SWKHL

SWK Holdings Corp. 10-K Summary: Fiscal Year Ended December 31, 2025

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2025. SWK Holdings Corp. operates primarily as a specialty finance and asset management firm focused on the life sciences sector. During the third quarter of 2025, the Company sold substantially all assets of its Pharmaceutical Development segment (MOD3 Pharma), leaving the Finance Receivables segment as its sole remaining operating segment. The Company is currently in the process of merging with Runway Growth Finance Corp., a transaction expected to close in the second quarter of 2026.

Key Financial Metrics

Note: The 2025 net loss was significantly impacted by a $22.6 million income tax expense related to a valuation allowance on deferred tax assets.

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased by $3.5 million (7.8%) due to a reduction in interest and royalty income from paid-off or sold finance receivables and the exit from the pharmaceutical development business.
• Segment Exit: The Company sold MOD3 Pharma assets in Q3 2025, recognizing a net gain on sale of $1.6 million. This eliminated the Pharmaceutical Development segment's future revenue and expense streams.
• Credit Losses: The Company recorded a benefit from credit losses of $0.9 million in 2025, compared to a provision expense of $12.8 million in 2024, driven by significant impairments recognized in the prior year.
• Tax Expense Spike: Income tax expense surged to $22.6 million from $4.9 million. This was primarily due to a $17.9 million valuation allowance recorded against deferred tax assets, as the Company concluded these assets were unlikely to be realized following the announcement of the merger.
• Liquidity Improvement: Cash and cash equivalents increased by $36.9 million to $42.8 million, driven by principal repayments and proceeds from the sale of finance receivables, partially offset by a $49.1 million special dividend.

Guidance, Outlook, and Risks

Outlook and Merger: The Company does not intend to pay cash dividends going forward due to the pending merger with Runway Growth Finance Corp. The merger is subject to stockholder approval and customary closing conditions. Management expects the combined entity to continue the specialty finance strategy.

Key Risks and Contingencies:

• Merger Litigation: Two shareholder lawsuits were filed in March 2026 alleging the proxy statement was misleading. The Company intends to vigorously defend against these claims, which seek to enjoin the merger.
• Credit Concentration: The Finance Receivables portfolio is concentrated in the life sciences sector. As of year-end, three customers accounted for 33.9% of revenues, and four partners accounted for 48.3% of interest and accounts receivable.
• Non-Accrual Assets: Three royalty investments (Flowonix, Best ABT, and Ideal Implant) totaling approximately $10 million were on non-accrual status as of December 31, 2025.
• Regulatory and Cybersecurity: The Company faces risks related to FDA regulations affecting its partners and potential cybersecurity incidents, including a past incident in January 2025 involving a fraudulent redirection of a borrower payment.

Investor Verification Checklist

• Merger Status: Verify the current status of the Runway Growth Finance merger, including any updates on the March 2026 shareholder litigation.
• Deferred Tax Assets: Confirm the realizability of the remaining deferred tax assets post-merger and the impact of the $17.9 million valuation allowance on future earnings.
• Portfolio Quality: Review the performance of the three non-accrual royalty assets (Flowonix, Best ABT, Ideal Implant) and the adequacy of the $7.3 million allowance for credit losses.
• Dividend Policy: Note the cessation of dividends; verify if any special distributions are planned prior to the merger closing.
• Debt Covenants: Confirm continued compliance with the First Horizon Bank credit facility covenants, particularly the liquidity and leverage ratios, given the reduced commitment size ($10.0 million).