the releaserealizability of valuation allowance onthe deferred tax assets of $6.7 million during the year ended December 31, 2023 and an increase in the Company's effective tax rate to 26.6% as of December 31, 2024 from a benefit of 8.7% for the same period in the prior year.2025.

As of December 31, 2024,2025, we had $5.9$42.8 million in cash and cash equivalents, compared to $4.5$5.9 million as of December 31, 2023.2024. The primary driver of the $1.4$36.9 million increase in our cash balance was $88.2primarily millionrelated ofto interest, fees, principal and royalty payments received on ourfinance receivables, and proceeds from the sale and repayment of finance receivables and $5.0 million of cash receipts from pharmaceutical development revenues.receivables. The increase in cash and cash equivalents was partially offset by $64.1the millionpayment of dividends, investment funding, net of deferred fees and origination expenses, anet netpayments of our credit facilityfacility, paymentpayments of $6.2 million, afor payroll and benefits expense of $5.4 million, $10.8 million ofexpense, payments on accounts payable, and share repurchases of $6.0 million.repurchases.

We entered into a $45.0 million revolving credit facility in June 2023 with First Horizon Bank. The Credit Agreement provides for one or more incremental increases not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior to the Commitment Termination Date. On OctoberDecember 10,4, 2023,2025, the CompanyCompany, SWK Funding LLC, First Horizon Bank, and the financial institution party thereto entered into a FirstSixth Amendment to Credit Agreement pursuant to which Woodforest National Bank was added as a lender under the Credit Agreement for(the an“Amendment”), aggregateto commitment of $15.0 million, thereby increasingreduce the aggregate commitments under the Credit Agreementthereunder from $45.0$60.0 million to $60.0$10.0 million. As of December 31, 2024,2025, there was $6.2 millionno outstanding amount under the new Credit Agreement, and $35.6 million was available for borrowing.Agreement. The $60.0$10.0 million Credit Agreement contains a $5.0 million liquidity covenant, bringing the total amount available for borrowing to $35.6$5.0 million.

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

As of December 31, 2024,2025, our finance receivables portfolio contains $277.8$218.6 million of net finance receivables and $0.6 million of marketable investments.receivables. We expect these assets to generate positive cash flows in 2025.2026. We continuously monitor the short and long-term financial position of our finance receivables portfolio. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates. Changes in interest rates, including the levels of the underlying reference ratesrates, may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future.

The table below provides an overview of our outstanding finance receivables transactions as of and for the three and sixnine months ended JuneSeptember 30, 2025 (in thousands, except rate, share and per share data):

Our critical accounting policies and estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the sixnine months ended JuneSeptember 30, 2025, compared to those discussed in our Annual Report.

Comparison of the three months ended JuneSeptember 30, 2025 and 2024 (in millions)

Revenues decreasedincreased to $10.1$10.9 million for the three months ended JuneSeptember 30, 2025 from $10.8$10.4 million for the three months ended JuneSeptember 30, 2024. The $0.7$0.5 million decreaseincrease in revenue for the three months ended JuneSeptember 30, 2025 was primarily due to a $1.2 million decrease in Finance Receivables segment revenue and a $0.5$1.1 million increase in PharmaceuticalFinance DevelopmentReceivables segment revenue. The finance receivables segment revenue decreasedincreased primarily due to the saleacceleration of exit fees earned on early payoff of the majority of the Company's royalty portfolio. The increase in pharmaceutical development revenues was due to the collaboration agreementloan with Aptar.Elutia, Inc.

Provision (benefit) for Credit Losses

Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a net benefit for credit losses of $0.9 million and a provision for credit losses of $0.8 million and $4.1$1.4 million during the three months ended JuneSeptember 30, 2025 and 2024, respectively. The decreasechange is primarily due to impairmentsthe totalingrelease $4.3of millionCECL duringreserves related to the sameearly periodpayoff inof the priorloan year.with Elutia, Inc.

