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What changed in Heritage Global Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Heritage Global Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+155 added−158 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-13)

Top changes in Heritage Global Inc.'s 2025 10-K

155 paragraphs added · 158 removed · 116 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeSpecialty Lending Segment Through HGC, we provide specialty financing solutions to investors in charged-off and nonperforming asset portfolios. Since the inception of HGC in 2019, we have issued $154.5 million in total loans to investors through both self-funded loans and in partnership with senior lenders. Our portion of the total loans funded since inception is $68.1 million.
Biggest changeSince the inception of HGC in 2019, we have issued $159.7 million in total loans to investors by both self- funded loans and in partnership with senior lenders. Our portion of the total loans funded since inception is $73.3 million. Our income from secured lending consists of upfront fees, interest income, monthly monitoring fees and backend profit share.
These consumer protection laws and regulations could result in substantial compliance costs and could interfere with the conduct of our business. Legislation in the United States has increased public companies’ regulatory and compliance costs as well as the scope and cost of work provided by independent registered public accountants and legal advisors.
These consumer protection laws and regulations could result in substantial compliance costs and could interfere with the conduct of our business. 6 Legislation in the United States has increased public companies’ regulatory and compliance costs as well as the scope and cost of work provided by independent registered public accountants and legal advisors.
Our extensive network and ability to find and source new opportunities are key factors for expansion. We believe we have the opportunity for growth in our valuation services through the addition of incremental bank-approved vendor lists, geographic expansion and through deeper penetration with our existing bank relationships.
Our extensive network and ability to find and source new opportunities are key factors for expansion. We also believe we have the opportunity for growth in our valuation services through the addition of incremental bank-approved vendor lists, geographic expansion and through deeper penetration with our existing bank relationships.
Our key competitive strengths are described below. 4 Differentiated Business Model. We believe we have diversified business lines serving the financial and industrial asset liquidation market. We have multiple revenue streams including our brokerage, principal based auction services, refurbishment and resale, advisory services and secured lending services.
Our key competitive strengths are described below. Differentiated Business Model. We believe we have diversified business lines serving the financial and industrial asset liquidation market. We have multiple revenue streams including our brokerage, principal based auction services, refurbishment and resale, advisory services and secured lending services.
Brokerage Segment Through NLEX, we act as an advisor for sales of charged-off and nonperforming asset portfolios via an electronic auction exchange platform for banks and other debt holders throughout the United States and Canada. Since the 1980s, NLEX has sold over $200 billion face value of performing, nonperforming and charged-off assets.
Brokerage Segment Through NLEX, we act as an advisor for sales of charged-off and nonperforming asset portfolios via an electronic auction exchange platform for banks and other debt holders throughout the United States and Canada. Since the 1980s, NLEX has sold over $250 billion face value of performing, nonperforming and charged-off assets.
Of the balance due from one borrower of $22.2 million, there are 11 distinct loan agreements, the underlying portfolio of accounts are diversified throughout FinTech loans, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios.
Of the balance due from one borrower of $21.5 million, there are 11 distinct loan agreements, the underlying portfolio of accounts are diversified throughout FinTech loans, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios.
On September 17, 2020, we entered into an Employment Agreement with Kirk Dove, the former President and Chief Operating Officer of the Company. Upon his resignation, Kirk Dove continued his employment with us in an advisory capacity, and is expected to do so until December 31, 2027.
In 2020, we entered into an Employment Agreement with Kirk Dove, the former President and Chief Operating Officer of the Company. Kirk Dove has continued his employment with us in an advisory capacity and is expected to do so until December 31, 2027.
Through our website, we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practical after we electronically file or furnish such materials to the SEC.
Through the Investor Relations portion of our website, we make available through a link to the SEC's EDGAR database, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, definitive proxy statements and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practical after we electronically file or furnish such materials to the SEC.
Our portfolio includes our largest borrower’s gross notes receivable balance of approximately $22.2 million, representing 74% of our total gross notes receivable balance as of December 31, 2024, as compared to 62% as of December 31, 2023. As discussed further in Item 7.
Our portfolio includes our largest borrower’s gross notes receivable balance of approximately $21.5 million, representing 76% of our total gross notes receivable balance as of December 31, 2025, as compared to 74% as of December 31, 2024. As discussed further in Item 7.
We have built an experienced executive-level management team with deep domain expertise. Our President and Chief Executive Officer, Ross Dove, is a third-generation auctioneer and a pioneering innovator in applying technology to the asset liquidation industry. Mr.
Our President and Chief Executive Officer, Ross Dove, is a third-generation auctioneer and a pioneering innovator in applying technology to the asset liquidation industry. Mr.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Nonaccrual Loans, our largest borrower is in default. As a result, the balance of the loans outstanding with our largest borrower were in nonaccrual status as of December 31, 2024. Whether we will realize any return with respect to the impacted loans is uncertain.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Nonaccrual Loans, our largest borrower is in default with respect to the payments required to be made to us. As a result, the balance of the loans outstanding with our largest borrower were in nonaccrual status as of December 31, 2025.
We do not evaluate concentration risk solely based on balance due from specific borrowers, but also consider the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk.
Whether we will realize any return or incur a loss with respect to the impacted loans is uncertain. We do not evaluate concentration risk solely based on balance due from specific borrowers, but also consider the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk.
Available Information We file certain reports with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and any amendments to those reports. The SEC maintains an Internet site at http://www.sec.gov that contains the reports and information statements and other information we file electronically.
Available Information We file certain reports and information statements with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, definitive proxy statements and any amendments to those reports.
Such restrictions include the U.S. Export Administration regulations, the International Traffic in Arms regulations, and economic sanctions and embargo laws administered by the Office of the Foreign Assets Control regulations.
We sell merchandise, such as scientific instruments, that is subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments. Such restrictions include the U.S. Export Administration Regulations, the International Traffic in Arms Regulations, and economic sanctions and embargo laws administered by the Office of the Foreign Assets Control.
As regulatory and compliance guidelines continue to evolve, we may incur additional costs in the future, which may or may not be material, in order to comply with legislative requirements or rules, pronouncements and guidelines by regulatory bodies. 6 We sell merchandise, such as scientific instruments, that is subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments.
As regulatory and compliance guidelines continue to evolve, we may incur additional costs in the future, which may or may not be material, in order to comply with legislative requirements or rules, pronouncements and guidelines by regulatory bodies.
The organization chart below outlines our basic domestic corporate structure as of December 31, 2024. 3 Heritage Global Inc. (Florida) (1) 100% 100% 100% 100% Heritage Global Partners, Inc. (California) (2) Heritage Global LLC (Delaware) (3) National Loan Exchange, Inc. (Illinois) (5) Heritage Global Capital LLC (Delaware) (6) 100% Heritage ALT LLC (Delaware) (4) (1) Registrant. (2) Auction and Liquidation.
Our telephone number is (858) 847-0659 and our corporate website is www.hginc.com . 3 The organization chart below outlines our basic domestic corporate structure as of December 31, 2025. Heritage Global Inc. (Florida) (1) 100% 100% 100% 100% Heritage Global Partners, Inc. (California) (2) Heritage Global LLC (Delaware) (3) National Loan Exchange, Inc.
The most recent name change more closely identifies HG with its auction and liquidation and specialty lending segments. Our corporate headquarters are located at 12625 High Bluff Drive, Suite 305, San Diego, CA 92130. Our telephone number is (858) 847-0659 and our corporate website is www.hginc.com .
The most recent name change more closely identifies HG with its auction and liquidation and specialty lending segments. Our corporate headquarters are located at 6130 Nancy Ridge Drive, San Diego, CA 92121.
The documents that we file under Canadian securities law are available on SEDAR at the following address: http//sedar.com . Our website address is www.hginc.com .
The SEC maintains an Internet site at http://www.sec.gov through which the public may read and copy the reports and information statements and other information we file electronically. The documents that we file under Canadian securities law are available on SEDAR at the following address: http//sedar.com . Our website address is www.hginc.com .
Historically, recessions drive an increased supply of surplus assets and increased demand for liquidation services, which we believe we are well-positioned to provide.
Historically, recessions drive an increased supply of surplus assets and increased demand for liquidation services, which we believe we are well-positioned to provide. Further, consumer revolving credit has increased above pre‑pandemic levels, and credit card delinquencies and charge-offs have risen to at or above pre‑pandemic benchmarks.
Because of growing volume in this industry, and due to continued elevated delinquency and charge-off rates, we anticipate growth opportunities in our brokerage segment as these sectors evolve. Given many of our clients' limited resources in this space, we have also implemented post-sale support, further entrenching NLEX with our dedicated clients as well as differentiating us from competitors.
