Note 5 – Notes Receivable, net

The Company’s notes receivable, net consists of investments in loans to buyers of charged-off and nonperforming receivable portfolios through HGC and financing of laboratory equipment sales through ALT. As discussed in Note 1, the Company commenced implementation of a strategic plan to wind down its Specialty Lending segment during the third quarter of 2026. The Company's estimate of expected credit losses incorporates borrower-specific information, expected recovery values, collateral considerations and other relevant factors. During the wind-down period, the Company will continue to actively manage and pursue recovery of its remaining Specialty Lending assets and lending relationships.

As of September 30, 2026 and December 31, 2025, the Company’s outstanding notes receivable balance related to loans to buyers of charged-off and nonperforming receivable portfolios, net of unamortized deferred fees and costs on originated loans, and adjusted for the allowance for credit losses was $3.7 million and $8.8 million, respectively. The activity during the nine months ended September 30, 2026 includes the additional investment in notes receivable of approximately $1.3 million, which was offset by principal payments made by borrowers of approximately $3.0 million and a $3.5 million increase to the allowance for credit losses, related to the Board's decision to wind down the Specialty Lending segment. As of September 30, 2026 and December 31, 2025, the amortized cost basis of notes receivable in nonaccrual status was $7.5 million and $4.9 million, respectively.

As of September 30, 2026 and December 31, 2025, the Company’s outstanding notes receivable balance related to financing of laboratory equipment sales, net of unamortized deferred fees and costs on originated loans and adjusted for the reserve for credit losses was $0.7 million and $0.6 million, respectively. The activity during the nine months ended September 30, 2026 includes the investment in notes receivable of approximately $0.7 million, which was offset by principal payments made by purchasers of $0.6 million and an immaterial amount of deferred financing fees, and allowance for credit losses.