Interest expense consists mostly of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense remained consistent for the three months ended JuneSeptember 30, 2025 as compared to the same period in the previous period.

Pharmaceutical manufacturing, research and development expense remained consistentdecreased for the three months ended JuneSeptember 30, 2025 as compared to the same period in the previous year resultingas ina anresult immaterialof changethe inMOD3 totalasset expense.sale.

The $0.4$0.2 million decrease in depreciation and amortization expense for the three months ended JuneSeptember 30, 2025 primarily related to no longer amortizing intangible assets relateddue to the Carasuspension licenseof asdepreciation theand intangibleamortization on assets were fully impaired. In addition, MOD3 was classified as held for sale forand the currentsubsequent periodsale resultingof inthose no depreciation on fixed assets included in held for sale.assets.

General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses remained consistentincreased for the three months ended JuneSeptember 30, 2025 as compared to 2024.2024, primarily due to increased legal fees partially offset by a reduction in compensation costs as a result of the MOD3 asset sale.

Other income (expense), net decreasedincreased to an expenseincome of $0.1$4.0 million for the three months ended JuneSeptember 30, 2025 from other income of $3.8$0.3 million for the three months ended JuneSeptember 30, 2024. The $3.9$3.7 million decreaseincrease primarily relates to the gain on revaluationfair value of financeadjustments receivablesof warrants and gain on exercisesale of warrants in the sameMOD3 period the prior year.assets.

Income tax expense remained consistentincreased for the three months ended JuneSeptember 30, 2025 as compared to the same period in the previous year resultingas ina anresult immaterialof the change in totalthe expense.provision for credit losses.

Comparison of the sixnine months ended JuneSeptember 30, 2025 and 2024 (in millions)

Revenues decreasedincreased to $21.9$32.8 million for the sixnine months ended JuneSeptember 30, 2025 from $22.2$32.6 million for the sixnine months ended JuneSeptember 30, 2024. The $0.3$0.2 million decreaseincrease in revenue for the sixnine months ended JuneSeptember 30, 2025 consisted of a $1.5$0.4 million decrease in Finance Receivables segment revenue offset by a $1.2$0.6 million increase in Pharmaceutical Development segment revenue. The $1.5$0.4 million decrease in Finance Receivables segment revenue was primarily due to a decrease in interest, fees and royalties earned on finance receivables that were paid off or sold during the period. The increase in the Pharmaceutical Development segment was primarily due to the Aptar collaboration agreement.

Our provision for credit losses is established through charges or credits to income in the form of the provision in order to bring our allowance for credit losses for loans and unfunded commitments to a level deemed appropriate by management. We recognized a net benefit for credit losses of $0.7$1.6 million during the sixnine months ended JuneSeptember 30, 2025 and a $9.4provision of $10.8 million provision during the sixnine months ended JuneSeptember 30, 2024. The decrease was primarily due to impairments included within the provision for credit losses during the sixnine months ended JuneSeptember 30, 2024. See Note 3 to the unaudited condensed consolidated financial statements for further information on the allowance for credit losses.

Interest expense consists of interest accrued on our revolving line of credit, 9.00% Senior Notes due 2027, unused line of credit and maintenance fees, as well as amortization of debt issuance costs. Interest expense remained consistent for the sixnine months ended JuneSeptember 30, 2025 as compared to the sixnine months ended JuneSeptember 30, 2024.

Pharmaceutical manufacturing, research and development expense increasedremained from $1.1 millionconsistent for the sixnine months ended JuneSeptember 30, 20242025 as compared to $1.4the millionsame forperiod in the sixprior months ended June 30, 2025. The $0.3 million increase was primarily due to increased compensation costs due to additional headcount during the period.year.