Because of growing volume in this industry, and due to continued elevated delinquency and charge-off rates, we anticipate growth opportunities in our brokerage segment as these sectors evolve.
Our business strategy in the Specialty Lending and Auction and Liquidation segments includes the option of partnering with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”).
We intend to continue to leverage our competitive advantages to grow within each segment and across platforms through increasing synergies, maintaining high incremental margins, improving earnings predictability, strengthening financial metrics reflected on our balance sheet and managing expenses. 4 Our business strategy in the Specialty Lending and Auction and Liquidation segments includes the option of partnering with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”).
As of December 31, 2024, our net balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $29.0 million, of which $9.6 million is classified as notes receivable and $19.4 million is classified as equity method investments. 5 Specialty Lending - Concentration and credit risk As of December 31, 2024, we held a gross balance of investments in notes receivable of $30.2 million, recorded in both notes receivable and equity method investments.
As of December 31, 2025, our net balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $27.1 million, of which $8.8 million is classified as notes receivable and $18.3 million is classified as equity method investments.
The market in which we operate is highly fragmented, presenting a continued opportunity for the Company to increase market share and drive consolidation. High Return on Invested Capital. We believe we have an opportunity to drive improved auction economics by serving more frequently in the role of principal rather than the lower margin role of broker. Strong Management Team.
We believe we have an opportunity to drive improved auction economics by serving more frequently in the role of principal rather than the lower margin role of broker. Strong Management Team. We have built an experienced executive-level management team with deep domain expertise.
(3) Holding Company. (4) Refurbishment & Resale. (5) Brokerage. (6) Specialty Lending. Employees As of December 31, 2024, we had 86 total and full-time employees, broken down by segment as follows: 34 are employed by HGP, 19 by NLEX, 22 by ALT, 5 by HGC and 6 by HG.
Employees As of December 31, 2025, we had 84 total and full-time employees, broken down by segment as follows: 35 are employed by HGP, 18 by NLEX, 21 by ALT, 4 by HGC and 6 by HG. Properties We lease or rent office space in several locations in the United States.
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We intend to continue to leverage our competitive advantages to grow within each segment and across platforms through increasing synergies, maintaining high incremental margins, improving earnings predictability, strengthening financial metrics reflected on our balance sheet and managing expenses.
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(Illinois) (5) Heritage Global Capital LLC (Delaware) (6) 100% Heritage ALT LLC (Delaware) (4) (1) Registrant. (2) Auction and Liquidation. (3) Holding Company. (4) Refurbishment & Resale. (5) Brokerage. (6) Specialty Lending.
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Further, consumer lending and resulting charge-offs, specifically via credit cards, are expected to continue their upward trend to meet, and possibly exceed, pre-pandemic levels, which we believe will drive an increased supply of charged off and nonperforming assets. Additionally, we believe an active market for mergers and acquisitions in manufacturing industries drives demand for industrial asset liquidations and our services.
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The principal locations are Del Mar, CA, Hayward, CA, and San Diego, CA, which are related to HGP’s operations, and Edwardsville, IL, which is related to NLEX’s operations.
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Our income from secured lending consists of upfront fees, interest income, monthly monitoring fees and backend profit share.
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We own a warehouse and office space located in East Lyme, CT, which is related to our ALT operations, and a warehouse and office space located in San Diego, CA which is used as the Company’s corporate headquarters and as warehouse and office space for the operations of HGP.
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We do not intend to hold highly concentrated balances due from one borrower as part of our long-term strategy but will in the short term have concentration risk on our path to an established and diversified portfolio.
Added
As of March 2026, we have moved from our leased office space in Del Mar, CA, to our newly owned and renovated office space and warehouse located in San Diego, CA. Our intention is to sublease the Del Mar office space for the remaining term, while still utilizing the previous warehouse space, also in San Diego near the new building.
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While recent data indicate these metrics have begun to stabilize and, in some measures moderate, we believe credit card charge-offs and nonperforming receivables are likely to remain elevated. Under adverse macroeconomic conditions, delinquencies and charge-off rates could increase further, potentially expanding the supply of charged-off and nonperforming portfolios available for sale.
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Additionally, we believe an active market for mergers and acquisitions in manufacturing industries drives demand for industrial asset liquidations and our services. The market in which we operate is highly fragmented, presenting a continued opportunity for the Company to increase market share and drive consolidation. High Return on Invested Capital.
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Given many of our clients' limited resources in this space, we have also implemented post-sale support, further entrenching NLEX with our dedicated clients as well as differentiating us from competitors. 5 Specialty Lending Segment Through HGC, we provide specialty financing solutions to investors in charged-off and nonperforming asset portfolios.
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Specialty Lending - Concentration and credit risk As of December 31, 2025, we held a gross balance of investments in notes receivable of $28.2 million, recorded in both notes receivable and equity method investments.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

29 edited+8 added−6 removed69 unchanged
Biggest changeOur business depends on our ability to successfully obtain a continuous supply of auction or appraisal contracts, or distressed and surplus assets for profitable resale to third parties. In this regard, we compete with numerous other organizations, some of which are much larger and better-capitalized, with greater resources available for both asset acquisition and associated marketing to potential customers.
Biggest changeIn this regard, we compete with numerous other organizations, some of which are much larger and better-capitalized, with greater resources available for both asset acquisition and associated marketing to potential customers. Additionally, some competitors have a longer history of activity in the business and may have advantages with respect to accessing both deals and capital.
The market price of our common stock may be influenced by many factors, including: • our operating and financial performance; • variances in our quarterly financial results compared to expectations; • the depth and liquidity of the market for our common stock; • we have a relatively small base of shares of common stock that could result in significant stock price movements upward or downward based on low levels of trading volume in our common stock; • future sales of common stock or debt or the perception that sales could occur; • investor perception of our business and our prospects; • developments relating to the occurrence of risks impacting our company, including any of the risk factors set forth herein; or • general economic and stock market conditions.
The market price of our common stock may be influenced by many factors, including: • our operating and financial performance; • variances in our quarterly financial results compared to expectations; • the depth and liquidity of the market for our common stock; • we have a relatively small base of shares of common stock that could result in significant stock price movements upward or downward based on low levels of trading volume in our common stock; 11 • future sales of common stock or debt or the perception that sales could occur; • investor perception of our business and our prospects; • developments relating to the occurrence of risks impacting our company, including any of the risk factors set forth herein; or • general economic and stock market conditions.
Failure to anticipate and manage these risks could have a material adverse effect upon our business and results of operations. A portion of our business is conducted through Joint Ventures. Conducting business through Joint Ventures, as described above under “Industry and Competition,” allows us to participate in significantly larger deals than those we could fund independently.
Failure to anticipate and manage these risks could have a material adverse effect upon our business and results of operations. 8 A portion of our business is conducted through Joint Ventures. Conducting business through Joint Ventures, as described above under “Industry and Competition,” allows us to participate in significantly larger deals than those we could fund independently.
In addition, without the consent of these stockholders, we could be delayed or prevented from entering into transactions that could be beneficial to us or our other investors. These stockholders may take these actions even if they are opposed by our other investors. There is a limited public trading market for our common stock.
In addition, without the consent of these stockholders, we could be delayed or prevented from entering into transactions that could be beneficial to us or our other investors. These stockholders may take these actions even if they are opposed by our other investors. 12 There is a limited public trading market for our common stock.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent errors and fraud.
Litigation of this type is often expensive to defend and may divert our management team’s attention as well as resources from the operation of our business. 11 We have a material amount of goodwill which, if it becomes impaired, would result in a reduction in our net income.
Litigation of this type is often expensive to defend and may divert our management team’s attention as well as resources from the operation of our business. We have a material amount of goodwill which, if it becomes impaired, would result in a reduction in our net income.
The price of our common stock could be subject to wide fluctuations in response to a number of factors. 12 We could be delisted from Nasdaq, which could seriously harm the liquidity of our stock and our ability to raise capital. Our common stock is currently listed on Nasdaq, which has qualitative and quantitative listing criteria.
The price of our common stock could be subject to wide fluctuations in response to a number of factors. We could be delisted from Nasdaq, which could seriously harm the liquidity of our stock and our ability to raise capital. Our common stock is currently listed on Nasdaq, which has qualitative and quantitative listing criteria.
Either situation could have a material adverse effect upon our use of working capital and our results of operations. Our Specialty Lending segment is concentrated. A significant portion of our Specialty Lending loan portfolio may at any time be concentrated with a small number of borrowers.
Either situation could have a material adverse effect upon our use of working capital and our results of operations. 7 Our Specialty Lending segment is concentrated. A significant portion of our Specialty Lending loan portfolio may at any time be concentrated with a small number of borrowers.
