Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39471

HERITAGE GLOBAL INC.

(Exact name of registrant as specified in its charter)


Florida	59-2291344
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

12625 High Bluff Drive, Suite 305, San Diego, CA 92130

(Address of Principal Executive Offices)

(858) 847-0659
(Registrant’s Telephone Number)

N/A

(Registrant’s Former Name)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common stock, $0.01 par value HGBL The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of November 1, 2024, there were 37,341,185 shares of common stock outstanding, $0.01 par value.

TABLE OF CONTENTS


Part I.	Financial Information

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	3

	Condensed Consolidated Statements of Income for the three and nine month periods ended September 30, 2024 and 2023 (unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2024 and 2023 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (unaudited)	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

Part II.	Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	35

Item 6.	Exhibits	36

	Signature Page	37

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements.

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share and per share amounts)



	September 30, 2024			December 31, 2023
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	26,571		$	12,279
Accounts receivable (net of allowance for credit losses of $130 in 2024 and $132 in 2023)		877			1,910
Current portion of notes receivable (net of allowance for credit losses of $422 in 2024 and $650 in 2023)		3,959			6,581
Inventory – equipment		4,721			5,074
Other current assets		833			448
Total current assets		36,961			26,292
Non-current portion of notes receivable, net		7,337			10,890
Equity method investments		21,447			21,361
Right-of-use assets		2,381			2,539
Property and equipment, net		1,692			1,705
Intangible assets, net		3,460			3,753
Goodwill		7,446			7,446
Deferred tax assets		7,740			9,115
Other assets		64			67
Total assets	$	88,528		$	83,168

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	6,268		$	7,237
Payables to sellers		13,125			4,975
Current portion of third party debt		525			1,733
Current portion of lease liabilities		802			789
Total current liabilities		20,720			14,734
Non-current portion of third party debt		—			5,495
Non-current portion of lease liabilities		1,681			1,859
Total liabilities		22,401			22,088

Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 563 of Series N as of September 30, 2024 and December 31, 2023; with liquidation preference over common stockholders equivalent to $1,000 per share		6			6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued 37,341,185 and 37,157,616 shares as of September 30, 2024 and December 31, 2023, respectively; and outstanding 36,343,561 and 36,761,441 shares as of September 30, 2024 and December 31, 2023, respectively		373			372
Additional paid-in capital		295,241			294,522
Accumulated deficit		(227,641	)		(233,026	)
Treasury stock at cost, 997,624 and 396,175 shares as of September 30, 2024 and December 31, 2023, respectively		(1,852	)		(794	)
Total stockholders’ equity		66,127			61,080
Total liabilities and stockholders’ equity	$	88,528		$	83,168

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of US dollars, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024		2023			2024			2023
Revenues:
Services revenue	$	8,063	$	9,985		$	25,527		$	30,040
Asset sales		2,347		5,566			9,067			15,221
Total revenues		10,410		15,551			34,594			45,261

Operating costs and expenses:
Cost of services revenue		1,735		2,423			4,665			6,570
Cost of asset sales		1,458		3,413			6,140			9,683
Selling, general and administrative		5,686		6,806			18,390			19,546
Depreciation and amortization		152		132			440			373
Total operating costs and expenses		9,031		12,774			29,635			36,172
Earnings of equity method investments		100		(8	)		2,622			675
Operating income		1,479		2,769			7,581			9,764
Interest income (expense), net		17		(56	)		(183	)		(225	)
Income before income tax expense		1,496		2,713			7,398			9,539
Income tax expense		407		736			2,013			1,954
Net income	$	1,089	$	1,977		$	5,385		$	7,585

Weighted average common shares outstanding – basic		36,576,931		36,742,018			36,641,820			36,675,838
Weighted average common shares outstanding – diluted		37,189,029		37,647,321			37,292,200			37,605,363
Net income per share – basic	$	0.03	$	0.05		$	0.15		$	0.21
Net income per share – diluted	$	0.03	$	0.05		$	0.14		$	0.20

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands of US dollars, except share amounts)
(unaudited)


									Additional
	Preferred stock				Common stock				paid-in			Accumulated			Treasury stock
	Shares		Amount		Shares		Amount		capital			deficit			Shares		Amount			Total
Balance as of December 31, 2023		563	$	6		37,157,616	$	372	$	294,522		$	(233,026	)		396,175	$	(794	)	$	61,080
Issuance of common stock from stock option awards		—		—		1,200		—		—			—			—		—			—
Issuance of restricted common stock		—		—		177,576		1		(76	)		—			—		—			(75	)
Stock-based compensation expense		—		—		—		—		228			—			—		—			228
Net income		—		—		—		—		—			1,799			—		—			1,799
Balance as of March 31, 2024		563		6		37,336,392		373		294,674			(231,227	)		396,175		(794	)		63,032
Issuance of common stock from stock option awards		—		—		4,793		—		(6	)		—			—		—			(6	)
Issuance of restricted common stock		—		—		—		—		—			—			—		—			—
Stock-based compensation expense		—		—		—		—		290			—			—		—			290
Net income		—		—		—		—		—			2,497			—		—			2,497
Balance as of June 30, 2024		563		6		37,341,185		373		294,958			(228,730	)		396,175		(794	)		65,813
Issuance of common stock from stock option awards		—		—		—		—		—			—			—		—			—
Stock-based compensation expense		—		—		—		—		283			—			—		—			283
Repurchase of common stock		—		—				—		—			—			601,449		(1,058	)		(1,058	)
Net income		—		—		—		—		—			1,089			—		—			1,089
Balance as of September 30, 2024		563	$	6		37,341,185	$	373	$	295,241		$	(227,641	)		997,624	$	(1,852	)	$	66,127


										Additional
	Preferred stock					Common stock				paid-in		Accumulated			Treasury stock
	Shares			Amount		Shares		Amount		capital		deficit			Shares		Amount			Total
Balance as of December 31, 2022		565		$	6		36,932,177	$	369	$	293,589	$	(245,270	)		243,468	$	(395	)	$	48,299
Cumulative change in accounting principle (Note 2)		—			—		—		—		—		(231	)		—		—			(231	)
Balance as of January 1, 2023 (as adjusted for change in accounting principle)		565			6		36,932,177		369		293,589		(245,501	)		243,468		(395	)		48,068
Issuance of common stock from stock option awards		—			—		31,191		—		5		—			—		—			5
Issuance of restricted common stock		—			—		134,592		2		150		—			—		—			152
Stock-based compensation expense		—			—		—		—		179		—			—		—			179
Net income		—			—		—		—		—		2,829			—		—			2,829
Balance as of March 31, 2023		565			6		37,097,960		371		293,923		(242,672	)		243,468		(395	)		51,233
Issuance of common stock from stock option awards		—			—		32,111		—		5		—			—		—			5
Issuance of restricted common stock		—			—		15,000		—		—		—			—		—			—
Issuance of common stock due to conversion of Series N Preferred stock		(2	)		—		80		—		—		—			—					—
Stock-based compensation expense		—			—		—		—		228		—			—		—			228
Net income		—			—		—		—		—		2,779			—		—			2,779
Balance as of June 30, 2023		563			6		37,145,151		371		294,156		(239,893	)		243,468		(395	)		54,245
Issuance of common stock from stock option awards		—			—		6,773		1		—		—			—		—			1
Stock-based compensation expense		—			—		—		—		175		—			—		—			175
Net income		—			—		—		—		—		1,977			—		—			1,977
Balance as of September 30, 2023		563		$	6		37,151,924	$	372	$	294,331	$	(237,916	)		243,468	$	(395	)	$	56,398

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(unaudited)


	Nine Months Ended September 30,
	2024			2023
Cash flows from operating activities:
Net income	$	5,385		$	7,585
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred issuance costs and fees		(77	)		76
Earnings of equity method investments		(2,622	)		(675	)
Noncash credit loss (recovery) expense		(228	)		632
Noncash lease expense		484			483
Depreciation and amortization		440			373
Deferred taxes		1,375			1,170
Stock-based compensation expense		801			582
Changes in operating assets and liabilities:
Accounts receivable		1,032			(1,910	)
Inventory – equipment		353			173
Other current assets		(382	)		428
Accounts payable and accrued liabilities		(965	)		(2,869	)
Payables to sellers		8,150			6,996
Lease liabilities		(492	)		(469	)
Net cash provided by operating activities		13,254			12,575

Cash flows from investing activities:
Investment in notes receivable		(5,047	)		(27,636	)
Payments received on notes receivable		9,039			6,147
Cash received on transfer of notes receivable to partners		—			8,851
Investment in equity method investments		(343	)		(6,465	)
Return of investment in equity method investments		2,744			4,124
Cash distributions from equity method investments		2,622			675
Purchase of property and equipment		(134	)		(237	)
Net cash provided by (used in) investing activities		8,881			(14,541	)

Cash flows from financing activities:
Proceeds from debt payable to third parties		—			13,000
Repayment of debt payable to third parties		(6,704	)		(8,039	)
Proceeds from issuance of common stock from stock option awards		—			36
Payments of tax withholdings related to issuance of restricted common stock and stock option awards		(81	)		(120	)
Repurchase of common stock		(1,058	)		—
Net cash (used in) provided by financing activities		(7,843	)		4,877
Net increase in cash and cash equivalents		14,292			2,911
Cash and cash equivalents as of beginning of period		12,279			12,667
Cash and cash equivalents as of end of period	$	26,571		$	15,578

Supplemental cash flow information:
Cash paid for taxes, net	$	682		$	547
Cash paid for interest	$	326		$	323
Noncash transfer of notes receivable to equity method investments	$	2,487		$	—
Noncash change in lease liabilities and right-of-use assets	$	327		$	405

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

HERITAGE GLOBAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 –Basis of Presentation

These unaudited condensed consolidated interim financial statements include the accounts of Heritage Global Inc. ("HG") together with its subsidiaries, including Heritage Global Partners, Inc. (“HGP”), National Loan Exchange Inc. (“NLEX”), Heritage Global LLC (“HG LLC”), Heritage Global Capital LLC (“HGC”), and Heritage ALT LLC (“ALT”). These entities, collectively, are referred to as "the Company,” "us" “we” or “our” in these consolidated financial statements. These consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and include the assets, liabilities, revenues, and expenses of all subsidiaries over which HG exercises control. All significant intercompany accounts and transactions have been eliminated upon consolidation.

The Company began its operations in 2009 with the establishment of HG LLC. The business was subsequently expanded by the acquisitions of HGP, NLEX, and ALT in 2012, 2014, and 2021 respectively, and the creation of HGC in 2019. As a result, HG is positioned to provide an array of value-added capital and financial asset solutions: auction and appraisal services, traditional asset disposition sales, and specialty financing solutions. The Company’s reportable segments consist of Auction and Liquidation, through HGP, Refurbishment & Resale, through ALT, Brokerage, through NLEX and Specialty Lending, through HGC.

The Company prepared the unaudited condensed consolidated interim financial statements included herein pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In the opinion of management, these condensed financial statements reflect all adjustments that are necessary to present fairly the results for the interim periods included herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are appropriate. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 14, 2024 (the “Form 10-K”).

The results of operations for the nine-month period ended September 30, 2024 are not necessarily indicative of those operating results to be expected for any subsequent interim period or for the entire year ending December 31, 2024. The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated balance sheet as of December 31, 2023, contained in the Company’s Form 10-K.

Repurchase Program

The Company’s 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. On September 13, 2024 the Company's Board of Directors approved an amendment to the Repurchase Program which increased the authorized aggregate amount of common shares the Company may repurchase to an aggregate of $6.0 million in common shares. The Company repurchased 601,449 shares in the open market for a purchase price of approximately $1.1 million during the three and nine months ended September 30, 2024. As of September 30, 2024, the Company had approximately $4.1 million in remaining aggregate dollar value of shares that may be purchased under the Repurchase Program.

Note 2 – Summary of Significant Accounting Policies

Use of estimates

The preparation of the Company’s unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable and notes receivable, inventory, investments, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities, including projecting future years’ taxable income, and stock-based compensation. These estimates have the potential to significantly impact our condensed consolidated interim financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.

Revenue recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and ASC Topic 310, Receivables (“ASC 310”).

Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions, and secured lending. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. 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.

All services and asset sales revenue from contracts with customers consists of three reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage. 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 a 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 (less than 1% of total revenues for the nine months ended September 30, 2024 and 2023), and therefore not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability”. The deferred revenue balance was approximately $0.5 million as of both September 30, 2024 and December 31, 2023 and is reflected in accounts payable and accrued liabilities on the condensed consolidated balance sheets. The deferred revenue balance is primarily related to customer deposits on asset sales within the Refurbishment & Resale segment. The Company records receivables in certain situations based on timing of payments for Auction and Liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations.

For auction services and brokerage sale transactions, funds are typically collected from buyers and are held by the Company on the seller's behalf. The funds are included in cash and cash equivalents in the condensed consolidated balance sheets. The Company releases the funds to the seller, less the Company's commission and other fees due, after the buyer has accepted the goods. The amount of cash held on behalf of the sellers is recorded as payables to sellers in the accompanying condensed consolidated balance sheets.

The Company evaluates revenue from Auction and Liquidation and Brokerage segment transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. The Company has determined that it acts as an agent for its fee based transactions and therefore reports the revenue from transactions in which the Company acts as an agent on a net basis.

The Company also earns income through transactions that involve the Company acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, in which the Company’s ownership share meets the criteria for the equity method investments under ASC Topic 323, Equity Method and Joint Ventures, the Company does not record revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company.

Through our Specialty Lending segment, the Company provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. The Company recognizes revenue generated by lending activity in accordance with ASC 310. Fees collected in relation to the issuance of loans include loan origination fees, interest income, portfolio monitoring fees, and a backend profit share percentage related to the underlying asset portfolio.

The loan origination fees are offset with any direct origination costs and are deferred upon issuance of the loan and amortized over the lives of the related loans, as an adjustment to interest income. 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.