The $0.9$1.2 million decrease in depreciation and amortization expense for the sixnine months ended JuneSeptember 30, 2025 primarily consists of a decrease in amortization expense related to no longer amortizing intangible assets related to the license with Cara licenseTherapeutics, Inc, as the intangible assets were fully impaired during the three months ended June 30, 2024. In addition, MOD3 was classified as held for sale for the current period resulting in no depreciation on fixed assets includedclassified inas held for sale.

General and administrative expenses consist primarily of compensation; stock-based compensation and related costs for management, staff and Board; legal and audit expenses; and corporate governance expenses. General and administrative expenses increased to $6.1$9.4 million for the sixnine months ended JuneSeptember 30, 2025 from $5.6$8.6 million for the sixnine months ended JuneSeptember 30, 2024 primarily due to an increase in compensation costs and legal costs during the period.

Other income (expense), net decreased to an expenseincome of $2.4$1.7 million for the sixnine months ended JuneSeptember 30, 2025 from an income of $3.4$3.7 million for the sixnine months ended JuneSeptember 30, 2024. The $5.8$2.0 million decrease is primarily due to neta lossesloss on the revaluation of finance receivables in the current period compared to neta gainsgain on the revaluation of finance receivables during the same period in the prior year.

During the sixnine months ended JuneSeptember 30, 2025 and 2024 we recognized $2.3$4.2 million and $1.3$2.2 million of income tax expense, respectively. Income tax expense increased period over period due to the release of valuation allowance on deferred tax assets of $1.0 million during the sixnine months ended JuneSeptember 30, 2024 and a decreasechange in the Company's provision for credit losses compared to the same period in the prior year.

As of JuneSeptember 30, 2025, we had $8.0$10.2 million in cash and cash equivalents, compared to $5.9 million as of December 31, 2024. The primary driver of the $2.1$4.3 million increase in our cash balance was primarily related to interest, fees, principal and royalty payments received on finance receivables, and proceeds from the sale of finance receivables. The increase in cash and cash equivalents was partially offset by the payment of dividends, investment funding, net of deferred fees and origination expenses, net payments of our credit facility, payments for payroll and benefits expense, payments on accounts payable, and share repurchases.

We entered into a $45.0 million revolving credit facility in June 2023 with First Horizon Bank. The Credit Agreement provides for one or more incremental increases not to exceed $80.0 million, subject to the consent of the Agent and each Lender, at any time prior to the Commitment Termination Date. On October 10, 2023, the Company entered into a First Amendment to Credit Agreement pursuant to which Woodforest National Bank was added as a lender under the Credit Agreement for an aggregate commitment of $15.0 million, thereby increasing the aggregate commitments under the Credit Agreement from $45.0 million to $60.0 million. As of JuneSeptember 30, 2025, there was $0.3 millionno outstanding amount under the new Credit Agreement. The $60.0 million Credit Agreement contains a $5.0 million liquidity covenant, bringing the total amount available for borrowing to $54.7$55.0 million.

As of JuneSeptember 30, 2025, our finance receivables portfolio contains $237.6$245.4 million of net finance receivables and $0.6$0.3 million of marketable investments. We expect these assets to generate positive cash flows during the remainder of 2025. We continuously monitor the short and long-term financial position of our finance receivables portfolio. In addition, the majority of our finance receivables portfolio are debt instruments that carry floating interest rates. Changes in interest rates, including the levels of the underlying reference rates may affect the interest income for debt instruments with floating rates. We believe we are well positioned to benefit should market interest rates rise in the future.

We continue to evaluate multiple attractive opportunities that, if consummated, we believe would similarly generate additional income. Since the timing of any investment is difficult to predict, our Finance Receivables segment may not be able to generate positive cash flow above what our existing assets are expected to produce in 2025. We do not assume any near-term repayments from borrowers, and as a result, no assurances can be given that actual results would not differ materially from the statement above.

As of JuneSeptember 30, 2025, we had $7.5$2.5 million in unfunded commitments. Please refer to Item 1., Financial Statements, Note 7 of the notes to the unaudited condensed consolidated financial statements for further information regarding the Company’s commitments and contingencies.