In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true. We are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”).
In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true. 9 We are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”).
To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2024, we did not have any preferred stock outstanding that has any preferential dividends.
To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2025, we did not have any preferred stock outstanding that has any preferential dividends.
Our executive officers, directors and their affiliates hold a large percentage of our common stock and their interests may differ from other stockholders. Our executive officers, directors and their affiliates beneficially own, in the aggregate, 12% of our common stock as of March 1, 2025.
Our executive officers, directors and their affiliates hold a large percentage of our common stock and their interests may differ from other stockholders. Our executive officers, directors and their affiliates beneficially own, in the aggregate, 12% of our common stock as of March 1, 2026.
Goodwill represents the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair value of the net assets acquired. Current accounting standards require that goodwill be periodically evaluated for impairment based on the fair value of the reporting unit. As of December 31, 2024 approximately 9% of our total assets represents goodwill.
Goodwill represents the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair value of the net assets acquired. Current accounting standards require that goodwill be periodically evaluated for impairment based on the fair value of the reporting unit. As of December 31, 2025 approximately 8% of our total assets represents goodwill.
If our borrowers are unable to purchase a sufficient volume of charged off receivables, or to purchase charged off receivables at a favorable price, our business, financial conditions and operating results could be negatively affected. Our operating results are subject to significant fluctuation.
If our borrowers are unable to purchase a sufficient volume of charged off receivables, or to purchase charged off receivables at a favorable price, our business, financial conditions and operating results could be negatively affected.
Pursuant to Section 607.0901 of the FBCA, a publicly held Florida corporation may not engage in a broad range of extraordinary corporate transactions with an interested shareholder within three years of when the shareholder became an interested shareholder without the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder), unless, among other exceptions: • the transaction is approved by a majority of disinterested directors; • the interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least three years preceding the announcement date of any such extraordinary corporate transaction; • the interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; or • the consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria. 10 Subject to certain exceptions, an interested shareholder is defined as a person who beneficially owns more than 15% of a corporation’s outstanding voting shares.
Pursuant to Section 607.0901 of the FBCA, a publicly held Florida corporation may not engage in a broad range of extraordinary corporate transactions with an interested shareholder within three years of when the shareholder became an interested shareholder without the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder), unless, among other exceptions: • the transaction is approved by a majority of disinterested directors; • the interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least three years preceding the announcement date of any such extraordinary corporate transaction; • the interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; or • the consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria.
Under our business model, when not acting solely as an auctioneer, we assume the general and physical inventory and credit risks associated with purchasing assets for subsequent resale.
Our business is subject to inventory risk and credit risk. Under our business model, when not acting solely as an auctioneer, we assume the general and physical inventory and credit risks associated with purchasing assets for subsequent resale.
Despite the accompanying variability of direct costs, quarterly fixed costs that are largely composed of salaries and benefits could exceed our gross profit. There can therefore be no assurance that we can sustain profitability on a quarterly or annual basis.
The timing of revenue recognition related to significant transactions can materially affect quarterly and annual operating results. Despite the accompanying variability of direct costs, quarterly fixed costs that are largely composed of salaries and benefits could exceed our gross profit. There can therefore be no assurance that we can sustain profitability on a quarterly or annual basis.
Our revenue and operating results are subject to fluctuation from quarter to quarter and from year to year due to the nature of the business, which involves discrete deals of varying size that are very difficult to predict. The timing of revenue recognition related to significant transactions can materially affect quarterly and annual operating results.
Our operating results are subject to significant fluctuation. Our revenue and operating results are subject to fluctuation from quarter to quarter and from year to year due to the nature of the business, which involves discrete deals of varying size that are very difficult to predict.
Provisions in our Articles and Restated Bylaws that could delay or prevent an unsolicited change in control include: • a staggered board of directors; • limitations on persons authorized to call a special meeting of stockholders; and • the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval.
Provisions in our Articles and Restated Bylaws that could delay or prevent an unsolicited change in control include: • a staggered board of directors; • limitations on persons authorized to call a special meeting of stockholders; and • the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval. 10 The Company is a Florida corporation and is therefore subject to certain anti-takeover provisions that apply to public corporations under Florida law.
Our Specialty Lending loan portfolio includes a gross notes receivable balance of approximately $22.2 million from one borrower, representing 74% of our total gross notes receivable as of December 31, 2024.
Our Specialty Lending loan portfolio includes a gross notes receivable balance of approximately $21.5 million from one borrower, representing 76% of our total gross notes receivable as of December 31, 2025.
Concentration with a small number of borrowers exposes us to the risk that financial difficulty with a single borrower or a small number of borrowers can materially affect our business, financial conditions or operating results.
Concentration with a small number of borrowers exposes us to the risk that financial difficulty with a single borrower or a small number of borrowers can materially affect our business, financial conditions or operating results. This borrower is currently in default, and our loans to this borrower are in nonaccrual status.
Although our purchase process includes due diligence to determine that there are no material adverse environmental issues, it is possible that such issues could be discovered subsequent to a completed purchase.
Although our purchase process includes due diligence to determine that there are no material adverse environmental issues, it is possible that such issues could be discovered subsequent to a completed purchase. Any remediation and related costs could have a material adverse effect upon our business and results of operations.
You should carefully consider and evaluate these risk factors, as any of them could materially and adversely affect our business, financial condition and results of operations, which, in turn, can adversely affect the price of our securities. Competition and Economic Risks We face significant competition in our business.
You should carefully consider and evaluate these risk factors, as any of them could materially and adversely affect our business, financial condition and results of operations, which, in turn, can adversely affect the price of our securities. It is not possible to predict or identify all such factors.
Any remediation and related costs could have a material adverse effect upon our business and results of operations. 9 Changes in tax laws or their interpretations, or becoming subject to additional foreign, U.S. federal, state or local taxes, could negatively affect our business, financial condition and results of operations.
Changes in tax laws or their interpretations, or becoming subject to additional foreign, U.S. federal, state or local taxes, could negatively affect our business, financial condition and results of operations. We are subject to extensive tax liabilities, including U.S. federal and state taxes.
Our Articles authorize the issuance of up to 10,000,000 shares of preferred stock, $10.00 par value per share. Of the 10,000,000 shares of preferred stock authorized under our Articles, the Company has designated 20,000 shares as Series N Preferred Stock. There are 563 shares of Series N Preferred Stock issued and outstanding.
Of the 10,000,000 shares of preferred stock authorized under our Articles, the Company has designated 20,000 shares as Series N Preferred Stock. There are 563 shares of Series N Preferred Stock issued and outstanding. Our Board is authorized to determine the rights and preferences of any additional series or class of preferred stock.
Although permitted by the FBCA, we have not elected in our Articles to opt out of the terms of Section 607.0901. This statutory provision may prevent takeover attempts that might result in a premium over the market price for shares of our common stock. Our Board of Directors may issue additional shares of preferred stock without stockholder approval.
This statutory provision may prevent takeover attempts that might result in a premium over the market price for shares of our common stock. Our Board of Directors may issue additional shares of preferred stock without stockholder approval. Our Articles authorize the issuance of up to 10,000,000 shares of preferred stock, $10.00 par value per share.
This borrower is currently in default, and our loans to this borrower are in nonaccrual status. 7 Our Specialty Lending segment depends on the expertise, efforts and financial health of our borrowers.
Our Specialty Lending segment depends on the expertise, efforts and financial health of our borrowers.
Moreover, despite reforms made possible by the Jumpstart Our Business Startups Act of 2012 and the 2015 Fixing America’s Surface Transportation Act, the reporting requirements, rules, and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly, particularly if we were no longer to qualify as a smaller reporting company.
Our management and other personnel devote a substantial amount of time to ensure that we comply with these requirements. The reporting requirements, rules, and regulations may increase our legal and financial compliance costs and may make some activities more time-consuming and costly, particularly if we were no longer to qualify as a smaller reporting company.
Therefore, either the loss of the services of the above existing officers, or the inability to attract and retain appropriately skilled new employees, could have a material adverse effect upon our business and results of operations. 8 Disruptions to information systems and those of certain third-party service providers utilized by us could adversely impact our operations, reputation and brand.
As our operations expand, we will be required to hire additional employees and may face competition for them. Therefore, either the loss of the services of the above existing officers, or the inability to attract and retain appropriately skilled new employees, could have a material adverse effect upon our business and results of operations.
The protection of client, employee and company data is extremely important to us. The regulatory environment surrounding information security and privacy is becoming increasingly demanding and frequently changing in the jurisdictions in which we do business. Clients and employees have expectations that we will protect their information from cyber-attacks and other security breaches.