The monitoring fees and the backend profit share are considered a separate earnings process as compared to the origination fees and interest income. Monitoring fees are recorded at the agreed upon rate, and at the moment in which payments are made by the borrower. The backend profit share is recognized in accordance with the agreed upon rate at the time in which the amount is realizable and earned. The recognition policy was established due to the uncertainty of timing of the amount of backend profit share which will be realized.

Through our Refurbishment and Resale segment, the Company offers financing on its standard laboratory equipment sales. The Company recognizes revenue upon shipment of its financed products in accordance with ASC 606. The Company records a loan receivable for the unpaid balance of the order. A loan amortization table is created upon shipment outlining the principal and interest income portion of each future payment. These loans are classified as held-for-investment and accounted for under the guidelines of ASC 310. Direct loan origination fees are offset by the expenses incurred and the net amount is amortized over the life of the related loan using the interest method described in ASC 835.

Nonaccrual Loans

The Company determines 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. The Company considers 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. The Company also monitors its borrowers’ financial standing and performance on an ongoing basis and regularly updates the collection forecasts for the underlying charged off or nonperforming receivable portfolios related to each outstanding loan. 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. If, based on its analysis, the Company elects 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 on nonaccrual status. Interest received on such loans is accounted for using the cost-recovery or the cash-basis method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest payments received by the creditor are recorded as interest income provided the amount does not exceed the amount that would have been earned at the loan’s original effective interest rate. 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.

In November 2023, the Company and its affiliated joint ventures restructured loans with its largest borrower by restructuring certain outstanding loans (the "Restructured Loans") with an amortized cost basis of $51.6 million or 59% of the amortized cost basis of the total charged-off asset portfolio loans of HGC and its affiliated joint ventures. The Company’s share of the Restructured Loans amortized cost basis was $22.2 million, or 57% of HGC’s share of the loan book. All Restructured Loans were restructured by term extension, adding a weighted average of 1.5 years to the life of the Restructured Loans, which reduced the monthly payments for the borrower. As of September 30, 2023, the Company increased its allowance for credit losses related to its largest borrower experiencing financial difficulties. This resulted in an allowance for credit losses on the loans later restructured of $1.0 million as of September 30, 2023. As of September 30, 2024, the Company’s 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.

The Company's largest borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios and remit net collections to the Company and senior lenders, however this borrower's June remittance did not meet the minimum required payment amount. The Company has 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. While the Company continues 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. In addition, there was a balance of $1.5 million from the Company’s share of other loans within its affiliated joint ventures that are impacted by the default with the largest borrower and were placed in nonaccrual status in June 2024. The Company's share of payments received from the nonaccrual loans, including interest, will be applied against the outstanding loan balance. As of September 30, 2024, the amortized cost basis of loans in nonaccrual status was $24.0 million, of which $5.4 million is recorded within notes receivable and $18.6 million is recorded within equity method investments. There were no loans in nonaccrual status as of December 31, 2023.

Specialty Lending - Concentration and credit risk

As of September 30, 2024, the Company held a gross balance of investments in notes receivable of $32.0 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $22.5 million, or 70% as of September 30, 2024, as compared to 62% as of December 31, 2023. The Company does not intend to hold highly concentrated balances due from one borrower as part of its long-term strategy but may, in the short term, have concentration risk on its path to an established and diversified portfolio.

The Company does not evaluate concentration risk solely based on balance due from specific borrowers, but also considers the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $22.5 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.

The Company mitigates this concentration risk by requiring, and monitoring, security from each borrower consisting of their charged off and nonperforming receivable portfolios. The Company engages in a due diligence process that leverages its valuation expertise and knowledge in the underlying nonperforming receivable portfolios marketplace. In the event of default, the Company is entitled to call the unpaid interest and principal balances and receive all net collections directly. The Company may also recover its investment by engaging a third party to collect on the underlying charged off or nonperforming receivable portfolio or the underlying portfolio can be sold through the Company's Brokerage segment. In certain cases, the Company’s recovery options may be subject to concurrence of the originator or other prior holder of the assets.

Accounts receivable

The Company carries accounts receivable at the face amounts less an allowance for estimated credit losses. The Company estimates its reserve for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts.

The Company only extends credit to entities and institutions of significance, such as well-known academic and financial institutions and U.S. government agencies. Consequently, historical accounts receivable credit losses are nearly zero, which provides the starting point for management’s assessment of the reserve for credit losses for its accounts receivable. The Company estimates its expected credit losses for accounts receivable based on historical credit loss experience, its assessment of current conditions, and other relevant available information from internal and external sources on a quarterly basis.

As of both September 30, 2024 and December 31, 2023, the reserve for credit losses related to accounts receivable was approximately $0.1 million.

Notes receivable

Under ASC 326, 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. 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. Additionally, since the Company began recording notes receivable on the condensed consolidated balance sheets, the Company has recorded no actual credit losses to notes receivable.

Lacking historical internal data upon which to base a reserve for credit losses to notes receivable, the Company, under ASC 326, estimates its reserve using external credit loss experience data. Management observes that the Company's notes receivable are similar in character to transactions undertaken by smaller banking institutions. The Company estimates its expected credit losses based on the Scaled Current Expected Credit Loss (CECL) Allowance Loss Estimator ("SCALE rate") available from the Federal Reserve. The SCALE rate methodology is endorsed by the FASB and the Conference of State Bank Supervisors. Management determined under ASC 326 that the SCALE rate, a generally applicable rate, may be appropriately adjusted by its assessment of observable facts and relevant circumstances indicating that the factors analyzed in the determination of the SCALE rate may not conform to the Company's operations and borrower assessments.

As of September 30, 2024, the SCALE rate was 1.3834% and the Company's credit loss allowance rate specific to notes receivable was 3.6%. 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 September 30, 2024 and December 31, 2023, the Company's allowance for credit losses related to notes receivable outstanding was $0.4 million and $0.7 million, respectively. 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. This review includes monthly and cumulative key performance indicators for each loan and borrower, as well as evaluation of borrower's financial condition.

Equity method investments

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 September 30, 2024, the SCALE rate was 1.3834% and the credit loss allowance rate specific to equity method investments was 4.8%. 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 September 30, 2024 and December 31, 2023, the Company's allowance for credit losses related to its equity method investments was $1.0 million and $0.9 million, respectively.

Future accounting pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which, among other updates, requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company anticipates that ASU 2023-07 will have no accounting impact, but will require additional disclosure for each of its reportable segments.

In December 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. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company anticipates that ASU 2023-09 will have no accounting impact but will require additional disclosure related to certain income tax calculations.

Note 3 – Accounts Receivable, net

The Company’s accounts receivable, net consists of accounts receivables recorded in the ordinary course of business associated with the recognition of revenue from contracts with customers.

In accordance with ASC 326, the Company performs a review of accounts receivables on a quarterly basis. During the nine months ended September 30, 2024, the Company recorded no material adjustments for credit losses in selling, general and administrative expense on the consolidated statement of income related to accounts receivable. As of both September 30, 2024 and December 31, 2023, the reserve for credit losses was approximately $0.1 million.

Note 4 – Notes Receivable, net

The Company’s notes receivable, net consists of investments in loans to buyers of charged-off and nonperforming receivable portfolios through HGC and financing of laboratory equipment sales through ALT.

As of September 30, 2024 and December 31, 2023, the Company’s outstanding notes receivables related to loans to buyers of charged-off and nonperforming receivable portfolios, net of unamortized deferred fees and costs on originated loans, and adjusted for the reserve for credit losses was $10.9 million and $17.5 million, respectively. The activity during the nine months ended September 30, 2024 includes the additional investment in notes receivable of approximately $4.5 million, which was offset by principal payments made by borrowers of approximately $8.8 million and noncash transfer of notes receivable to equity method investments of approximately $2.5 million.

As of September 30, 2024, the Company’s outstanding notes receivables related to financing of laboratory equipment sales, net of unamortized deferred fees and costs on originated loans and adjusted for the reserve for credit losses was $0.4 million. There was no notes receivable balance related to financing of laboratory equipment sales as of December 31, 2023. The activity during the nine months ended September 30, 2024 includes the investment in notes receivable of approximately $0.6 million, which was offset by principal payments made by purchasers of $0.2 million and immaterial deferred financing fees, and allowance for credit losses.

The table below shows the Company’s lending activity as of September 30, 2024 (in thousands):



	September 30, 2024
Notes receivable as of December 31, 2023	$	18,262
Investment in notes receivable		5,047
Noncash transfer of notes receivable to equity method investments		(2,487	)
Principal repayments		(9,039	)
Notes receivable, as of September 30, 2024		11,783
Deferred financing fees and costs, net		(65	)
Allowance for credit losses		(422	)
Notes receivable, net, September 30, 2024	$	11,296

In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis. During the nine months ended September 30, 2024, the Company recorded a credit of $0.3 million to the provision for credit losses in selling, general and administrative expense on the consolidated statement of income, which was primarily due to the decrease in balance of notes receivables. As of September 30, 2024 and December 31, 2023, the allowance for credit losses was approximately $0.4 million and $0.7 million, respectively. As of September 30, 2024, the amortized cost basis of notes receivable in nonaccrual status was $5.4 million.

Note 5 – Stock-based Compensation

As of September 30, 2024, the Company had four stock-based compensation plans, which are described more fully in Note 16 – Stockholders' Equity - Stock-Based Compensation Plans of the Company's audited consolidated financial statements for the year ended December 31, 2023 contained in the Company’s Form 10-K.

Stock Options

During the nine months ended September 30, 2024, the Company issued options to purchase 35,000 shares of common stock to certain of the Company’s employees. During the same period, the Company canceled 12,750 options to purchase common stock as a result of employee resignations.

The following summarizes the changes in common stock options for the nine months ended September 30, 2024:


	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding as of December 31, 2023		2,265,350		$	1.71		6.8	$	907
Granted		35,000		$	2.70
Exercised		(13,750	)	$	1.02
Forfeited		(12,750	)	$	1.87
Outstanding as of September 30, 2024		2,273,850		$	1.73		6.1	$	897

Options exercisable as of September 30, 2024		1,626,600		$	1.42		5.3	$	879

The Company recognized stock-based compensation expense related to common stock options of $0.4 million for the nine months ended September 30, 2024 and $0.6 million for the nine months ended September 30, 2023. As of September 30, 2024, there was approximately $1.0 million of unrecognized stock-based compensation expense related to unvested common stock options outstanding, which is expected to be recognized over a weighted average period of 1.6 years.

Restricted Stock

Restricted stock awards represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of restricted stock awards or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Compensation cost for these awards is based on the fair value of the shares of common stock on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period.

On March 7, 2024, the Company granted 128,044 shares of Company restricted common stock to employees under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vest on March 7, 2025.

On March 7, 2024, the Company granted 75,000 shares of Company restricted common stock to non-executive directors under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vest on March 7, 2025.

The Company determined the fair value of the shares awarded by using the closing price of our common stock as of the grant date. Stock-based compensation expense related to the restricted stock awards was approximately $0.4 million for the nine months ended September 30, 2024 and $0.1 million for the nine months ended September 30, 2023. The unrecognized stock-based compensation expense as of September 30, 2024 was approximately $0.3 million, which is expected to be recognized over a weighted average period of 0.4 years.

Note 6 – Equity Method Investments

In November 2018, CPFH LLC, of which the Company holds a 25% share, was formed to purchase certain real estate assets among partners in a joint venture. In March 2020, HGC Origination I LLC and HGC Funding I LLC were formed as joint ventures with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In April 2022, KNFH LLC, of which the Company holds a 25% share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. In December 2022, DHC8 LLC, of which the Company holds a 13.33% share was formed to provide funding and receive principal and interest payments as a result of the initial investment. In May 2023, HGC MPG Funding LLC, of which the Company holds a 25% share, was formed as a joint venture with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In December 2023, KNFH II LLC, of which the Company holds a 25% share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. CPFH LLC, KNFH LLC, DHC8 LLC and KNFH II LLC are joint ventures formed in connection with the Company’s Industrial Assets division, whereas HGC Origination I LLC, HGC Funding I LLC, and HGC MPG Funding LLC were formed in connection with the Financial Assets division. The Company has significant influence over the operations and financial policies of each of its equity method investments.

In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis for each of its specialty lending investments. During the nine months ended September 30, 2024, the Company recorded a $0.1 million adjustment for its share of the joint venture’s increase to the provision for credit losses. As of September 30, 2024, the Company's share of the allowance for credit losses was approximately $1.0 million, which was primarily related to HGC Origination I LLC and HGC MPG Funding LLC. As of September 30, 2024, the Company has incurred no actual credit losses through its equity method investments. As of September 30, 2024, the amortized cost basis of the Company's share of loans in nonaccrual status recorded in equity method investments was $18.5 million.

The tables below details the Company’s joint venture revenues and earnings during the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30, 2024
	KNFH LLC		DHC8 LLC		KNFH II LLC		HGC Origination I LLC and HGC Funding I LLC		HGC MPG Funding LLC
Revenue	$	—	$	751	$	13,249	$	3,705	$	3,987
Gross profit		—		751		5,213		3,705		3,987
Operating income		—		590		5,120		3,656		3,987
Net income	$	—	$	590	$	5,120	$	3,668	$	3,987


	Nine Months Ended September 30, 2023
	KNFH LLC			DHC8 LLC		KNFH II LLC		HGC Origination I LLC and HGC Funding I LLC		HGC MPG Funding LLC
Revenue	$	303		$	1,183	$	—	$	3,769	$	552
Gross profit		303			1,183		—		3,769		552
Operating income (loss)		(144	)		1,009		—		2,374		548
Net income (loss)	$	(144	)	$	1,009	$	—	$	2,374	$	548

The table below details the summarized components of assets and liabilities of the Company’s joint ventures, as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30,		December 31,
	2024		2023
Assets:
KNFH LLC	$	—	$	292
DHC8 LLC		2,068		7,061
KNFH II LLC		7,966		8,150
HGC Origination I LLC and HGC Funding I LLC		26,113		28,389
HGC MPG Funding LLC		33,066		38,081
Total assets	$	69,213	$	81,973

Liabilities:
KNFH LLC	$	—	$	289
DHC8 LLC		1,038		1,102
KNFH II LLC		2,200		4,000
HGC Origination I LLC and HGC Funding I LLC		972		10
HGC MPG Funding LLC		—		—
Total liabilities	$	4,210	$	5,401

Note 7 – Earnings Per Share

The Company is required, in periods in which it has net income, to calculate basic earnings per share (“basic EPS”) using the two-class method. The two-class method is required because the Company’s shares of Series N preferred stock, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares. For both the three and nine months ended September 30, 2024 and 2023, the earnings allocated to the outstanding preferred shares were not material.