Disruptions to information systems and those of certain third-party service providers utilized by us could adversely impact our operations, reputation and brand. The protection of client, employee and company data is extremely important to us. The regulatory environment surrounding information security and privacy is becoming increasingly demanding and frequently changing in the jurisdictions in which we do business.
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Additionally, some competitors have a longer history of activity in the business and may have advantages with respect to accessing both deals and capital. Our business is subject to inventory risk and credit risk.
Added
Consequently, you should not consider any such list to be a complete statement of all our potential risks or uncertainties. Some statements in the “Business” section and elsewhere in this Annual Report on Form 10-K are “forward-looking statements” and are qualified by the cautionary language regarding such statements. See “Forward-Looking Information” above.
Removed
As our operations expand, we will be required to hire additional employees and may face competition for them.
Added
Competition and Economic Risks We face significant competition in our business. Our business depends on our ability to successfully obtain a continuous supply of auction or appraisal contracts, or distressed and surplus assets for profitable resale to third parties.
Removed
We are subject to extensive tax liabilities, including U.S. federal and state taxes.
Added
Liens on collateral securing loans that we make to our borrowers may be subject to control by our senior lenders based on our contractual arrangements with those senior lenders. If there is a default, the value of the collateral may not be sufficient to repay in full both the senior lender(s) and us.
Removed
The Company is a Florida corporation and is therefore subject to certain anti-takeover provisions that apply to public corporations under Florida law.
Added
Certain loans that we make to our borrowers in charged-off and nonperforming asset portfolios may be made in conjunction with our senior lenders which may have priority rights in the collateral pledged by a borrower based on our contractual arrangement with the senior lender.
Removed
Our Board is authorized to determine the rights and preferences of any additional series or class of preferred stock.
Added
The senior lender may require assurances that it will control the disposition of any collateral in the event of default or the sale of the loans in charged-off and nonperforming asset portfolios in default.
Removed
Our management and other personnel devote a substantial amount of time to ensure that we comply with these requirements.
Added
In certain cases, the senior lender will require us to expressly subordinate our right to receive distributions of payments received with respect to loans to those held by the senior lender and further provide that the senior lender will control the commencement of the sale of the loans in full, and as a result, we may be unable to realize the proceeds of any collateral securing some of our loans.
Added
Clients and employees have expectations that we will protect their information from cyber-attacks and other security breaches.
Added
Subject to certain exceptions, an interested shareholder is defined as a person who beneficially owns more than 15% of a corporation’s outstanding voting shares. Although permitted by the FBCA, we have not elected in our Articles to opt out of the terms of Section 607.0901.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Edwardsville office is leased from a related party, as discussed in Note 15 to our consolidated financial statements. We own a warehouse and office space East Lyme, CT, which is related to our ALT operations.
Biggest changeThe Edwardsville office is leased from a related party, as discussed in Note 14 to our consolidated financial statements.
Added
We own a warehouse and office space located in East Lyme, CT, which is related to our ALT operations, and a warehouse and office space located in San Diego, CA which is used as the Company’s corporate headquarters and as warehouse and office space for the operations of HGP.
Added
As of March 2026, we have moved from our leased office space in Del Mar, CA, to our newly owned and renovated office space and warehouse located in San Diego, CA. Our intention is to sublease the Del Mar office space for the remaining term, while still utilizing the previous warehouse space, also in San Diego near the new building.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Shares of our common stock, $0.01 par value per share, are quoted under the symbol “HGBL” on the Nasdaq Stock Market. Holders As of March 1, 2025, we had approximately 323 holders of common stock of record.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Shares of our common stock, $0.01 par value per share, are quoted under the symbol “HGBL” on the Nasdaq Stock Market. Holders As of March 1, 2026, we had approximately 257 holders of common stock of record.
Dividends To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2024, we did not have any preferred stock outstanding that has any preferential dividends. Recent Sales of Unregistered Securities.
Dividends To date, we have not paid dividends on our common stock nor do we anticipate that we will pay dividends in the foreseeable future. As of December 31, 2025, we did not have any preferred stock outstanding that has any preferential dividends. Recent Sales of Unregistered Securities.
Removed
On December 12, 2024, the Company issued 14,001 shares of common stock to certain accredited personnel pursuant to the exercise of stock options. On December 17, 2024, the Company issued an additional 25,758 shares of common stock to certain accredited personnel pursuant to the exercise of stock options.
Added
The Company did not sell any of its securities during the fiscal year ended December 31, 2025 that were not registered under the Securities Act of 1933, as amended. Issuer Purchases of Equity Securities No shares of the Company’s common stock were repurchased during the three months ended December 31, 2025. Item 6. [ Reserved]. 15
Removed
These securities were issued in reliance on the exemption set forth in Section 4(a)(2) of the Securities Act of 1933, as amended. Issuer Purchases of Equity Securities.
Removed
During the three months ended December 31, 2024, repurchases of the Company's common stock were as follows: Period (a) Total Number of Shares Purchased [1] (b) Average Price Paid per Share [2] (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs [3] October 1 through October 31, 2024 271,220 $ 1.70 1,268,844 $ 3,686,720 November 1 through November 30, 2024 179,552 $ 1.67 1,448,396 $ 3,386,594 December 1 through December 31, 2024 214,187 $ 1.77 1,662,583 $ 3,007,858 [1] No shares of our common stock were purchased other than through a publicly announced plan or program. [2] Amounts in this column reflect weighted average price paid per share, which includes commissions and other expenses associated with the repurchases. [3] Our Board of Directors authorized a share repurchase program on May 5, 2022 (“Repurchase Program”), which permits the Company to purchase up to an aggregate of $4.0 million in common shares over a three year period ending in June 2025.
Removed
On September 13, 2024, our Board of Directors approved an amendment to the Company’s existing share repurchase program to (i) increase the authorized aggregate amounts of shares of the Company’s common stock the Company may repurchase from $4.0 million to $6.0 million and (ii) extend the term of the Repurchase Program from May 4, 2025 to June 30, 2025.
Removed
This column reflects the approximate dollar value of shares of our common stock that are available for purchase under the Repurchase Program, as amended. Item 6. [ Reserved]. 15

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. [Reserved] 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 25 Item 8. Financial Statements and Supplementary Data 25 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 25 Item 9A. Controls and Procedures 25 Item 9B.
Biggest changeItem 6. [Reserved] 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 24 Item 8. Financial Statements and Supplementary Data 24 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 24 Item 9A. Controls and Procedures 25 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

59 edited+20 added−27 removed42 unchanged
Biggest changeSignificant components of selling, general and administrative expense were as shown below (dollars in thousands): 19 Year Ended December 31, 2024 2023 % change Compensation: Auction and Liquidation $ 5,714 $ 6,502 (12 )% Refurbishment & Resale 2,413 2,314 4 % Brokerage 5,185 6,217 (17 )% Specialty Lending 1,483 1,030 44 % Corporate & other 2,228 2,357 (5 )% Stock-based compensation 1,253 776 61 % Board of Directors fees 401 322 25 % Accounting, tax and legal professional fees 1,558 1,421 10 % Insurance 590 540 9 % Occupancy 1,263 1,285 (2 )% Travel and entertainment 603 831 (27 )% Advertising and promotion 611 604 1 % Information technology support 607 711 (15 )% Provision for credit losses (256 ) 530 (148 )% Other 613 600 2 % Total selling, general and administrative expense $ 24,266 26,040 (7 )% Reclassifications – Certain prior year balances within schedule of selling, general and administrative expense above have been reclassified to conform to current year presentation.
Biggest changeSelling, general and administrative expense – Selling, general and administrative expense was $25.0 million in 2025 as compared to $24.3 million in 2024, an increase of $0.7 million or approximately 3%, which included legal and professional fees associated with due diligence efforts of approximately $0.4 million. 19 Significant components of selling, general and administrative expense were as shown below (dollars in thousands): Year Ended December 31, 2025 2024 % change Compensation: Auction and Liquidation $ 5,999 $ 5,714 5 % Refurbishment & Resale 2,869 2,413 19 % Brokerage 5,074 5,185 (2 )% Specialty Lending 1,045 1,483 (30 )% Corporate & other 2,241 2,228 1 % Stock-based compensation 900 1,253 (28 )% Board of Directors fees 490 401 22 % Accounting, tax and legal professional fees 1,498 1,463 2 % Insurance 603 590 2 % Occupancy 1,382 1,263 9 % Travel and entertainment 583 603 (3 )% Advertising and promotion 695 611 14 % Information technology support 745 607 23 % (Recovery) provision for credit losses (20 ) (267 ) (93 )% Other 868 719 21 % Total selling, general and administrative expense $ 24,972 24,266 3 % Reclassifications – Certain prior year balances within schedule of selling, general and administrative expense above have been reclassified to conform to current year presentation.
We determined that (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows.
We have determined (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows.
The significant changes in operating assets and liabilities during 2024 as compared to 2023 are primarily due to the nature of our operations. We earn revenue from discrete auction and liquidation deals that vary considerably with respect to their magnitude and timing, and that can consist of fees, commissions, asset sale proceeds, or a combination of all.
The significant changes in operating assets and liabilities during 2025 as compared to 2024 are primarily due to the nature of our operations. We earn revenue from discrete auction and liquidation deals that vary considerably with respect to their magnitude and timing, and that can consist of fees, commissions, asset sale proceeds, or a combination of all.
Off-Balance Sheet Arrangements – We had no off-balance sheet arrangements during the years ended December 31, 2024 and 2023. Key Performance Indicators We monitor a number of financial and non-financial measures on a regular basis in order to track our underlying operational performance and trends.
Off-Balance Sheet Arrangements – We had no off-balance sheet arrangements during the years ended December 31, 2025 and 2024. Key Performance Indicators We monitor a number of financial and non-financial measures on a regular basis in order to track our underlying operational performance and trends.
Similar to notes receivable, the loans held by the Joint Ventures are evaluated on a quarterly basis to determine if an adjustment to the allowance for credit losses is needed. As of December 31, 2024, the SCALE rate increased to 1.3644% and the credit loss rate specific to equity method investments was 4.5%.
Similar to notes receivable, the loans held by the Joint Ventures are evaluated on a quarterly basis to determine if an adjustment to the allowance for credit losses is needed. As of December 31, 2025, the SCALE rate increased to 1.3767% from 1.3644% as of December 31, 2024, and the credit loss rate specific to equity method investments was 4.5%.
Depreciation and amortization expense – Depreciation and amortization expense in 2024 was $0.6 million, as compared to $0.5 million in 2023. Depreciation and amortization expense in both years consisted primarily of amortization expense related to intangible assets, while the depreciation of property, plant and equipment was not material.
Depreciation and amortization expense – Depreciation and amortization expense in 2025 was $0.5 million, as compared to $0.6 million in 2024. Depreciation and amortization expense in both years consisted primarily of amortization expense related to intangible assets, while the depreciation of property, plant and equipment was not material.
In 2024, we increased the valuation allowance by $1.3 million, resulting in a net deferred tax asset balance of approximately $6.0 million. The change to the valuation allowance was primarily due to the application of our nonaccrual loan policy, which resulted in a decrease to our estimates related to the utilization of net operating loss carryforwards in 2025.
In 2024, we increased the valuation allowance by $1.3 million, resulting in a net deferred tax asset balance of approximately $6.0 million. The change to the valuation allowance was primarily due to the application of our nonaccrual loan policy, which resulted in a decrease to our estimates related to the utilization of net operating loss carry forwards in 2025.
We evaluate which portion of the deferred tax assets, if any, will more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on our use of our net operating and net capital loss carryforwards.
We evaluate which portion of the deferred tax assets, if any, will more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on our use of our net operating and net capital loss carry forwards.
In 2024, the total amount of gross profit allocated to ALT from HGP was approximately $1.4 million, as compared to the total amount of gross profit allocated to ALT from HGP in 2023 of approximately $3.8 million. [2] All financing arrangements are originated with Corporate and other.
In 2025, the total amount of gross profit allocated to ALT from HGP was approximately $1.8 million, as compared to the total amount of gross profit allocated to ALT from HGP in 2024 of approximately $1.3 million. [2] All financing arrangements are originated with Corporate and other.
The operating assets and liabilities associated with such transactions are therefore subject to the same variability and can be different at the end of any given period. Cash flows from investing activities. Cash provided by investing activities during 2024 was $10.9 million, as compared to cash used in investing activities of $15.9 million during 2023.
The operating assets and liabilities associated with such transactions are therefore subject to the same variability and can be different at the end of any given period. Cash flows from investing activities. Cash used in investing activities during 2025 was $9.4 million, as compared to cash provided by investing activities of $10.9 million during 2024.
If we determine (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows, we will place the loans on nonaccrual status.
If management determines (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows, the Company will place the loans on nonaccrual status.
In addition, there was a balance of $1.5 million from our share of other loans within affiliated Joint Ventures that are impacted by the default with our largest borrower and have been placed in nonaccrual status as of June 2024. Our share of payments received from this borrower, including interest, will be applied against the outstanding loan balance.
In addition, there was a balance of $1.5 million from our share of other loans within our affiliated joint ventures that are impacted by the default with this borrower and were placed in nonaccrual status in June 2024. Our share of payments received from the nonaccrual loans, including interest, will be applied against the outstanding loan balance.
We expect that future net cash flows from our operating activities will continue to be the primary source of cash required to fund our ongoing operations for the foreseeable future. 16 Ownership Structure and Capital Resources At December 31, 2024 and 2023, we had stockholders’ equity of $65.2 million and $61.1 million, respectively.
We expect that future net cash flows from our operating activities will continue to be the primary source of cash required to fund our ongoing operations for the foreseeable future. 16 Ownership Structure and Capital Resources At December 31, 2025 and 2024, we had stockholders’ equity of $67.0 million and $65.2 million, respectively.
See Note 2 and Note 5 to our consolidated financial statements for further detail.
See Note 2 and Note 4 to our consolidated financial statements for further detail.
In the event additional capital is needed, we believe we can obtain additional debt financing through capital partners. Cash Position and Cash Flows Cash and cash equivalents at December 31, 2024 were $21.7 million compared to $12.3 million at December 31, 2023. Cash flows from operating activities.
In the event additional capital is needed, we believe we can obtain additional debt financing through capital partners. Cash Position and Cash Flows Cash and cash equivalents at December 31, 2025 were $20.5 million compared to $21.7 million at December 31, 2024. Cash flows from operating activities.
With the exception of revenue generated within our Specialty Lending segment, revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities. 21 All services and asset sales revenue from contracts with customers consists of three of our reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage segments.
With the exception of revenue generated within our Specialty Lending segment, revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities.
In order to evaluate the need for an adjustment to the receivable balance related to credit losses, or impairment, we perform a review of all outstanding loan receivables on a quarterly basis to determine if any indicators exist that suggest the loan will not be fully recoverable.
In order to evaluate the need for an adjustment to the receivable balance related to credit losses, or impairment, the Company performs a review of all outstanding loan receivables on a quarterly basis to determine if any indicators exist that suggest the loan will not be fully recoverable and assess the credit quality of the loan receivables.
If, based on our analysis, we elect to maintain accrual status after initial payment default, the loan will generally be placed on nonaccrual status if principal or interest payments become 90 days past due. The accrual of interest is generally discontinued and all accrued interest is reversed against interest income when a loan is placed on nonaccrual status.
If, based on our analysis, we elect to maintain accrual status after initial payment default, the loan will generally be placed on nonaccrual status if principal or interest payments become 90 days past due. The accrual of interest is generally discontinued when a loan is placed in nonaccrual status.
As we continue to work closely with the borrower and its senior lenders in an effort to mitigate the default in an efficient and effective manner, the impacted loans have been placed in nonaccrual status beginning in June 2024.
While we continue to work closely with the borrower and its senior lenders in an effort to mitigate the default in an efficient and effective manner, the impacted loans were placed in nonaccrual status in June 2024.
The determination of the fair value of our stock options is based on a variety of factors including, but not limited to, the price of our common stock, the expected volatility of the stock price over the expected life of the award and expected exercise behavior.
The fair value of stock options is calculated using the Black-Scholes option pricing model. The determination of the fair value of our stock options is based on a variety of factors including, but not limited to, the price of our common stock, the expected volatility of the stock price over the expected life of the award and expected exercise behavior.
The decrease of $0.1 million is primarily due to a decrease in accounts payable and accrued liabilities of $1.2 million and the current portion of third party debt of $1.3 million, offset by an increase in payables to sellers of $2.4 million.
The increase of $0.9 million is primarily due to an increase in accounts payable and accrued liabilities of $1.1 million and other current liabilities of $0.4 million, offset by decreases in the current portion of third party debt of $0.4 million and payables to sellers of $0.1 million.
In 2024, the total amount of interest allocated to the Specialty Lending segment (HGC) from Corporate and other was approximately $0.3 million, as compared to the total amount of interest allocated to HGC from Corporate and other in 2023 of approximately $0.5 million. 2024 Compared to 2023 Revenues and cost of revenues – Revenues were $45.4 million in 2024 as compared to $60.5 million in 2023 and costs of services revenue and asset sales were $14.1 million in 2024 compared to $20.7 million in 2023.