In periods in which the Company records a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. As the preferred stock does not participate in losses, the two-class method is not used in periods in which the Company records a net loss.

Stock options and other potential common shares are included in the calculation of diluted earnings per share (“diluted EPS”). In calculating diluted EPS, such shares are assumed to be exercised or converted, except when their effect would be anti-dilutive.

The table below shows the calculation of the number of shares used in computing diluted EPS:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic weighted average shares outstanding		36,576,931		36,742,018		36,641,820		36,675,838
Treasury stock effect of common stock options and restricted stock awards		612,098		905,303		650,380		929,525
Diluted weighted average common shares outstanding		37,189,029		37,647,321		37,292,200		37,605,363

For the three months ended September 30, 2024 and 2023, there were potential common shares of 0.6 million and 0.9 million, respectively, that were excluded from the computation of diluted EPS, as the inclusion of such common shares would have been anti-dilutive. For the nine months ended September 30, 2024 and 2023, there were potential common shares of 0.7 million and 0.9 million, respectively, that were excluded from the computation of diluted EPS, as the inclusion of such common shares would have been anti-dilutive.

Note 8 – Leases

The Company leases office and warehouse space in four locations: Del Mar, California, Hayward, California, San Diego, California and Edwardsville, Illinois. The Company determined that all of its lease arrangements are classified as operating leases.

On August 12, 2022, the Company entered into an agreement with Liberty Industrial Park, LLC pursuant to which the Company leases 6,627 square feet of industrial space in San Diego, California. The commencement date of the lease was September 1, 2022 and the lease term expires on August 30, 2027. It provides for an initial monthly base rent of $11,266, which increases on an annual basis to $13,180 per month in the final year. In addition, the Company is obligated to pay its share of maintenance costs of common areas.

On June 1, 2023, the Company amended its Edwardsville office building lease with David Ludwig, extending the term of the agreement to May 31, 2027 and setting rent amounts for the new term. It provides for an initial monthly base rent of $9,412, which increases on an annual basis to $9,914 per month in the final year.

On September 23, 2024, the Company amended its Del Mar office lease with OF 09 Hacienda, LLC, extending the term of the agreement by 24 months to February 28, 2027 and setting rent amounts for the new term. The amended Del Mar office lease provides for an initial monthly base rent of $14,660 beginning March 1, 2025 and increases on an annual basis to $15,099 per month in the final year.

The right-of-use assets and lease liabilities for each lease location are as follows (in thousands):


	September 30,		December 31,
	2024		2023
Right-of-use assets:
Del Mar, CA	$	402	$	186
Hayward, CA		1,310		1,525
San Diego, CA		387		477
Edwardsville, IL		282		351
Total right-of-use assets	$	2,381	$	2,539

Lease liabilities
Del Mar, CA	$	402	$	203
Hayward, CA		1,384		1,594
San Diego, CA		412		498
Edwardsville, IL		285		353
Total lease liabilities	$	2,483	$	2,648

The Company’s leases generally do not provide an implicit rate, and, therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within the same particular economic environment. The Company used its incremental borrowing rate as of January 1, 2019 for operating leases that commenced prior to that date. As of January 1, 2019, the Company’s incremental borrowing rate was 5.25%. For leases commencing after January 1, 2019 the Company uses its incremental borrowing rate at time of commencement. On September 1, 2022, June 1, 2023, and September 23, 2024, the Company’s incremental borrowing rate was 5.50%, 7.25%, and 6.25%, respectively. The weighted average remaining lease term for operating leases is 3.4 years and the weighted average discount rate is 5.51% as of September 30, 2024.

Lease expense is recognized on a straight-line basis over the lease term. For both the nine months ended September 30, 2024 and September 30, 2023, lease expense was approximately $0.6 million. As of September 30, 2024, undiscounted future minimum lease payments related to leases that have initial or remaining lease terms in excess of one year are as follows (in thousands):


2024 (remainder of year from October 1, 2024 to December 31, 2024)	$	199
2025		807
2026		829
2027		573
2028		299
Total undiscounted future minimum lease payments		2,707
Less: imputed interest		(224	)
Present value of lease liabilities	$	2,483

Note 9 – Lessor Arrangement

In December 2023, the Company, with certain partners making up the KNFH II LLC joint venture, entered into a purchase and sale agreement for a pharmaceutical plant in Fenton, Missouri, including land, a building, and all machinery and equipment held within with a purchase price of $8.0 million.

In April 2024, KNFH II LLC entered into a purchase and sale agreement for the machinery and equipment within the pharmaceutical plant with a purchase price of $5.0 million. Additionally, KNFH II LLC entered into a lease agreement for the lease of the real estate assets; the building and land. This lease agreement includes a purchase option with a purchase price of $8.0 million that is expected to be exercised by the lessee. The lessor arrangement is classified as a sales-type lease, and, therefore, the present value of future lease payments, including the purchase option, has been recognized as revenue and a lease receivable as of the effective date. As of September 30, 2024, the Company recognized approximately $1.3 million in earnings from equity method investments, related to the Company’s share of net income attributable to KNFH II LLC.

The Company accounts for the transaction under the equity method where the Company’s share in earnings from equity method investments is shown in one line item on the income statement. Refer to Note 6 for further information.

Note 10 – Intangible Assets and Goodwill

Intangible assets

The Company’s identifiable intangible assets are associated with its acquisitions of HGP in 2012, NLEX in 2014 and ALT in 2021, as shown in the table below (in thousands except for lives), and are amortized using the straight-line method over their remaining estimated useful lives. The Company’s tradename that was acquired as part of the acquisition of NLEX in 2014 has an indefinite life and therefore is not amortized.


	Remaining		Carrying Value					Carrying Value
	Life		December 31,					September 30,
	(years)		2023		Amortization			2024
Amortizable intangible assets:
Trade Name (HGP)		0.3	$	128	$	(96	)	$	32
Trade Name (ALT)		16.9		575		(24	)		551
Vendor Relationship (ALT)		1.9		613		(173	)		440
Total amortizable intangible assets				1,316		(293	)		1,023

Indefinite-lived intangible assets:
Trade Name (NLEX)	N/A			2,437		—			2,437
Total intangible assets			$	3,753	$	(293	)	$	3,460

Amortization expense during both the nine months ended September 30, 2024 and 2023 was $0.3 million. The Company estimates that the residual value for intangible assets is not significant.

As of September 30, 2024, the estimated amortization expense for the remainder of the current fiscal year and the next five fiscal years and thereafter is shown below (in thousands):


Year	Amount
2024 (remainder of year from October 1, 2024 to December 31, 2024)	$	98
2025		263
2026		186
2027		32
2028		32
Thereafter		412
Total estimated amortization expense	$	1,023

Goodwill

The Company’s goodwill relates to its acquisition of various entities. Goodwill consists of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
ALT	$	1,861	$	1,861
HGP		2,041		2,041
NLEX		3,544		3,544
Total goodwill	$	7,446	$	7,446

There were no additions to goodwill and no impairments recorded to the carrying value of goodwill during the nine months ended September 30, 2024.

Note 11 – Debt

Outstanding debt as of September 30, 2024 and December 31, 2023 is summarized as follows (in thousands):


	September 30, 2024		December 31, 2023
Current:
ALT Note	$	525	$	511
2021 Credit Facility		—		—
2023 Credit Facility		—		1,222
Total third party debt, current		525		1,733

Non-current:
ALT Note		—		395
2023 Credit Facility		—		5,100
Total third party debt, non-current		—		5,495

Total third party debt	$	525	$	7,228

2021 Credit Facility

On May 5, 2021, the Company entered into a promissory note, business loan agreement, commercial security agreement and pledge agreement (the “2021 Credit Facility”) with C3bank, National Association ("Lender") for a $10.0 million revolving line of credit. The Company is permitted to use the proceeds of the loan solely for its business operations. The Company is the borrower under the 2021 Credit Facility. The 2021 Credit Facility is secured by a security interest in certain of the Company’s subsidiaries’ current and future tangible and intangible assets, inventory, chattel paper, accounts, equipment and general intangibles, and a pledge of the equity of the direct and indirect subsidiaries of the Company.

On August 23, 2022, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “2022 Modification Agreement”), effective as of April 1, 2022, by and between the Company and Lender. The 2022 Modification Agreement modified and reaffirmed the 2021 Credit Facility to provide for, among other things, the arrangement of financial covenants, which remained unchanged, into two categories: (i) financial covenants used to resize the maximum principal amount available to the Company as of the date of determination (as determined by Lender in its sole discretion), and (ii) financial covenants to be maintained by the Company.

On May 26, 2023, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Modification Agreement”), effective as of May 26, 2023, by and between the Company and Lender. 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. The maturity date was modified to October 27, 2024. The applicable interest rate spread and floor was modified to be the Wall Street Journal Prime rate plus 1.00% (such rate not to be less than 6.75% per annum). Additionally, the Modification Agreement modifies the loan covenants to provide that the Company shall pay the Lender an annual unused line fee, payable on the earlier of (a) bi-annually every six (6) months in arrears, within ten (10) days thereof, commencing on October 27, 2023, or (b) the payment in full of the 2021 Credit Facility, but only if the average balance of the 2021 Credit Facility for the respective six months is below $5.0 million. The availability of additional draws under the 2021 Credit Facility is conditioned, among other things, on the compliance with certain customary representations and warranties, including default, insolvency or bankruptcy, material adverse change in financial condition and any guarantor’s attempt to revise its guarantee. The agreement governing the 2021 Credit Facility also contains customary affirmative covenants regarding, among other things, the maintenance of records, maintenance of certain insurance coverage, compliance with governmental requirements and maintenance of several financial covenants. The 2021 Credit Facility contains certain customary financial covenants and negative covenants that, among other things, include restrictions on the Company’s ability to create, incur or assume indebtedness for borrowed money, including capital leases or to sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of the Company’s assets. As of September 30, 2024, there was no outstanding balance on the 2021 Credit Facility.

On July 24, 2024 the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Second Modification Agreement”), effective as of July 24, 2024, to modify certain loan covenants. As of September 30, 2024 the Company was in compliance with all financial and negative covenants.

On October 4, 2024 the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Third Modification Agreement”), effective as of October 4, 2024, to extend the maturity date of the 2021 Credit Facility to December 27, 2024.

The Company's weighted average interest rate on short-term borrowings as of September 30, 2024 and December 31, 2023 was 8.75% and 9.51%, respectively.

ALT Note

On August 23, 2021, the Company entered into a $2.0 million subordinated promissory note with an interest rate of 3% per annum and a maturity date of August 23, 2025 (the “ALT Note”) as part of the aggregate purchase price paid to acquire certain assets and liabilities of American Laboratory Trading. The ALT Note requires 48 equal installments of approximately $44,000 on the first day of each month beginning September 23, 2021 with the final payment due on August 23, 2025. The outstanding balance of the ALT Note as of September 30, 2024 was $0.5 million.

2023 Credit Facility

On May 26, 2023, the Company entered into a promissory note, a business loan agreement and commercial security agreement (collectively, the “2023 Credit Facility”) with C3 Bank. The 2023 Credit Facility provides for a new $7.0 million term loan (the "Term Loan"), which is repayable in monthly installments of principal and interest until the maturity date of April 27, 2028. The Company determines the current portion of the Term Loan to be the amount of principal owed in the next 12 months. The Term Loan sets the interest rate spread and interest rate floor to accrue at a variable interest rate, which is based on the rate of interest last quoted by The Wall Street Journal as the “prime rate,” plus a margin of 0.250%. Additionally, the Term Loan provides that in the event of prepayment the Company shall pay the Lender a prepayment fee during the first year equal to twelve months of interest (less interest actually paid). The Company is the borrower under the Term Loan and is permitted to use the proceeds of the Term Loan solely for its business operations. The Term Loan is secured by a security interest in certain of the Company’s and its certain subsidiaries’ current and future tangible and intangible assets, inventory, chattel paper, accounts, equipment and general intangibles and a pledge of the equity of the direct and indirect subsidiaries of the Company. Specifically, the Term Loan is secured by the building currently used by ALT in East Lyme, CT.

On July 24, 2024, the Company paid $5.8 million for the full remaining principal balance outstanding of $5.7 million on its Term Loan agreement with C3 Bank, in advance of the loan’s April 27, 2028 maturity date, and $0.1 million in interest accrued to July 24, 2024.

Note 12 – Income Taxes

At September 30, 2024, the Company had aggregate federal net operating loss carry forwards of $50.3 million. These net operating loss carry forwards begin to expire in 2024. The Company’s utilization of restricted net operating tax loss carry forwards against future income for tax purposes is restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years. Restrictions in net operating loss carry forwards occurred in 2001 as a result of the acquisition of the Company by Street Capital. Pursuant to Section 382 of the Internal Revenue Code, the annual usage of the Company’s net operating loss carry forwards was limited to approximately $2.5 million per annum until 2008 and $1.7 million per annum through December 31, 2023. As of December 31, 2023, all of the Company's restricted net operating loss carry forwards have been fully utilized. The Company has no net operating loss carry forwards limited under Section 382 of the Internal Revenue Code as of September 30, 2024.

The reported tax expense varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to the income from operations before taxes primarily as a result of the impact of state income taxes.

The Company records net deferred tax assets to the extent that it believes such assets will more likely than not be realized. As a result of cumulative losses and uncertainty with respect to future taxable income, the Company has provided a partial valuation allowance against its net deferred tax assets. As of both September 30, 2024 and December 31, 2023, the Company's valuation allowance against its deferred tax assets was approximately $2.2 million.