In 2025, no interest was allocated to the Specialty Lending segment (HGC) from Corporate and other, as compared to the total amount of interest allocated to HGC from Corporate and other in 2024 of approximately $0.3 million. 2025 Compared to 2024 Revenues and cost of revenues – Revenues were $51.0 million in 2025 as compared to $45.4 million in 2024 and costs of services revenue and asset sales were $19.9 million in 2025 compared to $14.1 million in 2024.
The approximate $5.3 million decrease was primarily attributable to a decrease of $6.3 million in net income adjusted for noncash items during 2024 as compared to 2023, offset by an increase in operating assets and liabilities of $1.0 million during 2024 as compared to 2023.
The approximate $1.6 million decrease was primarily attributable to a decrease of $0.6 million in net income adjusted for noncash items during 2025 as compared to 2024 and a decrease in operating assets and liabilities of $1.0 million during 2025 as compared to 2024.
The change in our current assets of $6.8 million is primarily due to a decrease in the current portion of notes receivable of $3.2 million and accounts receivable of $0.4 million, offset by increases in cash and cash equivalents of $9.5 million, inventory of $0.3 million, and other current assets of $0.6 million.
The change in our current assets of $0.5 million is primarily due to an increase in the current portion of notes receivable of $1.1 million, inventory of $0.6 million and accounts receivable of $0.3 million, offset by decreases in cash and cash equivalents of $1.2 million and other current assets of $0.3 million.
Cash provided by financing activities in 2023 of $2.5 million was primarily attributable to $13.0 million in proceeds from draws on our 2021 Credit Facility and Term Loan, offset by $8.9 million in repayments to our 2021 Credit Facility, $0.7 million in repayments to our Term Loan, $0.5 million in repayments to our ALT Note, as well as repurchase of our common stock under our Repurchase Program of approximately $0.4 million. 17 Management’s Discussion of Results of Operations The following table summarizes our consolidated results of operations (in thousands): Year Ended December 31, 2024 2023 Revenues: Services revenue $ 32,607 $ 39,480 Asset sales 12,754 21,065 Total revenues 45,361 60,545 Operating costs and expenses: Cost of services revenue 5,805 8,007 Cost of asset sales 8,321 12,724 Selling, general and administrative 24,266 26,040 Depreciation and amortization 591 514 Total operating costs and expenses 38,983 47,285 Earnings of equity method investments 2,688 1,059 Operating income 9,066 14,319 Interest expense, net (93 ) (324 ) Income before income tax expense 8,973 13,995 Income tax expense 3,791 1,520 Net income $ 5,182 $ 12,475 Our revenue has several components: (1) traditional fee based asset disposition services, such as commissions from on-line and webcast auctions, liquidations and negotiated sales, and commissions from the NLEX charged-off receivables business, (2) the acquisition and subsequent disposition of distressed and surplus assets, including industrial machinery and equipment and real estate, and (3) fees and interest earned for appraisal, management advisory services and specialty lending services.
Cash used in financing activities in 2024 was primarily attributable to $6.3 million in repayments to our Term Loan (as discussed further under Note 11 – Debt), $0.5 million in repayments to our ALT Note, as well as repurchase of our common stock under our Repurchase Program of approximately $2.2 million. 17 Management’s Discussion of Results of Operations The following table summarizes our consolidated results of operations (in thousands): Year Ended December 31, 2025 2024 Revenues: Services revenue $ 33,281 $ 32,607 Asset sales 17,697 12,754 Total revenues 50,978 45,361 Operating costs and expenses: Cost of services revenue 7,953 5,805 Cost of asset sales 11,993 8,321 Selling, general and administrative 24,972 24,266 Depreciation and amortization 472 591 Total operating costs and expenses 45,390 38,983 Earnings of equity method investments 123 2,688 Operating income 5,711 9,066 Interest income (expense), net 134 (93 ) Income before income tax expense 5,845 8,973 Income tax expense 2,258 3,791 Net income $ 3,587 $ 5,182 Our revenue has several components: (1) traditional fee based asset disposition services, such as commissions from on-line and webcast auctions, liquidations and negotiated sales, and commissions from the NLEX charged-off receivables business, (2) the acquisition and subsequent disposition of distressed and surplus assets, including industrial machinery and equipment and real estate, and (3) fees and interest earned for appraisal, management advisory services and specialty lending services.
Cash provided by operating activities was $7.7 million during 2024 as compared to $13.0 million during 2023.
Cash provided by operating activities was $6.1 million during 2025 as compared to $7.7 million during 2024.
Liquidity and Capital Resources Liquidity At December 31, 2024, we had working capital of $18.5 million, as compared to working capital of $11.6 million at December 31, 2023, an increase of $6.9 million. Our current assets increased to $33.1 million at December 31, 2024 compared to $26.3 million at December 31, 2023.
Liquidity and Capital Resources Liquidity At December 31, 2025, we had working capital of $18.1 million, as compared to working capital of $18.5 million at December 31, 2024, a decrease of $0.4 million. Our current assets increased to $33.6 million at December 31, 2025 compared to $33.1 million at December 31, 2024.
Further, we do not utilize segmented asset information to evaluate the performance of our reportable segments and do not include intercompany transfers between segments for management reporting purposes. 18 The following table sets forth certain financial information for the Company's reportable segments (in thousands): Year Ended December 31, 2024 Auction and Liquidation Refurbishment & Resale Brokerage Specialty Lending Corporate and other Consolidated Gross profit [1] $ 10,560 $ 4,103 $ 14,069 $ 2,503 $ — $ 31,235 Operating expenses [2] (7,911 ) (3,655 ) (6,717 ) (1,800 ) (4,774 ) (24,857 ) Earnings from equity method investments 1,391 — — 1,297 — 2,688 Operating income (loss) $ 4,040 $ 448 $ 7,352 $ 2,000 $ (4,774 ) $ 9,066 Year Ended December 31, 2023 Auction and Liquidation Refurbishment & Resale Brokerage Specialty Lending Corporate and other Consolidated Gross profit [1] $ 13,545 $ 6,285 $ 16,762 $ 3,223 $ — $ 39,815 Operating expenses [2] (8,767 ) (3,438 ) (7,816 ) (2,280 ) (4,254 ) (26,555 ) Earnings from equity method investments 140 — — 919 — 1,059 Operating income (loss) $ 4,918 $ 2,847 $ 8,946 $ 1,862 $ (4,254 ) $ 14,319 [1] Within the Company’s Industrial Asset division, management allocates gross profit from certain auctions from the Auction and Liquidation segment (HGP) to the Refurbishment & Resale segment (ALT).
Further, we do not utilize segmented asset information to evaluate the performance of our reportable segments and do not include intercompany transfers between segments for management reporting purposes. 18 The following table sets forth certain financial information for the Company's reportable segments (in thousands): Year Ended December 31, 2025 Auction and Liquidation Refurbishment & Resale Brokerage Specialty Lending Corporate and other Consolidated Gross profit [1] $ 10,941 $ 5,827 $ 12,844 $ 1,355 $ 65 $ 31,032 Operating expenses [2] (8,336 ) (4,168 ) (6,728 ) (1,182 ) (5,030 ) $ (25,444 ) Earnings from equity method investments 66 — — 57 — 123 Operating income (loss) $ 2,671 $ 1,659 $ 6,116 $ 230 $ (4,965 ) $ 5,711 Year Ended December 31, 2024 Auction and Liquidation Refurbishment & Resale Brokerage Specialty Lending Corporate and other Consolidated Gross profit [1] $ 10,560 $ 4,103 $ 14,069 $ 2,503 $ — $ 31,235 Operating expenses [2] (7,911 ) (3,655 ) (6,717 ) (1,800 ) (4,774 ) (24,857 ) Earnings from equity method investments 1,391 — — 1,297 — 2,688 Operating income (loss) $ 4,040 $ 448 $ 7,352 $ 2,000 $ (4,774 ) $ 9,066 [1] Within the Company’s Industrial Asset division, management allocates gross profit from certain auctions from the Auction and Liquidation segment (HGP) to the Refurbishment & Resale segment (ALT).
The increase over the SCALE rate was due to both risks with the concentrated balance and declining collections industry-wide. As of December 31, 2024 and December 31, 2023, we have recorded an allowance for credit losses related to its equity method investments of $1.0 million and $0.9 million, respectively.
The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. As of both December 31, 2025 and December 31, 2024, the allowance for credit losses recorded against our equity method investments balance was $1.0 million.
Notes receivable, net Our notes receivable balance consists of loans to buyers of charged-off receivable portfolios, which is considered the only loan category or segment to be reported under the applicable accounting guidance.