Note 13 – Related Party Transactions

As part of the operations of NLEX, the Company leases office space in Edwardsville, IL that is owned by the President of NLEX and a member of the board of directors of the Company, David Ludwig. The total amount paid to the related party for both the nine months ended September 30, 2024 and 2023 was approximately $85,000 and is included in selling, general and administrative expenses in the unaudited condensed consolidated statements of income.

Note 14 – Segment Information

The following table sets forth certain financial information for the Company's reportable segments (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Industrial Assets Division:
Auction and Liquidation	$	583		$	1,099		$	3,500		$	3,282
Refurbishment & Resale		153			1,001			172			2,838
Total divisional operating income		736			2,100			3,672			6,120

Financial Assets Division:
Brokerage		1,655			2,055			5,662			6,217
Specialty Lending		156			(344	)		1,749			739
Total divisional operating income		1,811			1,711			7,411			6,956

Corporate operating expense		(1,068	)		(1,042	)		(3,502	)		(3,312	)

Consolidated operating income	$	1,479		$	2,769		$	7,581		$	9,764

Note 15 – Subsequent Events

The Company has evaluated events subsequent to September 30, 2024 for potential recognition or disclosure in its condensed consolidated financial statements. There have been no material subsequent events requiring recognition or disclosure in this Quarterly Report on Form 10-Q, other than noted below.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the information contained in the unaudited condensed consolidated interim financial statements of Heritage Global Inc. (together with its consolidated subsidiaries, “we”, “us”, “our” or the “Company”) and the related notes thereto for the three and nine month periods ended September 30, 2024 and 2023, appearing elsewhere herein, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2024 (the “Form 10-K”).

Forward Looking Information

This Quarterly Report on Form 10-Q (the “Report”) contains certain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995 that are based on management’s exercise of business judgment as well as assumptions made by, and information currently available to, management. When used in this document, the words “may,” "will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These statements are subject to certain risks, uncertainties, and assumptions, including the important factors noted under Item 1A “Risk Factors” in our Form 10-K, and as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.

Overview, History and Recent Developments

Heritage Global Inc. was incorporated in Florida in 1983 under the name “MedCross, Inc.” Our name was changed to “I-Link Incorporated” in 1997, to “Acceris Communications Inc.” in 2003, to “C2 Global Technologies Inc.” in 2005, to “Counsel RB Capital Inc.” in 2011, and to Heritage Global Inc. in 2013. The most recent name change more closely identifies HG with its auction and specialty lending business lines.

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. Information contained on our website is not incorporated by reference into this Form 10-Q.

The organization chart below outlines our basic domestic corporate structure as of September 30, 2024.



		Heritage Global Inc. (1)



100%	100%		100%	100%

Heritage Global Partners, Inc. (2) (California)	Heritage Global LLC (3) (Delaware)		National Loan Exchange, Inc. (5) (Illinois)	Heritage Global Capital LLC (6) (Delaware)

	100%

	Heritage ALT LLC (4) (Delaware)

____________________

(1) Registrant.

(2) Auction and Liquidation.

(3) Holding Company.

(4) Refurbishment and Resale.

(5) Brokerage.

(6) Specialty Lending.

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. 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 updates the collection forecasts for the underlying charged off or nonperforming receivable portfolios related to each outstanding loan. 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, 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. Interest received on such loans is accounted for using the cost-recovery or the cash-basis method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest payments received by the creditor are recorded as interest income provided the amount does not exceed the amount that would have been earned at the loan’s original effective interest rate. 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.

In November 2023, we and our affiliated joint ventures restructured loans (the "Restructured Loans") with our largest borrower by restructuring certain outstanding loans with an amortized cost basis of $51.6 million or 59% of the amortized cost basis of the total charged-off asset portfolio loans of our and our affiliated joint ventures. Our share of the Restructured Loans amortized cost basis was $22.2 million, or 57% of our share of the loan book. All Restructured Loans were restructured by term extension, adding a weighted average of 1.5 years to the life of the Restructured Loans, which reduced the monthly payments for the borrower. As of September 30, 2023, we increased the allowance for credit losses related to our largest borrower experiencing financial difficulties. This resulted in an allowance for credit losses on the loans later restructured of $1.0 million as of September 30, 2023. As of September 30, 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.

Our largest borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios and remit net collections to us and senior lenders, however this borrower's June remittance did not meet the minimum required payment amount. 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. 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. In addition, there was a balance of $1.5 million from our share of other loans within its affiliated joint ventures that are impacted by the default with our largest borrower and have been placed in nonaccrual status in June 2024. Our share of payments received from this borrower, including interest, will be applied against the outstanding loan balance. As of September 30, 2024, the amortized cost basis of loans in nonaccrual status was $24.0 million, of which $5.4 million is recorded within notes receivable and $18.6 million is recorded within equity method investments. There were no loans in nonaccrual status as of December 31, 2023.

Specialty Lending - Concentration and credit risk

As of September 30, 2024, we held a gross balance of investments in notes receivable of $32.0 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $22.5 million, or 70% as of September 30, 2024, as compared to 62% as of December 31, 2023. We do not intend to hold highly concentrated balances due from one borrower as part of its long-term strategy but may, in the short term, have concentration risk on our path to an established and diversified portfolio.

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. Of the balance due from one borrower of $22.5 million, there are 11 distinct loan agreements, the underlying portfolio of accounts are diversified throughout FinTech, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios.

We mitigate this concentration risk by requiring, and monitoring, security from each borrower consisting of their charged off and nonperforming receivable portfolios. We engage in a due diligence process that leverages our valuation expertise, knowledge and experience in the underlying nonperforming receivable portfolios marketplace. In the event of default, we are entitled to call the unpaid interest and principal balances and receive all net collections directly. We may also recover our investment by engaging a third party to collect on the underlying charged off or nonperforming receivable portfolio or the underlying portfolio can be sold through our Brokerage segment. In certain cases, our recovery options may be subject to concurrence of the originator or other prior holder of the assets. From inception of the specialty lending program through September 30, 2024, we have incurred no actual credit losses.

Industry and Competition

Our business consists primarily of the auction, appraisal, refurbishment and asset advisory services provided by our Industrial Assets division and the charged-off receivable brokerage and specialty financing services provided by our Financial Assets division, each of which is further described below. Our business also includes the purchase and sale, including at auction, of industrial machinery and equipment, real estate, inventories, charged-off receivable and distressed debt. The market for all of these services and assets is highly fragmented. To acquire auction or appraisal contracts, or assets for resale, we compete with other liquidators, auction companies, dealers and brokers. We also compete with them for potential purchasers and lenders. Some competitors have significantly greater financial and marketing resources and name recognition.

We believe that our business is positioned to grow in all economic cycles. As the economy encounters situations of recession, flattening yield curves and rising credit costs, our business may experience wider margins on principal asset sales, a favorable lending cycle for charged-off and nonperforming asset portfolios, higher volumes of nonperforming assets and building surplus inventories and bankruptcies. In times of economic growth, our business has demonstrated its ability to experience growth based on our competitive advantages in the industry, including our domain expertise related to deal sourcing and execution capabilities, our diversification of integrated service platforms and our experience across underserved markets. 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.

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”). These Joint Ventures give us access to more opportunities, help to mitigate some of the competition from the market’s larger participants, and contribute to our objective to be the leading resource for clients requiring financial and industrial asset solutions.

Our Competitive Strengths

We believe we have attributes that differentiate us from our competitors and that provide us with significant competitive advantages. 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. Further, our business is event-driven and we have repeat, forward-flow contracts in place with industry leading customers. We expect to drive growth in our revenue streams by taking different roles, and using partners as needed.

Compelling macro growth drivers - Historically, recessions drive an increased supply of surplus assets and an increased demand for liquidation services, which we believe we are well-positioned to provide. Further, consumer lending and resulting charge-offs are expected to continue their upward trend to meet, and possibly exceed, pre-pandemic levels, which we believe will drive an increased supply of non-performing consumer loans. 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 - 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. Further, we believe we have a strong growth opportunity in providing secured loans to our financial asset debt buyers, a service we are providing through HGC.

Strong management team - 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. Dove began his career in the auction business over forty years ago, beginning with a small family-owned auction house and helping to expand it into a global firm, DoveBid, which was sold to a third party in 2008. In addition, our senior management team has deep domain expertise in both industrial asset and financial asset transactions. 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, 2024. Also, during 2020, Nick Dove was appointed as President, Industrial Assets Division, and David Ludwig was appointed as President, Financial Assets Division. Nick Dove previously served as Executive Vice President of Sales of Heritage Global Partners since August 2017. David Ludwig previously served as President of NLEX, a wholly owned subsidiary of the Company, and has served in such capacity since the Company acquired NLEX in 2014.

Financial Assets Division

Our Financial Assets Division provides services to issuers of consumer credit that are looking to monetize nonperforming and charged-off loans — loans that creditors have written off as uncollectable. Nonperforming and charged-off loans typically originate from banks that issue unsecured consumer credit.

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. NLEX sales are concentrated in online, automotive, credit card, secured and unsecured consumer and business loan and real estate charge-offs. The typical credit we broker sells at a deep discount to face value, and we typically receive a commission for these services from both buyers and sellers. We have existing relationships with high quality, top-tier and mid-tier debt buyers. In addition to its banking relationships, NLEX has continued to be opportunistic as new lending facilities, such as FinTech, peer-to-peer and more recently Buy Now Pay Later lenders have expanded the availability of consumer credit. Together with growing volume in this industry, due to large increases in delinquency and charge-off rates, we anticipate significant 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.

Specialty 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 $153.9 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 $67.5 million. Our income from secured lending consists of upfront fees, interest income, monthly monitoring fees and backend profit share. In general, we expect to earn an annual rate of return on our share of notes receivable outstanding in accrual status of approximately 20% or more based on established terms of the loans funded and performance of collections. Because of the default by our largest borrower discussed above, approximately 75% of the total balance of our loans outstanding were in nonaccrual status as of September 30, 2024. We do not expect to realize any return with respect to these loans in 2024, and whether we will realize any return with respect to these loans is uncertain. As of September 30, 2024, our net balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $30.8 million, of which $10.9 million is classified as notes receivable and $19.9 million is classified as equity method investments.

Our management team has decades of domain expertise with the ability to leverage extensive funding activity and widespread industry relationships. We believe we have the opportunity for growth through increased penetration of the underserved market of mid-tier buyers of charged-off receivables, providing more economic financing options and a greater variety of funding solutions to our customers.

Industrial Assets Division

Our Industrial Assets Division advises enterprise and financial customers on the sale of industrial assets, mostly from surplus and sometimes distressed circumstances while acting as an agent, guarantor or principal in the sale.

Auction and Liquidation Segment

Through HGP, we offer a global full-service auction, appraisal and asset advisory firm, including the acquisition of turnkey manufacturing facilities and used industrial machinery and equipment. The fees for our services typically range from 15%–50%, depending on our role and the transaction. This division predominantly targets sellers of surplus or distressed “inside the building” assets. Our buyers consist of both end-users and dealers.

Refurbishment & Resale Segment

Through ALT, we have specialized our offering in the biotech and pharma sectors, which have been key verticals over the past decade. ALT focuses on refurbishing and reselling laboratory equipment.

Our management team has decades of domain expertise with the ability to leverage extensive industry relationships, real time access to databases of buyers and sales, as well as a deep understanding of the underlying asset value across the more than 25 industrial sectors in which we operate. We believe we have the opportunity for growth in our auction services through our ability to secure ongoing contracts with large multinational sellers, to be a first mover in emerging sectors, and to gain market share in sectors in which we are currently less active. 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.

Government Regulation

We are subject to federal, state and local consumer protection laws, including laws protecting the privacy of customer non-public information and regulations prohibiting unfair and deceptive trade practices. Many jurisdictions also regulate “auctions” and “auctioneers” and may regulate online auction services. 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. 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.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations references our unaudited condensed consolidated interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable and notes receivable, inventory, investments, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities including projecting future years’ taxable income, and stock-based compensation. These estimates have the potential to significantly impact our consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.

We have no off-balance sheet arrangements.

We have not paid any dividends, and do not expect to pay any dividends in the future.

The critical accounting policies used in the preparation of our audited consolidated financial statements are discussed in our Form 10-K. There were no material changes to these policies during the nine months ended September 30, 2024.

Management’s Discussion of Financial Condition

Liquidity and Capital Resources

Liquidity

We had working capital of $16.2 million and $11.6 million as of September 30, 2024 and December 31, 2023, respectively.

Our current assets as of September 30, 2024 increased to $37.0 million compared to $26.3 million as of December 31, 2023. This change was primarily due to an increase in cash of $14.3 million, partially offset by a decrease in the current portion of notes receivable by $2.6 million, a decrease in inventory of $0.4 million and a decrease in accounts receivable of $1.0 million. Our current liabilities as of September 30, 2024 increased to $20.7 million compared to $14.7 million as of December 31, 2023. The most significant change was an increase in our payables to sellers due to the timing of certain asset liquidation settlements of $8.1 million, partially offset by a decrease of $1.2 million in current portion of third party debt and $0.9 million in accounts payable and accrued liabilities.

During the nine months ended September 30, 2024, our primary source of cash was cash on hand and cash provided by operating activities. Cash disbursements during the nine months ended September 30, 2024 consisted primarily of repayment of third party debt of $6.7 million and investments in notes receivable of $5.0 million.

We believe we can fund our operations and our debt service obligations for 12 months from the date of filing this quarterly report and beyond through a combination of working capital, cash flows from our on-going operations and accessing financing from our existing line of credit.

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 our 2021 Credit Facility. 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 September 30, 2024, we had an outstanding balance of $0.5 million on the ALT Note.

On May 26, 2023, we 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. The maturity date was modified to October 27, 2024. We are permitted to use the proceeds of the loan solely for our business operations. As of September 30, 2024, there was no outstanding balance on the 2021 Credit Facility.

On October 4, 2024 we entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Third Modification Agreement”), effective as of October 4, 2024, to extend the maturity date of the 2021 Credit Facility to December 27, 2024.