As of December 31, 2025, additional loan balances placed in nonaccrual status was approximately $1.7 million. Notes receivable, net Our notes receivable balance consists of loans to buyers of charged-off receivable portfolios, which is considered the only loan category or segment to be reported under the applicable accounting guidance.
Our current liabilities decreased to $14.6 million at December 31, 2024 as compared to $14.7 million at December 31, 2023.
Our current liabilities increased to $15.5 million at December 31, 2025 as compared to $14.6 million at December 31, 2024.
Cash provided by investing activities during 2024 was offset by cash used in investing activities consisting primarily of investments in notes receivable of $5.7 million and equity method investments of $0.3 million. Cash used in investing activities during 2023 consisted primarily of investments in notes receivable of $29.8 million and equity method investments of $17.2 million.
Cash provided by investing activities during 2024 was offset by cash used in investing activities consisting primarily of investments in notes receivable of $5.7 million and equity method investments of $0.3 million. Cash flows from financing activities. Cash provided by financing activities was $2.0 million during 2025, as compared to cash used in financing activities of $9.1 million during 2024.
Our CODM evaluates the performance of our reportable segments based primarily on operating income and routinely receives internal reports that analyze operating income for the reporting segments. The CODM is not routinely provided detailed information regarding significant operating expenses by segment, and such information is not considered critical for allocating resources or assessing the performance of each segment.
The CODM is not routinely provided detailed information regarding significant operating expenses by segment, and such information is not considered critical for allocating resources or assessing the performance of each segment.
As of December 31, 2024, the amortized cost basis of loans in nonaccrual status was $23.5 million, of which $5.3 million is recorded within notes receivable and $18.2 million is recorded within equity method investments. There were no loans in nonaccrual status as of December 31, 2023.
As of December 31, 2025, the amortized cost basis of loans in nonaccrual status was $23.9 million, of which $4.9 million is recorded within notes receivable and $19.0 million is recorded within equity method investments.
These loans are measured at historical costs and reported at their outstanding principal balances net of any unamortized deferred fees and costs on originated loans and allowance for credit losses.
These loans are measured at historical costs and reported at their outstanding principal balances net of any unamortized deferred fees and costs on originated loans and allowance for credit losses. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans.
The interest method is used to arrive at a periodic interest cost (including amortization) that will represent a level effective rate on the sum of the face amount of the debt and (plus or minus) the unamortized premium or discount and expense at the beginning of each period. 22 Nonaccrual Loans We determine a loan to be in default status when the minimum payment amount has not been received within the grace period of the payment due date.
The interest method is used to arrive at a periodic interest cost (including amortization) that will represent a level effective rate on the sum of the face amount of the debt and (plus or minus) the unamortized premium or discount and expense at the beginning of each period.
Services revenue recognized over a period of time is not material in comparison to total revenues (less than 1% of total revenues for the year ended December 31, 2024), and therefore not reported on a disaggregated basis.
The exception to recognition at this point in time occurs when certain contracts provide for advance payments recognized over a period of time. Services revenue recognized over a period of time is not material in comparison to total revenues (approximately 1% of total revenues for the year ended December 31, 2025), and therefore not reported on a disaggregated basis.
Cash used in investing activities during 2023 was offset by cash provided by investing activities primarily of cash received on transfer of notes receivable to partners of $8.9 million, payments received on notes receivable of $11.9 million as well as return of investment and cash distributions received from equity method investments of $10.7 million. Cash flows from financing activities.
Cash used in investing activities during 2025 was offset by cash provided by payments received on notes receivable of $6.5 million as well as return of investment and cash distributions received from equity method investments of $1.5 million.
As of December 31, 2024 and December 31, 2023, our allowance for credit losses related to notes receivable outstanding was $0.4 million and $0.7 million, respectively. See Note 2 and Note 3 to our consolidated financial statements for further detail. Equity Method Investments As noted above, we conduct a portion of our business through Joint Ventures.
See Note 2 and Note 3 to our consolidated financial statements for further detail. 23 Equity Method Investments As noted above, we conduct a portion of our business through Joint Ventures.
We also monitor financial standing and performance of our borrowers on an ongoing basis and regularly update the collection forecasts for the underlying charged off or nonperforming receivable portfolios related to each outstanding loan.
We consider quantitative and qualitative factors when evaluating a loan in default status to determine the likelihood of recovering the outstanding principal balance and contractual interest payments. We also monitor our borrowers’ financial standing and performance on an ongoing basis and regularly update the collection forecasts for the underlying charged off or nonperforming receivable portfolios related to each outstanding loan.
We also earn income through transactions that involve us acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”).
We have determined that we act as an agent for our fee based transactions and therefore we report the revenue from transactions in which we act as an agent on a net basis. 21 We also earn income through transactions that involve us acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”).
Under ASC 326, we elected to evaluate notes receivable as a single pool, for individual notes receivable and borrowers with similar risk characteristics. Notes receivable and borrowers that do not share risk characteristics are evaluated on an individual basis.
The Company evaluates notes receivable as a single pool, for individual notes receivable and borrowers with similar risk characteristics. Notes receivable and borrowers that do not share risk characteristics are evaluated on an individual basis. Management evaluates the Company's notes receivables related to financing laboratory equipment sales within the notes receivable pool.
Pursuant to the terms of existing credit agreements, our largest borrower was required to collect on underlying charged off and nonperforming consumer loan portfolios and remit a required minimum monthly payment to us. However, this borrower became unable to make the required minimum monthly payments and therefore is in default.
However, this borrower became unable to make the required minimum monthly payments beginning in June 2024 and therefore is in default. This borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios and remit net collections to the Company and senior lenders.
Cash used in financing activities in 2024 of $9.1 million was primarily attributable to $6.3 million in repayments to our Term Loan (as discussed further under Note 11 – Debt), $0.5 million in repayments to our ALT Note, as well as repurchase of our common stock under our Repurchase Program of approximately $2.2 million.
Cash provided by financing activities in 2025 was primarily attributable to $4.1 million in proceeds from our Mortgage (as discussed further under Note 11 – Debt) and $1.1 million in proceeds from secured borrowing related to the machinery and equipment lessor arrangement (as discussed further under Note 5 - Lessor Arrangements), offset by cash used in financing activities of $0.4 million in repayments to our ALT Note and approximately $2.6 million in repurchases of our common stock under our Repurchase Program.
Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and all remaining principal and interest payments are deemed probable.
Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and all remaining principal and interest payments are deemed probable. 22 Pursuant to the terms of existing credit agreements, our largest borrower was required to collect on underlying charged off and nonperforming consumer loan portfolios and remit a required minimum monthly payment to the Company.
You should carefully evaluate the financial information below, which reconciles our GAAP reported net income to EBITDA and Adjusted EBITDA for the periods presented (in thousands). 20 Year Ended December 31, 2024 2023 Net income $ 5,182 $ 12,475 Add back: Depreciation and amortization 591 514 Interest expense, net 93 324 Income tax expense 3,791 1,520 EBITDA 9,657 14,833 Management add back: Stock based compensation 1,253 776 Adjusted EBITDA $ 10,910 $ 15,609 Recently adopted accounting pronouncements In 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”), which applies a current expected credit loss model, which is a new impairment model based on expected losses rather than incurred losses.
You should carefully evaluate the financial information below, which reconciles our GAAP reported net income to EBITDA and Adjusted EBITDA for the periods presented (in thousands). 20 Year Ended December 31, 2025 2024 Net income $ 3,587 $ 5,182 Add back: Depreciation and amortization 472 591 Interest (income) expense, net (134 ) 93 Income tax expense 2,258 3,791 EBITDA 6,183 9,657 Management add back: Stock based compensation 900 1,253 Adjusted EBITDA $ 7,083 $ 10,910 Recently adopted accounting pronouncements On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information.
Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and our “contract liability”.
Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and our “contract liability”. As of December 31, 2025, 2024 and 2023, the deferred revenue balance was approximately $0.9 million, $0.6 million and $0.5 million, respectively, and is recorded within other current liabilities on the consolidated balance sheet.
As of December 31, 2024, the SCALE rate increased to 1.3644% and our credit loss rate specific to notes receivable was 3.7%. The increase over the SCALE rate was due to both risks with the concentrated balance and declining collections industry-wide.
As of December 31, 2025, the SCALE rate increased to 1.3767% from 1.3644% as of December 31, 2024, and the Company's credit loss allowance rate specific to notes receivable was 3.5%.
Our indebtedness consists of a promissory note dated August 23, 2021 (the “ALT Note”) issued in the amount of $2.0 million as part of the aggregate purchase price paid to acquire certain assets and liabilities of American Laboratory Trading and any amounts borrowed under the promissory note, business loan agreement, commercial security agreement and pledge agreement (the “2021 Credit Facility”) with C3bank, National Association, for a $10.0 million revolving line of credit.
As of December 31, 2025, we had no outstanding balance on the 2021 Credit Facility. The Company also had indebtedness that consisted of a promissory note dated August 23, 2021 (the “ALT Note”) issued in the amount of $2.0 million as part of the aggregate purchase price paid to acquire certain assets and liabilities of American Laboratory Trading.
The maturity date was modified to June 27, 2026. We are permitted to use the proceeds of the loan solely for our business operations. As of December 31, 2024, we had no outstanding balance on the 2021 Credit Facility.
The Fifth Modification Agreement modified and reaffirmed the 2021 Credit Facility to, among other things, extend the maturity date to June 27, 2026, modify the applicable interest rate, and further modify the loan covenants. We are permitted to use the proceeds of the 2021 Credit Facility solely for our business operations.
For further discussion of our income taxes, see Note 13 to our consolidated financial statements. 24 Stock-based compensation Our stock-based compensation is primarily in the form of options to purchase common shares. The fair value of stock options is calculated using the Black-Scholes option pricing model.
We expect to utilize our remaining net operating loss carry forwards, and as such have removed the valuation allowance against our deferred tax assets. For further discussion of our income taxes, see Note 13 to our consolidated financial statements. Stock-based compensation Our stock-based compensation is primarily in the form of options to purchase common shares.
On December 27, 2024, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Modification Agreement”), by and between the Company and C3 Bank. The Modification Agreement modifies and reaffirms the 2021 Credit Facility to, among other things, extend the maturity date, modify the applicable interest rate, and further modify the loan covenants.
On December 27, 2024, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Fifth Modification Agreement”), by and between the Company and the Lender.
As of December 31, 2024, 2023 and 2022, the deferred revenue balance was approximately $0.6 million, $0.5 million and $0.4 million, respectively, and is recorded within accounts payable and accrued liabilities on the consolidated balance sheet. The deferred revenue balance is primarily related to customer deposits on asset sales within our Refurbishment & Resale segment.
The deferred revenue balance is primarily related to customer deposits on asset sales within our Refurbishment & Resale segment.
This resulted in gross profit of $31.2 million in 2024 compared to $39.8 million in 2023, a decrease of approximately $8.6 million or approximately 22%.
This resulted in gross profit of $31.0 million in 2025 compared to $31.2 million in 2024, a decrease of approximately $0.2 million or approximately 1%. Although gross profit was relatively consistent year over year, we experienced a product mix shift in 2025 from financial assets to industrial assets.
Management estimates the allowance for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. As we lack historical internal data, we observe that our notes receivable are similar in character to transactions undertaken by smaller banking institutions.
Management estimates the reserve balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience typically provides the basis for an estimation of expected credit losses; however, the Company lacks sufficient data upon which to base a historical estimation.
Generally, revenue is recognized at the point in time in which the performance obligation has been satisfied and full consideration is received. The exception to recognition at this point in time occurs when certain contracts provide for advance payments recognized over a period of time.
All services and asset sales revenue from contracts with customers consists of three of our reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage segments. Generally, revenue is recognized at the point in time in which the performance obligation has been satisfied and full consideration is received.
The status of default does not solely trigger nonaccrual loan status. We consider quantitative and qualitative factors when evaluating a loan in default status to determine the likelihood of recovering the outstanding principal balance and contractual interest payments.
Nonaccrual Loans We determine a loan to be in a default status when the minimum payment amount has not been received within the grace period of the payment due date. The status of default does not solely trigger nonaccrual loan status.
During 2024, our primary source of cash was the cash on hand, payments received on notes receivable of $11.0 million and $7.7 million of cash provided by our operating activities.
The Company repaid the ALT Note in full in August, 2025. As of December 31, 2025, we had no outstanding balance on the ALT Note. During 2025, our primary source of cash was cash on hand, cash provided by operating activities, principal repayments on notes receivable of $6.5 million, and proceeds from the Mortgage of $4.1 million.
As of December 31, 2024, our allowance for credit losses related to the Restructured Loans was $1.1 million, of which $0.3 million was classified as notes receivable and $0.8 million was recorded within equity method investments.
This review includes monthly and cumulative key performance indicators for each loan and borrower, as well as evaluation of borrower's financial condition. As of December 31, 2025 and December 31, 2024, the allowance for credit losses recorded against our notes receivable balance was $0.3 million and $0.4 million, respectively.
Removed
The terms of the ALT Note require us to pay off the Note in 48 equal installments of approximately $44,000 with an interest rate of 3% per annum and a maturity date of August 23, 2025. As of December 31, 2024, we had an outstanding balance of $0.4 million on the ALT Note.
Added
Our indebtedness consists of a promissory note, a business loan agreement and commercial security agreement (collectively, the “Mortgage Loan Agreement”) with C3bank, National Association (the “Lender”), that provides for a $4.1 million term loan (the “Mortgage”) and any amounts borrowed under the promissory note, business loan agreement, commercial security agreement and pledge agreement (the “2021 Credit Facility”) with the Lender, for a $10.0 million revolving line of credit.
Removed
Cash disbursements during 2024 consisted primarily of investments in notes receivable of $5.7 million, repurchase of our common stock under our Repurchase Program of approximately $2.2 million, repayments on our ALT Note of $0.5 million, repayments on our Term Loan of $6.3 million (as discussed further under Note 11 – Debt), payment of operating expenses, and settlement of auction liabilities.
Added
On February 6, 2025 we entered into the Mortgage Loan Agreement with the Lender. The Mortgage Loan Agreement provides for the Mortgage that we used to purchase real property and the building located at 6130 Nancy Ridge Drive in San Diego, California on February 11, 2025 for $7.4 million.
Removed
Cash used in financing activities was $9.1 million during 2024, as compared to cash provided by financing activities of $2.5 million during 2023.
Added
This property is used as the Company’s corporate headquarters and as warehouse and office space for the operations of Heritage Global Partners, Inc., our subsidiary that operates our Auction and Liquidation segment. As of December 31, 2025, we had an outstanding balance of $4.1 million on the Mortgage.
Removed
The decrease in gross profit in the current year is primarily due to a significant one-time principal auction transaction in our Industrial Asset Division in the first quarter of 2023, as well as decreased volume of transactions within our Brokerage segment as compared to 2023.
Added
Cash disbursements during the year ended December 31, 2025 consisted primarily of investment in our new San Diego facility for $8.5 million, investments in notes receivable of $5.9 million, and repurchases of our common stock of $2.6 million.
Removed
Selling, general and administrative expense – Selling, general and administrative expense was $24.3 million in 2024 as compared to $26.0 million in 2023, a decrease of $1.8 million or 7%.
Added
Cash used in investing activities consisting primarily of purchase of property and equipment of $8.5 million, investments in notes receivable of $5.9 million, investments in equity method investments of $1.6 million and investments in participating interest of $1.6 million.
Removed
As compared to 2023 there was a decrease in selling, general and administrative expense during 2024 primarily due to decreased compensation expense as a result of lower performance in certain operational segments.
Added
Our CODM evaluates the performance of our reportable segments based primarily on gross profit and operating income. The CODM routinely receives internal reports that analyze these metrics for the reporting segments.
Removed
The expected credit losses, and subsequent adjustments to such losses, is recorded through an allowance account that is deducted from, or added to, the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.
Added
In 2025, we saw an increase in gross profit related to our Auction and Liquidation segment of approximately $0.4 million and an increase in gross profit related to our Refurbishment and Resale segment of approximately $1.7 million, offset by a decrease in gross profit in both our Brokerage and Specialty Lending segments of approximately $1.2 million.
Removed
ASU 2016-13 eliminates the current accounting model for loans and debt securities acquired with deteriorated credit quality under ASC Topic 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality , which provides authoritative guidance for the accounting of our notes receivable.
Added
The product mix results in a lower gross margin overall due to the nature of our business and higher cost of revenues associated with the Industrial Asset Division.
Removed
With respect to smaller reporting companies, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
Added
Earnings in Equity Method Investments – Earnings in equity method investments were $0.1 million in 2025 compared to $2.7 million in 2024.
Removed
The adoption of ASU 2016-13 resulted in an adjustment to retained earnings on January 1, 2023 of $0.3 million, and established an expected credit loss reserve against our receivables related to loans outstanding, including those held within equity method investments.
Added
The $2.6 million decrease is primarily due to our $1.3 million share of earnings from the KNFH II LLC joint venture recorded in the second quarter of 2024 and a $1.3 million decrease in earnings due to the implementation of the modified cost recovery method in our Specialty Lending segment for loans placed in nonaccrual status in June of 2024.
Removed
The increase is a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio.

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