Capital Resources

As of September 30, 2024 and December 31, 2023, we had stockholders’ equity of $66.1 million and $61.1 million, respectively.

We determine our future capital and operating requirements based upon our current and projected operating performance and contractual commitments. We expect to be able to finance our future operations through a combination of working capital, future net cash flows from operating activities and our 2021 Credit Facility. Our contractual requirements are limited to the outstanding debt and lease commitments with related and unrelated parties. Capital requirements are generally limited to our purchases of surplus and distressed assets and our investment activity under our Specialty Lending segment. We believe that our current capital resources, including available borrowing capacity from our 2021 Credit Facility and Term Loan, are sufficient for these requirements. 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 as of September 30, 2024 were $26.6 million as compared to $12.3 million as of December 31, 2023, an increase of approximately $14.3 million.

Cash From Operating Activities

Cash provided by operations was $13.3 million during the nine months ended September 30, 2024 as compared to $12.6 million during the same period in 2023. The approximate $0.7 million change was primarily attributable to an increase in operating assets and liabilities of $5.3 million and a decrease of $4.7 million in net income adjusted for noncash items during the nine months ended September 30, 2024 as compared to the same period in 2023.

The changes in operating assets and liabilities during the nine months ended September 30, 2024 as compared to the same period in 2023 are primarily due to the nature of our operations. We earn revenue from discrete asset 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 thereof. The operating assets and liabilities associated with these deals are, therefore, subject to the same variability and can be quite different at the end of any given period.

Cash From Investing Activities

Cash provided by investing activities during the nine months ended September 30, 2024 was $8.9 million compared to cash used in investing activities of $14.5 million during the same period in 2023.

Cash provided by investing activities during the nine months ended September 30, 2024 consisted primarily of payments received on notes receivable of $9.0 million and return of investment and cash distributions received from equity method investments of $5.3 million. Cash provided by investing activities during the nine months ended September 30, 2024 was offset by cash used in investing activities primarily of investments in notes receivable of $5.0 million and equity method investments of $0.3 million.

Cash used in investing activities during the nine months ended September 30, 2023 consisted primarily in investment in notes receivable of $27.6 million and equity method investments of $6.5 million, related entirely to specialty lending activity within our Financial Assets Division. Cash used in investing activities during the nine months ended September 30, 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 $6.1 million as well as return of investment and cash distributions received from equity method investments of $4.8 million.

Cash From Financing Activities

Cash used in financing activities was approximately $7.8 million during the nine months ended September 30, 2024 compared to cash provided by financing activities of $4.9 million during the nine months ended September 30, 2023. Financing activities during the nine months ended September 30, 2024 consisted primarily of $6.3 million in repayments of our Term Loan and $0.4 million in repayments to our ALT Note. Financing activities during the nine months ended September 30, 2023 consisted primarily of $13.0 million in proceeds from draws on our 2021 Credit Facility and our Term Loan, offset by $7.3 million in repayments to our 2021 Credit Facility, $0.4 million in repayments to our Term Loan and $0.4 million in repayments to our ALT Note.

Contractual Obligations

Our significant contractual obligations are our third party loans, client and partner asset liquidation settlement payments and lease obligations. The loan and lease obligations are fully described in the notes to the consolidated financial statements included in our Form 10-K.

Management’s Discussion of Results of Operations

The following table sets out the Company’s condensed consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands).


	Three Months Ended September 30,					Change						Nine Months Ended September 30,						Change
	2024		2023			Dollars			Percent			2024			2023			Dollars			Percent
Revenues:
Services revenue	$	8,063	$	9,985		$	(1,922	)		(19	)%	$	25,527		$	30,040		$	(4,513	)		(15	)%
Asset sales		2,347		5,566			(3,219	)		(58	)%		9,067			15,221			(6,154	)		(40	)%
Total revenues		10,410		15,551			(5,141	)		(33	)%		34,594			45,261			(10,667	)		(24	)%

Operating costs and expenses:
Cost of services revenue		1,735		2,423			(688	)		(28	)%		4,665			6,570			(1,905	)		(29	)%
Cost of asset sales		1,458		3,413			(1,955	)		(57	)%		6,140			9,683			(3,543	)		(37	)%
Selling, general and administrative		5,686		6,806			(1,120	)		(16	)%		18,390			19,546			(1,156	)		(6	)%
Depreciation and amortization		152		132			20			15	%		440			373			67			18	%
Total operating costs and expenses		9,031		12,774			(3,743	)		(29	)%		29,635			36,172			(6,537	)		(18	)%
Earnings of equity method investments		100		(8	)		108			(1350	)%		2,622			675			1,947			288	%
Operating income		1,479		2,769			(1,290	)		(47	)%		7,581			9,764			(2,183	)		(22	)%
Interest income (expense), net		17		(56	)		73			(130	)%		(183	)		(225	)		42			(19	)%
Income before income tax expense		1,496		2,713			(1,217	)		(45	)%		7,398			9,539			(2,141	)		(22	)%
Income tax expense		407		736			(329	)		(45	)%		2,013			1,954			59			(3	)%
Net income	$	1,089	$	1,977		$	(888	)		(45	)%	$	5,385		$	7,585		$	(2,200	)		(29	)%

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.

We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments. We manage our business primarily on differentiated revenue streams for services offered. Our reportable segments consist of the Auction and Liquidation segment, Refurbishment & Resale segment, Brokerage segment, and Specialty Lending segment. Our Auction and Liquidation segment, through HGP, operates as a global full-service auction, appraisal and asset advisory firm, including the acquisition of turnkey manufacturing facilities and used industrial machinery and equipment. Our Refurbishment & Resale segment, through ALT, acquires, refurbishes and supplies specialized laboratory equipment. Our Brokerage segment, through NLEX, brokers charged-off receivables in the U.S. and Canada on behalf of financial institutions. Our Specialty Lending segment, through HGC, provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios.

We evaluate the performance of our reportable segments based primarily on operating income. Notwithstanding the foregoing, the reported segment operating income for ALT and HGC represents incremental costs for managing these segments as part of their sister segments (HGP for ALT and NLEX for HGC). As such, the reported operating income for ALT and HGC does not represent their true standalone contribution, as we do not attempt to allocate existing fixed divisional overhead costs of the sister divisions to the newer segments. Similarly, corporate overhead cost is not allocated to the operating divisions for management reporting purposes. 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.

The following table sets forth operating income for the Company's reportable segments (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Industrial Assets Division:
Auction and Liquidation	$	583		$	1,099		$	3,500		$	3,282
Refurbishment & Resale		153			1,001			172			2,838
Total divisional operating income		736			2,100			3,672			6,120

Financial Assets Division:
Brokerage		1,655			2,055			5,662			6,217
Specialty Lending		156			(344	)		1,749			739
Total divisional operating income		1,811			1,711			7,411			6,956

Corporate operating expense		(1,068	)		(1,042	)		(3,502	)		(3,312	)

Consolidated operating income	$	1,479		$	2,769		$	7,581		$	9,764

Three-Month Period Ended September 30, 2024 Compared to Three-Month Period Ended September 30, 2023

Revenues and cost of revenues – Revenues were $10.4 million during the three months ended September 30, 2024 compared to $15.6 million during the same period in 2023. Costs of services revenue and asset sales were $3.2 million during the three months ended September 30, 2024 compared to $5.8 million during the three months ended September 30, 2023. The gross profit of these items was $7.2 million during the three months ended September 30, 2024 compared to $9.7 million during the same period in 2023, a decrease of approximately $2.5 million, or approximately 26%. The decrease in gross profit in the third quarter of 2024 compared to the third quarter of 2023 is primarily due to normal changes in the timing and magnitude of asset liquidation transactions.

Selling, general and administrative expense – Selling, general and administrative expense was $5.7 million during the three months ended September 30, 2024 compared to $6.8 million during the same period in 2023.

Significant components of selling, general and administrative expense for the three months ended September 30, 2024 and 2023 are shown below (in thousands):


	Three Months Ended September 30,
	2024			2023		% change
Compensation
Auction and liquidation	$	1,359		$	1,754		(23	)%
Refurbishment and resale		599			592		1	%
Brokerage		1,215			1,193		2	%
Specialty lending		311			282		10	%
Corporate and other		451			627		(28	)%
Stock-based compensation		283			175		62	%
Board of Directors fees		123			90		37	%
Accounting, tax and legal professional fees		337			442		(24	)%
Insurance		144			133		8	%
Occupancy		317			313		1	%
Travel and entertainment		125			182		(31	)%
Advertising and promotion		155			150		3	%
Information technology support		164			96		71	%
Provision for credit losses		(44	)		545		(108	)%
Other		147			232		(37	)%
Total selling, general & administrative expense	$	5,686		$	6,806		(16	)%

Selling, general and administrative expense during the third quarter of 2024 decreased by approximately $1.1 million compared to the selling, general and administrative expense during the third quarter of 2023. This decrease is primarily due to a decrease in performance-related compensation and an increase to the allowance for credit losses recorded in the third quarter of 2023, which has maintained at a relatively consistent balance through the third quarter of 2024.

Depreciation and amortization expense – Depreciation and amortization expense was $0.2 million during the three months ended September 30, 2024 compared to $0.1 million during the three months ended September 30, 2023, which consisted primarily of amortization expense related to intangible assets in both periods.

Earnings of Equity Method Investments - Earnings of equity method investments was $0.1 million during the three months ended September 30, 2024 compared to an immaterial loss during the same period in 2023.

Nine-Month Period Ended September 30, 2024 Compared to Nine-Month Period Ended September 30, 2023

Revenues and cost of revenues – Revenues were $34.6 million during the nine months ended September 30, 2024 compared to $45.3 million during the same period in 2023. Costs of services revenue and asset sales were $10.8 million during the nine months ended September 30, 2024 compared to $16.3 million during the same period in 2023. The gross profit of these items was $23.8 million during the nine months ended September 30, 2024 compared to $29.0 million during the same period in 2023, a decrease of approximately $5.2 million, or approximately 18%. The decrease in gross profit in the third quarter of 2024 compared to the third quarter of 2023 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 the normal changes in the timing and magnitude of asset liquidation transactions.

Selling, general and administrative expense – Selling, general and administrative expense was $18.4 million during the nine months ended September 30, 2024 compared to $19.5 million during the nine months ended September 30, 2023.

Significant components of selling, general and administrative expense for the nine months ended September 30, 2024 and 2023 are shown below (in thousands):


	Nine Months Ended September 30,
	2024			2023		% change
Compensation
Auction and liquidation	$	4,256		$	4,740		(10	)%
Refurbishment and resale		1,788			1,638		9	%
Brokerage		3,971			4,725		(16	)%
Specialty lending		1,287			773		66	%
Corporate and other		1,741			1,780		(2	)%
Stock-based compensation		801			582		38	%
Board of Directors fees		279			244		14	%
Accounting, tax and legal professional fees		1,237			1,296		(5	)%
Insurance		437			400		9	%
Occupancy		943			950		(1	)%
Travel and entertainment		458			627		(27	)%
Advertising and promotion		430			404		6	%
Information technology support		446			299		49	%
Provision for credit losses		(219	)		632		(135	)%
Other		535			456		17	%
Total selling, general & administrative expense	$	18,390		$	19,546		(6	)%

As compared to the nine months ended September 30, 2023, there was a decrease in selling, general and administrative expense during the nine months ended September 30, 2024 primarily due to a decrease in performance-related compensation and an increase to the allowance for credit losses recorded in the third quarter of 2023, which has decreased during the nine months ended September 30, 2024.

Depreciation and amortization expense – Depreciation and amortization expense was $0.4 million during both the nine months ended September 30, 2024 and 2023, which consisted primarily of amortization expense related to intangible assets.

Earnings in Equity Method Investments were $2.6 million during the nine months ended September 30, 2024 compared to $0.7 million during the same period in 2023. The $1.9 million increase is mainly due to our $1.3 million share of earnings from the KNFH II LLC joint venture in 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. Other than operating income (a GAAP financial measure as shown in our consolidated statements of income), which we believe is the most important measure of our operational performance and trends, we believe that EBITDA and Adjusted EBITDA (non-GAAP financial measures) are key performance indicators (“KPIs”) for our business. These KPIs may not be defined or calculated in the same way as similar KPIs used by other companies.

We prepared our unaudited condensed consolidated financial statements in accordance with GAAP. We define EBITDA as net income plus depreciation and amortization, interest expense, and provision for income taxes. Adjusted EBITDA reflects EBITDA adjusted further to eliminate the effects of stock-based compensation. Management uses EBITDA and Adjusted EBITDA in assessing the Company’s results, evaluating the Company’s performance and in reaching operating and strategic decisions. Management believes that the presentation of EBITDA and Adjusted EBITDA, when considered together with our GAAP financial statements and the reconciliation to the most directly comparable GAAP financial measure, is useful in providing investors a more complete understanding of the factors and trends affecting the underlying performance of the Company on a historical and ongoing basis. Our use of EBITDA and Adjusted EBITDA is not meant to be, and should not be, considered in isolation or as a substitute for, or superior to, any GAAP financial measure. 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).


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024			2023		2024		2023
Net income	$	1,089		$	1,977	$	5,385	$	7,585
Add back:
Depreciation and amortization		152			132		440		373
Interest expense, net		(17	)		56		183		225
Income tax expense		407			736		2,013		1,954
EBITDA		1,631			2,901		8,021		10,137

Management add back:
Stock based compensation		283			175	801		582
Adjusted EBITDA	$	1,914		$	3,076	$	8,822	$	10,719

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As a Smaller Reporting Company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures.

As of the end of the period covered by this Report, our Chief Executive Officer and Principal Financial Officer (the “Certifying Officers”) conducted evaluations of our disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officers have concluded that our disclosure controls and procedures were effective as of September 30, 2024.

Further, there were no changes in our internal control over financial reporting during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes to the legal proceedings discussed in our Form 10-K.

Item 1A. Risk Factors

As a Smaller Reporting Company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Company repurchased 601,449 shares in the open market during the three months ended September 30, 2024 pursuant to the Repurchase Program. As of September 30, 2024, the Company had approximately $4.1 million in remaining aggregate dollar value of shares that may be purchased under the Repurchase Program. The following table presents the number and average price of shares purchased in each fiscal month during the three months ended September 30, 2024:



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]
July 1 through July 31, 2024		—	$	—		—	$	—
August 1 through August 31, 2024		235,206		1.85		235,206		4,770,360
September 1 through September 30, 2024		366,243		1.70		366,243		4,148,125
Total		601,449	$	1.76		601,449	$	4,148,125
[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. 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. 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 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Rule 10b5-1 Trading Plans of Directors and Section 16 Officers

On August 14, 2024, David Ludwig, President of Financial Assets division, adopted a written arrangement that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (the "Trading Plan"). The Trading Plan provides for the sale of 137,000 shares of our common stock and will terminate on March 15, 2025, unless terminated earlier in accordance with the Trading Plan's terms.

Rule 10b5-1 Trading Plans of the Company

In connection with our Repurchase Program, on September 13, 2024, the Company's Board of Directors adopted a written arrangement that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (the "Repurchase Trading Plan"). The Repurchase Trading Plan provides for the Company to repurchase of up to $6.0 million in shares of our common stock and will terminate on March 15, 2025, unless terminated earlier in accordance with the Repurchase Trading Plan's terms. During the three months ended September 30, 2024, 24,180 shares of common stock were repurchased under the Repurchase Trading Plan. Future repurchases may be made as open market transactions, privately negotiated transactions or through a series of forward purchase agreements, option contracts or similar agreements, including the Repurchase Trading Plan as described above. The Company has no obligation to repurchase stock under this program and may suspend or terminate the Repurchase Program at any time.

Item 6. Exhibits.

(a) Exhibits


Exhibit No.		Identification of Exhibit
3.1		Second Amended and Restated Articles of Incorporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 7, 2024 (File No. 001-39471), and incorporated herein by reference)

3.2		Restated Bylaws, as amended (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 30, 2020 (File No. 001-39471), and incorporated herein by reference).

4.1		Warrant Agreement by and between Heritage Global Inc. and Napier Park Industrial Asset Acquisition, LP, effective as of March 19, 2019 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 25, 2019 (File No. 000-17973), and incorporated herein by reference).

10.1		Loan Modification Agreement and Reaffirmation of Loan, by and between Heritage Global Inc. and C3bank, National Association, effective as of July 24, 2024 (filed as Exhibit 10.1 to the Company’s Current Report on Form 10-Q filed on August 8, 2024 (File No. 001-39471), and incorporated herein by reference).

10.2*		Loan Modification Agreement and Reaffirmation of Loan, by and between Heritage Global Inc. and C3bank, National Association, effective as of October 4, 2024

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted under Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted under Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized.


	Heritage Global Inc.

Date: November 7, 2024	By:	/s/ Ross Dove
		Ross Dove
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Brian J. Cobb
		Brian J. Cobb
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Exhibit 10.2

LOAN MODIFICATION AGREEMENT AND

REAFFIRMATION OF LOAN

[HERITAGE GLOBAL INC.; LOAN NO.:13880]

This LOAN MODIFICATION AGREEMENT AND REAFFIRMATION OF LOAN (this “Agreement”) is made effective as of October 4, 2024 (“Reference Date”) by and between Heritage Global Inc., a Florida corporation (“Borrower”), and C3bank, National Association (“Lender”) with respect to the following facts:

R E C I T A L S:

On or about May 5, 2021, Lender entered into a Business Loan Agreement (as modified, the “Existing Loan Agreement”, as modified by this Agreement, the “Loan Agreement”) with Borrower whereby Lender agreed to make a revolving line of credit to Borrower in the maximum principal amount of Ten Million and No/100 Dollars ($10,000,000.00) (the “Loan”). The Loan was evidenced by, among other things, (i) that certain Promissory Note dated May 5, 2021, from Borrower in favor of Lender in the original principal amount of Ten Million and No/100 Dollars ($10,000,000.00), as amended and restated by that certain Amended and Restated Promissory Note dated May 26, 2023 (as the same may be amended, restated, modified or replaced from time to time, the “Note”), (ii) that certain Commercial Security Agreement dated May 5, 2021, by and among Borrower, Heritage Global Partners Inc., a California corporation (“HGP”), Heritage Global LLC, a Delaware limited liability company (“HG”), Heritage ALT LLC, formerly known as Equity Partners HG LLC, a Delaware limited liability company (“EPHG”), National Loan Exchange, Inc., an Illinois company (“NLEX”), Heritage Global Capital LLC, a Delaware limited liability company (“HGC”, together with HGP, HG, EPHG and NLEX, each a “Grantor” and collectively, the “Grantors”) and Lender (as the same heretofore may have been or hereafter may be amended, restated, supplemented, extended, renewed, replaced or otherwise modified from time to time, the “Security Agreement”), and (iii) Pledge and Security Agreement of even date hereof by and between Borrower and Lender (as the same heretofore may have been or hereafter may be amended, restated, supplemented, extended, renewed, replaced or otherwise modified from time to time, the “Pledge Agreement”);

On or about April 1, 2022, Borrower and Lender entered into that certain Loan Modification Agreement and Reaffirmation of Loan dated as of such date (the “First Modification”), which, among other things, revised EPHG’s name and the Loan financial covenants.

On or about May 4, 2023, Borrower and Lender entered into that certain Change in Terms Agreement dated as of such date (the “Second Modification”), which, among other things, extended the maturity date to June 7, 2023.

On or about May 26, 2023, Borrower and Lender entered into that certain Loan Modification Agreement and Reaffirmation of Loan dated as of such date (the “Third Modification”), which among other things, revised the interest rate, extended the maturity date to October 27, 2024, added the Unused Line Fee, and revised the Loan financial covenants.

Exhibit 10.2

On or about July 24, 2024, Borrower and Lender entered into that certain Loan Modification Agreement and Reaffirmation of Loan dated as of such date (the “Fourth Modification”), which among other things revised the Loan financial covenants.

This Agreement, the Existing Loan Agreement, the First Modification, the Second Modification, the Third Modification, the Fourth Modification, the Note, the Security Agreement, the Pledge Agreement, and the Related Documents together with any other documents required by Lender to evidence or secure the Loan, and any and all amendments and modifications thereto, shall be collectively referred to as the “Loan Documents”. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Loan Agreement (or if not defined in the Loan Agreement, in the other Loan Documents);

Borrower has now requested and Lender hereby agrees to, subject to the terms and conditions of this Agreement, among other things, to extend the Maturity Date.

At Borrower’s request, Lender has agreed to modify the Existing Loan Agreement and other Loan Documents, conditioned upon Borrower’s execution of and performance under this Agreement and the ratification and confirmation of the Loan and the Loan Documents, and of any and all such documents required by Lender and completion of such other acts or things reasonably requested by Lender.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Recitals. The recitals set forth above are hereby incorporated herein as true and correct.

Confirmation of Loan. Borrower hereby acknowledges and confirms Borrower’s obligations to Lender as set forth in the Loan Documents and reaffirms and restates each and every term, condition, provision, and waiver thereof. There is no intention to otherwise modify, increase, reduce or alter the respective rights or obligations of Lender under the Loan Documents except as set forth herein. Nothing in this Agreement shall be deemed to constitute Lender’s release of Borrower of any of its obligations under the Loan Documents.

Representations and Warranties. Borrower hereby represents and warrants to Lender that:

This Agreement and the other Loan Documents represent valid and enforceable obligations against the Borrower.

As of the Reference Date, Borrower has no claims or defenses against Lender or any other person or entity which would or might affect (i) the enforceability of any provisions of the Loan Documents; or (ii) the collectability of sums advanced by Lender in connection with the Loan.

Exhibit 10.2

The execution, delivery, and performance by Borrower of this Agreement and the Loan Documents have been duly authorized, are not in conflict with the terms of any organizational document of such Borrower and will not violate any law, rule, or order of any court or governmental agency or body to which Borrower is subject. All representations and warranties contained in this Agreement, the Existing Loan Agreement and in any and all of the other Loan Documents are true and correct as of the date of this Agreement, and all such representations and warranties shall survive the execution of this Agreement.

As of the Reference Date, there is no uncured breach or default under the Loan Documents or any material agreement. There have been no new material agreements entered into since the date of the closing of the Loan and no amendments, waivers, modifications or terminations of any material agreement have occurred, other than as stated herein.

Borrower acknowledges that this modification does not guarantee any modification beyond this modification of Borrower’s obligations as detailed herein, and any such additional modification and/or amendment is subject to Lender’s written approval, in Lender’s sole discretion.

Additional Amendment to Loan Documents. The Loan Documents are hereby modified as follows:

Maturity Date. The Maturity Date is hereby extended to December 27, 2024, the “New Maturity Date”. For avoidance of doubt the entire outstanding indebtedness shall be due and payable on December 27, 2024, or on such earlier date resulting from acceleration or otherwise as provided in the Loan Documents.

For avoidance of doubt, as of October 4, 2024, the unpaid principal balance of the Loan was ($0.00).

From and after the Reference Date, any references in any Loan Documents to any of the Loan Documents shall mean such Loan Document, as modified by this Agreement.

No Novation. Nothing in this Agreement shall be construed to be a novation, cancellation, satisfaction, release, or substitution of the Loan or other indebtedness of Borrower under the Note or other Loan Documents.

No Other Modifications. Except as amended and/or modified by this Agreement, all of the obligations and other terms of the Existing Loan Agreement and other Loan Documents shall remain in full force and effect, unaltered and unchanged by this Agreement.

Conditions Precedent to Loan Modification. The obligation of Lender to give effect to the modifications set forth herein is subject to the satisfaction of each of the following conditions precedent:

Borrower as necessary and appropriate, shall execute, acknowledge and deliver to Lender: (i) such duly adopted consents and/or resolutions of Borrower and of such other entities as Lender may require, and naming the person(s) authorized to execute this Agreement on behalf of each such entity; and (ii) any further and additional documents as Lender may determine

Exhibit 10.2

to be necessary or appropriate, including, without limitation, such documents as may be necessary or appropriate to insure the proper attachment, perfection and priority of Lender’s security interest in the Collateral.

Borrower shall have paid to Lender, in immediately available funds, the amount of all expenses incurred by Lender in connection with (i) the negotiation and preparation of this Agreement and all other documents executed and delivered pursuant hereto, and (ii) the transactions contemplated by this Agreement and all documents executed and delivered pursuant hereto (including, without limitation, legal fees and expenses, title premiums and other closing costs);

Intentionally Omitted.

The representations and warranties contained in this Agreement, the Existing Loan Agreement and the other Loan Documents shall be true and correct, in all material respects, as of the effective date of this Agreement; and

Lender shall be satisfied, in its sole discretion, that after giving effect to this Agreement no Event of Default shall exist and no event, circumstance or condition shall exist which, with notice or passage of time or both would be an Event of Default.

Release of Claims by Borrower. Except as expressly set forth herein, Borrower on its own behalf and on behalf of each of its respective agents, employees, representatives, affiliates, predecessors-in-interest, heirs, successors, and assigns (such persons and entities other than Borrower are referred to collectively as the “Other Releasors”), releases, discharges and acquits Lender and each of its assignees, members, investors and participants (if any), and each of its respective officers, directors, shareholders, agents, employees, affiliates, successors, and assigns (collectively, the “Released Parties”), of and from any and all rights, claims, demands, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, causes of action, promises, damages, costs, losses and expenses of every kind, nature, description or character which exist or which could or may be claimed to exist, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, claimed or unclaimed, whether based on contract, tort, breach of any duty, or other legal or equitable theory of recovery, each as though fully set forth herein at length (collectively, the “Claims”), which in any way arise out of, are connected with or relate to any or all of the following, existing or occurring as of or prior to the execution of this Agreement: (a) the Loan or the administration of the Loan, as well as any action or inaction of the Released Parties or any of them with respect to the Loan or the administration thereof; (b) any or all of the transactions which are the subject of or contemplated by any or all of the Loan Agreement or other Loan Documents; (c) the Collateral; or (d) any fact, matter, transaction or act or omission by any or all of the Released Parties and relating to the Loan, the Loan Documents, or the Collateral.

Waiver. As to all matters being released by Borrower pursuant to this Section 7, Borrower, on its own behalf and on behalf of each of its respective Other Releasors, expressly waive any and all rights under Section 1542 of the California Civil Code and any and all rights under any similar statute, rule or regulation of any state or territory of the United States, and any and all rights under any similar statute, rule or regulation of the United States or any of its agencies. Section 1542 of the California Civil Code provides as follows:

Exhibit 10.2

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THIS RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”

No Assignment. Borrower, on its own behalf and on behalf of each of its respective Other Releasors, warrant and represent to Lender that Borrower and the Other Releasors have not sold, assigned, transferred, conveyed or otherwise disposed of any Claims that are the subject of this Section.

Discovery of Unknown or Different Facts. Borrower on its own behalf and on behalf of each of its respective Other Releasors, acknowledge and agree that the facts with respect to which the release of Claims contained in this Section is executed may hereafter be found to be different from the facts now believed by Borrower to be true, and Borrower on its own behalf and on behalf of each of their respective Other Releasors, expressly accept and assume the risk of such possible differences and agree that the release of Claims contained in this Section shall be and remain effective notwithstanding such differences in facts.

Reaffirmation. Each Grantor agrees as follows:

Such Grantor reaffirms to Lender each of the representations, warranties, covenants, obligations and agreements made by such Grantor as set forth in the Security Agreement executed by it (as amended herein, the Security Agreement) with the same force and effect as if each were separately stated herein and made as of the date hereof, and such Grantor is not relying on the financial condition of Borrower or the value of any and all Collateral as an inducement to enter into this Agreement. This reaffirmation renews and extends the Security Agreement executed by such Grantor in favor of Lender and in no way acts as a release or relinquishment of any Security Agreement. Such Grantor has been provided with a copy and has reviewed the Loan Documents and this Agreement and expressly acknowledges, confirms and agrees that the Security Agreement is not affected by this Agreement, except as specifically provided herein.

Such Grantor certifies as of the date hereof that the Security Agreement remains in full force and effect (as amended herein) and enforceable in accordance with its respective terms and there exists no defaults, offsets or defenses thereunder, or any event which with the giving of notice, passage of time, or both would constitute a default, offset or defense thereunder.

10.

Effect of Agreement. All of the representations, warranties, terms, and conditions of the Loan Documents remain unaltered and in full force and effect in accordance with their respective terms. Borrower acknowledges that it has consulted with counsel and such other experts and advisors as they deem necessary in connection with the negotiation, execution and delivery of this Agreement, or have had an opportunity to so consult and have knowingly chosen not to do so. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, their respective successors and assigns. No other person shall be entitled to claim any right or benefit hereunder, except the parties hereto.

Exhibit 10.2

11.

Severability. In case any provision of this Agreement shall be invalid, illegal, or unenforceable, such provision shall be severable from the remainder of this Agreement and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

12.

Counterparts; Validity. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. The failure of any party to execute this Agreement shall have no effect on its validity or enforceability as to or among the other parties.

13.

Entire Agreement. This Agreement and the Loan Documents are intended by the parties as the final expression of their agreement and therefore contain the entire agreement between the parties and supersede all prior understandings or agreements concerning the subject matter hereof. This Agreement may only be amended in a writing signed by Lender and Borrower.

[Remainder of page intentionally left blank; signature pages follow]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first above written.

    BORROWER:
 
Heritage Global Inc., 
a Florida corporation
 
By: _________________________________  Name: James Sklar
Its: Executive Vice President, General Counsel and Secretary
 
GRANTOR:
 
Heritage Global Partners Inc.,   
a California corporation
 
By: _________________________________  Name: James Sklar
Its: Executive Vice President, General Counsel and Secretary
 
Heritage Global LLC, 
a Delaware limited liability company
 
By: _________________________________  Name: James Sklar
Its: Executive Vice President, General Counsel and Secretary

Heritage Global Capital LLC, 
a Delaware limited liability company
 
By: _________________________________  

    LENDER:
 
C3bank,
National Association
 
By: ____________________________________
Name: Bryan Downie
Its: SVP/Chief Credit Officer

Signature page to Loan Modification Agreement and

Reaffirmation of Loan

Exhibit 10.2

    Name: James Sklar
Its: Executive Vice President, General Counsel and Secretary
GRANTOR:
 
Heritage ALT LLC, 
a Delaware limited liability company, formerly known as Equity Partners HG LLC
 
By: _________________________________  Name: James Sklar
Its: Executive Vice President, General Counsel and Secretary
 
Heritage Global Inc., 
a Florida corporation
 
By: _________________________________  Name: James Sklar
Its: Executive Vice President, General Counsel and Secretary
 
National Loan Exchange, Inc.
an Illinois company
 
By: _________________________________  Name: David Ludwig
Its: President

Signature page to Loan Modification Agreement and

Reaffirmation of Loan

Exhibit 10.2

Signature page to Loan Modification Agreement and

Reaffirmation of Loan

Exhibit 31.1

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ross Dove, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Heritage Global Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2024


By:	/s/ Ross Dove
	Ross Dove
	Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

OFFICER’S CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian J. Cobb, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Heritage Global Inc.;

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2024


By:	/s/ Brian J. Cobb
	Brian J. Cobb
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1

HERITAGE GLOBAL INC.

OFFICER’S CERTIFICATION
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)

The undersigned Ross Dove, duly appointed and incumbent officer of Heritage Global Inc., a Florida corporation (the “Corporation”), in connection with the Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), does hereby represent, warrant and certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that, to the best of his knowledge:

The Report is in full compliance with reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

November 7, 2024

    /s/ Ross Dove

   

    Ross Dove

   

    Chief Executive Officer
(Principal Executive Officer)

Exhibit 32.2

HERITAGE GLOBAL INC.

OFFICER’S CERTIFICATION
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)

The undersigned Brian J. Cobb, duly appointed and incumbent officer of Heritage Global Inc., a Florida corporation (the “Corporation”), in connection with the Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), does hereby represent, warrant and certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that, to the best of his knowledge:

The Report is in full compliance with reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

November 7, 2024

    /s/ Brian J. Cobb

   

    Brian J. Cobb

   

    Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 01, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2024
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Trading Symbol	HGBL
Security Exchange Name	NASDAQ
Entity Registrant Name	HERITAGE GLOBAL INC.
Entity Central Index Key	0000849145
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Interactive Data Current	Yes
Document Transition Report	false
Title of 12(b) Security	Common stock, $0.01 par value
Entity Incorporation, State or Country Code	FL
Document Quarterly Report	true
Entity Common Stock, Shares Outstanding		37,341,185
Entity Current Reporting Status	Yes
Entity Shell Company	false
Securities Act File Number	001-39471
Entity Tax Identification Number	59-2291344
Entity Address, Address Line One	12625 High Bluff Drive
Entity Address, Address Line Two	Suite 305
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92130
City Area Code	858
Local Phone Number	847-0659

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 26,571	$ 12,279
Accounts receivable (net of allowance for credit losses of $130 in 2024 and $132 in 2023)	877	1,910
Current portion of notes receivable (net of allowance for credit losses of $422 in 2024 and $650 in 2023)	3,959	6,581
Inventory – equipment	4,721	5,074
Other current assets	833	448
Total current assets	36,961	26,292
Non-current portion of notes receivable, net	7,337	10,890
Equity method investments	21,447	21,361
Right-of-use assets	2,381	2,539
Property and equipment, net	1,692	1,705
Intangible assets, net	3,460	3,753
Goodwill	7,446	7,446
Deferred tax assets	7,740	9,115
Other assets	64	67
Total assets	88,528	83,168
Current liabilities:
Accounts payable and accrued liabilities	6,268	7,237
Payables to sellers	13,125	4,975
Current portion of third party debt	525	1,733
Current portion of lease liabilities	802	789
Total current liabilities	20,720	14,734
Non-current portion of third party debt	0	5,495
Non-current portion of lease liabilities	1,681	1,859
Total liabilities	22,401	22,088
Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 563 of Series N as of September 30, 2024 and December 31, 2023; with liquidation preference over common stockholders equivalent to $1,000 per share	6	6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued 37,341,185 and 37,157,616 shares as of September 30, 2024 and December 31, 2023, respectively; and outstanding 36,343,561 and 36,761,441 shares as of September 30, 2024 and December 31, 2023, respectively	373	372
Additional paid-in capital	295,241	294,522
Accumulated deficit	(227,641)	(233,026)
Treasury stock at cost, 997,624 and 396,175 shares as of September 30, 2024 and December 31, 2023, respectively	(1,852)	(794)
Total stockholders’ equity	66,127	61,080
Total liabilities and stockholders’ equity	$ 88,528	$ 83,168

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 130	$ 132
Notes receivable, net of allowance for credit losses	$ 422	$ 650
Preferred stock, par value (in dollars per share)	$ 10	$ 10
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	563	563
Preferred stock, shares outstanding	563	563
Preferred Stock, Liquidation Preference Per Share	$ 1,000	$ 1,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	300,000,000	300,000,000
Common Stock, shares issued	37,341,185	37,157,616
Common stock, shares outstanding	36,343,561	36,761,441
Treasury Stock, Common, Shares	997,624	396,175

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenues:
Total revenues	$ 10,410	$ 15,551	$ 34,594	$ 45,261
Operating costs and expenses:
Selling, general and administrative	5,686	6,806	18,390	19,546
Depreciation and amortization	152	132	440	373
Total operating costs and expenses	9,031	12,774	29,635	36,172
Earnings of equity method investments	100	(8)	2,622	675
Operating income	1,479	2,769	7,581	9,764
Interest income (expense), net	17	(56)	(183)	(225)
Income before income tax expense	1,496	2,713	7,398	9,539
Income tax expense	407	736	2,013	1,954
Net income	$ 1,089	$ 1,977	$ 5,385	$ 7,585
Weighted average common shares outstanding – basic	36,576,931	36,742,018	36,641,820	36,675,838
Weighted average common shares outstanding – diluted	37,189,029	37,647,321	37,292,200	37,605,363
Net income per share – basic	$ 0.03	$ 0.05	$ 0.15	$ 0.21
Net income per share – diluted	$ 0.03	$ 0.05	$ 0.14	$ 0.2
Services Revenue [Member]
Revenues:
Total revenues	$ 8,063	$ 9,985	$ 25,527	$ 30,040
Operating costs and expenses:
Cost of services revenue and assets sales	1,735	2,423	4,665	6,570
Asset Sales [Member]
Revenues:
Total revenues	2,347	5,566	9,067	15,221
Operating costs and expenses:
Cost of services revenue and assets sales	$ 1,458	$ 3,413	$ 6,140	$ 9,683

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Treasury Stock, Common [Member]
Beginning Balance at Dec. 31, 2022	$ 48,299	$ 6	$ 369	$ 293,589	$ (245,270)	$ (395)
Begining Balance (in shares) at Dec. 31, 2022		565	36,932,177			243,468
Cumulative change in accounting principle (Note 2)	(231)				(231)
Balance as of January 1, 2023 (as adjusted for change in accounting principle)	48,068	$ 6	$ 369	293,589	(245,501)	$ (395)
Balance as of January 1, 2023 (as adjusted for change in accounting principle), shares		565	36,932,177			243,468
Issuance of common stock from stock option awards	5			5
Issuance of common stock from stock options awards, shares			31,191
Issuance of restricted common stock	152		$ 2	150
Issuance of restricted common stock, shares			134,592
Stock-based compensation expense	179			179
Net Income (Loss)	2,829				2,829
Ending Balance at Mar. 31, 2023	51,233	$ 6	$ 371	293,923	(242,672)	$ (395)
Ending Balance (in shares) at Mar. 31, 2023		565	37,097,960			243,468
Beginning Balance at Dec. 31, 2022	48,299	$ 6	$ 369	293,589	(245,270)	$ (395)
Begining Balance (in shares) at Dec. 31, 2022		565	36,932,177			243,468
Net Income (Loss)	7,585
Ending Balance at Sep. 30, 2023	56,398	$ 6	$ 372	294,331	(237,916)	$ (395)
Ending Balance (in shares) at Sep. 30, 2023		563	37,151,924			243,468
Beginning Balance at Mar. 31, 2023	51,233	$ 6	$ 371	293,923	(242,672)	$ (395)
Begining Balance (in shares) at Mar. 31, 2023		565	37,097,960			243,468
Issuance of common stock from stock option awards	5			5
Issuance of common stock from stock options awards, shares			32,111
Issuance of common stock due to conversion of Series N Preferred stock, shares		(2)	80
Issuance of restricted common stock, shares			15,000
Stock-based compensation expense	228			228
Net Income (Loss)	2,779				2,779
Ending Balance at Jun. 30, 2023	54,245	$ 6	$ 371	294,156	(239,893)	$ (395)
Ending Balance (in shares) at Jun. 30, 2023		563	37,145,151			243,468
Issuance of common stock from stock option awards	1		$ 1
Issuance of common stock from stock options awards, shares			6,773
Stock-based compensation expense	175			175
Net Income (Loss)	1,977				1,977
Ending Balance at Sep. 30, 2023	56,398	$ 6	$ 372	294,331	(237,916)	$ (395)
Ending Balance (in shares) at Sep. 30, 2023		563	37,151,924			243,468
Beginning Balance at Dec. 31, 2023	61,080	$ 6	$ 372	294,522	(233,026)	$ (794)
Begining Balance (in shares) at Dec. 31, 2023		563	37,157,616			396,175
Issuance of common stock from stock options awards, shares			1,200
Issuance of restricted common stock	(75)		$ 1	(76)
Issuance of restricted common stock, shares			177,576
Stock-based compensation expense	228			228
Net Income (Loss)	1,799				1,799
Ending Balance at Mar. 31, 2024	63,032	$ 6	$ 373	294,674	(231,227)	$ (794)
Ending Balance (in shares) at Mar. 31, 2024		563	37,336,392			396,175
Beginning Balance at Dec. 31, 2023	$ 61,080	$ 6	$ 372	294,522	(233,026)	$ (794)
Begining Balance (in shares) at Dec. 31, 2023		563	37,157,616			396,175
Issuance of common stock from stock options awards, shares	13,750
Net Income (Loss)	$ 5,385
Ending Balance at Sep. 30, 2024	66,127	$ 6	$ 373	295,241	(227,641)	$ (1,852)
Ending Balance (in shares) at Sep. 30, 2024		563	37,341,185			997,624
Beginning Balance at Mar. 31, 2024	63,032	$ 6	$ 373	294,674	(231,227)	$ (794)
Begining Balance (in shares) at Mar. 31, 2024		563	37,336,392			396,175
Issuance of common stock from stock option awards	(6)			(6)
Issuance of common stock from stock options awards, shares			4,793
Stock-based compensation expense	290			290
Net Income (Loss)	2,497				2,497
Ending Balance at Jun. 30, 2024	65,813	$ 6	$ 373	294,958	(228,730)	$ (794)
Ending Balance (in shares) at Jun. 30, 2024		563	37,341,185			396,175
Stock-based compensation expense	283			283
Repurchase of common stock, Shares						601,449
Repurchase of common stock, Value	(1,058)					$ (1,058)
Net Income (Loss)	1,089				1,089
Ending Balance at Sep. 30, 2024	$ 66,127	$ 6	$ 373	$ 295,241	$ (227,641)	$ (1,852)
Ending Balance (in shares) at Sep. 30, 2024		563	37,341,185			997,624

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows provided by operating activities:
Net income	$ 5,385	$ 7,585
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred issuance costs and fees	(77)	76
Earnings of equity method investments	(2,622)	(675)
Noncash credit loss expense	(228)	632
Noncash lease expense	484	483
Depreciation and amortization	440	373
Deferred taxes	1,375	1,170
Stock-based compensation expense	801	582
Changes in operating assets and liabilities:
Accounts receivable	1,032	(1,910)
Inventory – equipment	353	173
Other current assets	(382)	428
Accounts payable and accrued liabilities	(965)	(2,869)
Payables to sellers	8,150	6,996
Lease liabilities	(492)	(469)
Net cash provided by operating activities	13,254	12,575
Cash flows from investing activities:
Investment in notes receivable	(5,047)	(27,636)
Payments received on notes receivable	9,039	6,147
Cash received on transfer of notes receivable to partners	0	8,851
Investment in equity method investments	(343)	(6,465)
Return of investment in equity method investments	2,744	4,124
Cash distributions from equity method investments	2,622	675
Purchase of property and equipment	(134)	(237)
Net cash provided by (used in) investing activities	8,881	(14,541)
Cash flows from financing activities:
Proceeds from debt payable to third parties	0	13,000
Repayment of debt payable to third parties	(6,704)	(8,039)
Proceeds from issuance of common stock from stock option awards	0	36
Payments of tax withholdings related to issuance of restricted common stock and stock option awards	(81)	(120)
Repurchase of common stock	(1,058)	0
Net cash (used in) provided by financing activities	(7,843)	4,877
Net increase in cash and cash equivalents	14,292	2,911
Cash and cash equivalents as of beginning of period	12,279	12,667
Cash and cash equivalents as of end of period	26,571	15,578
Supplemental cash flow information:
Cash paid for taxes, net	682	547
Cash paid for interest	326	323
Noncash transfer of notes receivable to equity method investments	2,487	0
Noncash change in lease liabilities and right-of-use assets	$ 327	$ 405

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 1,089	$ 2,497	$ 1,799	$ 1,977	$ 2,779	$ 2,829	$ 5,385	$ 7,585

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024 shares
Trading Arrangements, by Individual
Material Terms of Trading Arrangement	Item 5. Other Information. Rule 10b5-1 Trading Plans of Directors and Section 16 Officers On August 14, 2024, David Ludwig, President of Financial Assets division, adopted a written arrangement that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (the "Trading Plan"). The Trading Plan provides for the sale of 137,000 shares of our common stock and will terminate on March 15, 2025, unless terminated earlier in accordance with the Trading Plan's terms. Rule 10b5-1 Trading Plans of the Company In connection with our Repurchase Program, on September 13, 2024, the Company's Board of Directors adopted a written arrangement that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) (the "Repurchase Trading Plan"). The Repurchase Trading Plan provides for the Company to repurchase of up to $6.0 million in shares of our common stock and will terminate on March 15, 2025, unless terminated earlier in accordance with the Repurchase Trading Plan's terms. During the three months ended September 30, 2024, 24,180 shares of common stock were repurchased under the Repurchase Trading Plan. Future repurchases may be made as open market transactions, privately negotiated transactions or through a series of forward purchase agreements, option contracts or similar agreements, including the Repurchase Trading Plan as described above. The Company has no obligation to repurchase stock under this program and may suspend or terminate the Repurchase Program at any time.
David Ludwig [Member]
Trading Arrangements, by Individual
Name	David Ludwig
Title	President of Financial Assets division
Rule 10b5-1 Arrangement Adopted	true
Non-Rule 10b5-1 Arrangement Adopted	true
Adoption Date	August 14, 2024
Rule 10b5-1 Arrangement Terminated	true
Termination Date	March 15, 2025
Aggregate Available	137,000
Board of Director [Member]
Trading Arrangements, by Individual
Title	Board of Directors
Rule 10b5-1 Arrangement Adopted	true
Non-Rule 10b5-1 Arrangement Adopted	true
Adoption Date	September 13, 2024
Rule 10b5-1 Arrangement Terminated	true
Termination Date	March 15, 2025
Aggregate Available	24,180

Basis of Presentation

9 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note 1 –Basis of Presentation

Repurchase Program

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Use of estimates

Revenue recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and ASC Topic 310, Receivables (“ASC 310”).

Nonaccrual Loans

Specialty Lending - Concentration and credit risk

Accounts receivable

As of both September 30, 2024 and December 31, 2023, the reserve for credit losses related to accounts receivable was approximately $0.1 million.

Notes receivable

Equity method investments

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.

Future accounting pronouncements

Accounts Receivable, net

9 Months Ended

Sep. 30, 2024

Accounts Receivable, after Allowance for Credit Loss [Abstract]

Accounts Receivable, net

Note 3 – Accounts Receivable, net

The Company’s accounts receivable, net consists of accounts receivables recorded in the ordinary course of business associated with the recognition of revenue from contracts with customers.

Notes Receivable, Net

9 Months Ended

Sep. 30, 2024

Receivables [Abstract]

Notes Receivable, net

Note 4 – Notes Receivable, net

The table below shows the Company’s lending activity as of September 30, 2024 (in thousands):



	September 30, 2024
Notes receivable as of December 31, 2023	$	18,262
Investment in notes receivable		5,047
Noncash transfer of notes receivable to equity method investments		(2,487	)
Principal repayments		(9,039	)
Notes receivable, as of September 30, 2024		11,783
Deferred financing fees and costs, net		(65	)
Allowance for credit losses		(422	)
Notes receivable, net, September 30, 2024	$	11,296

Stock-based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Note 5 – Stock-based Compensation

Stock Options

The following summarizes the changes in common stock options for the nine months ended September 30, 2024:


	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding as of December 31, 2023		2,265,350		$	1.71		6.8	$	907
Granted		35,000		$	2.70
Exercised		(13,750	)	$	1.02
Forfeited		(12,750	)	$	1.87
Outstanding as of September 30, 2024		2,273,850		$	1.73		6.1	$	897

Options exercisable as of September 30, 2024		1,626,600		$	1.42		5.3	$	879

Restricted Stock

Equity Method Investments

9 Months Ended

Sep. 30, 2024

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Note 6 – Equity Method Investments

The tables below details the Company’s joint venture revenues and earnings during the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30, 2024
	KNFH LLC		DHC8 LLC		KNFH II LLC		HGC Origination I LLC and HGC Funding I LLC		HGC MPG Funding LLC
Revenue	$	—	$	751	$	13,249	$	3,705	$	3,987
Gross profit		—		751		5,213		3,705		3,987
Operating income		—		590		5,120		3,656		3,987
Net income	$	—	$	590	$	5,120	$	3,668	$	3,987


	Nine Months Ended September 30, 2023
	KNFH LLC			DHC8 LLC		KNFH II LLC		HGC Origination I LLC and HGC Funding I LLC		HGC MPG Funding LLC
Revenue	$	303		$	1,183	$	—	$	3,769	$	552
Gross profit		303			1,183		—		3,769		552
Operating income (loss)		(144	)		1,009		—		2,374		548
Net income (loss)	$	(144	)	$	1,009	$	—	$	2,374	$	548

The table below details the summarized components of assets and liabilities of the Company’s joint ventures, as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30,		December 31,
	2024		2023
Assets:
KNFH LLC	$	—	$	292
DHC8 LLC		2,068		7,061
KNFH II LLC		7,966		8,150
HGC Origination I LLC and HGC Funding I LLC		26,113		28,389
HGC MPG Funding LLC		33,066		38,081
Total assets	$	69,213	$	81,973

Liabilities:
KNFH LLC	$	—	$	289
DHC8 LLC		1,038		1,102
KNFH II LLC		2,200		4,000
HGC Origination I LLC and HGC Funding I LLC		972		10
HGC MPG Funding LLC		—		—
Total liabilities	$	4,210	$	5,401

Earnings Per Share

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

Earnings Per Share

Note 7 – Earnings Per Share

The table below shows the calculation of the number of shares used in computing diluted EPS:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic weighted average shares outstanding		36,576,931		36,742,018		36,641,820		36,675,838
Treasury stock effect of common stock options and restricted stock awards		612,098		905,303		650,380		929,525
Diluted weighted average common shares outstanding		37,189,029		37,647,321		37,292,200		37,605,363

Leases

9 Months Ended

Sep. 30, 2024

Leases [Abstract]

Leases

Note 8 – Leases

The right-of-use assets and lease liabilities for each lease location are as follows (in thousands):


	September 30,		December 31,
	2024		2023
Right-of-use assets:
Del Mar, CA	$	402	$	186
Hayward, CA		1,310		1,525
San Diego, CA		387		477
Edwardsville, IL		282		351
Total right-of-use assets	$	2,381	$	2,539

Lease liabilities
Del Mar, CA	$	402	$	203
Hayward, CA		1,384		1,594
San Diego, CA		412		498
Edwardsville, IL		285		353
Total lease liabilities	$	2,483	$	2,648


2024 (remainder of year from October 1, 2024 to December 31, 2024)	$	199
2025		807
2026		829
2027		573
2028		299
Total undiscounted future minimum lease payments		2,707
Less: imputed interest		(224	)
Present value of lease liabilities	$	2,483

Lessor Arrangement

9 Months Ended

Sep. 30, 2024

Lessor Disclosure [Abstract]

Lessor Arrangement

Note 9 – Lessor Arrangement

Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Note 10 – Intangible Assets and Goodwill

Intangible assets


	Remaining		Carrying Value					Carrying Value
	Life		December 31,					September 30,
	(years)		2023		Amortization			2024
Amortizable intangible assets:
Trade Name (HGP)		0.3	$	128	$	(96	)	$	32
Trade Name (ALT)		16.9		575		(24	)		551
Vendor Relationship (ALT)		1.9		613		(173	)		440
Total amortizable intangible assets				1,316		(293	)		1,023

Indefinite-lived intangible assets:
Trade Name (NLEX)	N/A			2,437		—			2,437
Total intangible assets			$	3,753	$	(293	)	$	3,460

Amortization expense during both the nine months ended September 30, 2024 and 2023 was $0.3 million. The Company estimates that the residual value for intangible assets is not significant.

As of September 30, 2024, the estimated amortization expense for the remainder of the current fiscal year and the next five fiscal years and thereafter is shown below (in thousands):


Year	Amount
2024 (remainder of year from October 1, 2024 to December 31, 2024)	$	98
2025		263
2026		186
2027		32
2028		32
Thereafter		412
Total estimated amortization expense	$	1,023

Goodwill

The Company’s goodwill relates to its acquisition of various entities. Goodwill consists of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
ALT	$	1,861	$	1,861
HGP		2,041		2,041
NLEX		3,544		3,544
Total goodwill	$	7,446	$	7,446

There were no additions to goodwill and no impairments recorded to the carrying value of goodwill during the nine months ended September 30, 2024.

Debt

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Debt

Note 11 – Debt

Outstanding debt as of September 30, 2024 and December 31, 2023 is summarized as follows (in thousands):


	September 30, 2024		December 31, 2023
Current:
ALT Note	$	525	$	511
2021 Credit Facility		—		—
2023 Credit Facility		—		1,222
Total third party debt, current		525		1,733

Non-current:
ALT Note		—		395
2023 Credit Facility		—		5,100
Total third party debt, non-current		—		5,495

Total third party debt	$	525	$	7,228

2021 Credit Facility

The Company's weighted average interest rate on short-term borrowings as of September 30, 2024 and December 31, 2023 was 8.75% and 9.51%, respectively.

ALT Note

2023 Credit Facility

Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 – Income Taxes

Related Party Transactions

9 Months Ended

Sep. 30, 2024

Related Party Transactions

Note 13 – Related Party Transactions

Segment Information

9 Months Ended

Sep. 30, 2024

Segment Reporting Information, Additional Information [Abstract]

Segment Information

Note 14 – Segment Information

The following table sets forth certain financial information for the Company's reportable segments (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Industrial Assets Division:
Auction and Liquidation	$	583		$	1,099		$	3,500		$	3,282
Refurbishment & Resale		153			1,001			172			2,838
Total divisional operating income		736			2,100			3,672			6,120

Financial Assets Division:
Brokerage		1,655			2,055			5,662			6,217
Specialty Lending		156			(344	)		1,749			739
Total divisional operating income		1,811			1,711			7,411			6,956

Corporate operating expense		(1,068	)		(1,042	)		(3,502	)		(3,312	)

Consolidated operating income	$	1,479		$	2,769		$	7,581		$	9,764

Subsequent Events

9 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

Subsequent Events

Note 15 – Subsequent Events

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2024
Accounting Policies [Abstract]
Use of Estimates	Use of estimates The preparation of the Company’s unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable and notes receivable, inventory, investments, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities, including projecting future years’ taxable income, and stock-based compensation. These estimates have the potential to significantly impact our condensed consolidated interim financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature.
Revenue Recognition	Revenue recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and ASC Topic 310, Receivables (“ASC 310”). Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions, and secured lending. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. 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. All services and asset sales revenue from contracts with customers consists of three reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage. 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 a 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 (less than 1% of total revenues for the nine months ended September 30, 2024 and 2023), and therefore not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability”. The deferred revenue balance was approximately $0.5 million as of both September 30, 2024 and December 31, 2023 and is reflected in accounts payable and accrued liabilities on the condensed consolidated balance sheets. The deferred revenue balance is primarily related to customer deposits on asset sales within the Refurbishment & Resale segment. The Company records receivables in certain situations based on timing of payments for Auction and Liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations. For auction services and brokerage sale transactions, funds are typically collected from buyers and are held by the Company on the seller's behalf. The funds are included in cash and cash equivalents in the condensed consolidated balance sheets. The Company releases the funds to the seller, less the Company's commission and other fees due, after the buyer has accepted the goods. The amount of cash held on behalf of the sellers is recorded as payables to sellers in the accompanying condensed consolidated balance sheets. The Company evaluates revenue from Auction and Liquidation and Brokerage segment transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. The Company has determined that it acts as an agent for its fee based transactions and therefore reports the revenue from transactions in which the Company acts as an agent on a net basis. The Company also earns income through transactions that involve the Company acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, in which the Company’s ownership share meets the criteria for the equity method investments under ASC Topic 323, Equity Method and Joint Ventures, the Company does not record revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company. Through our Specialty Lending segment, the Company provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. The Company recognizes revenue generated by lending activity in accordance with ASC 310. Fees collected in relation to the issuance of loans include loan origination fees, interest income, portfolio monitoring fees, and a backend profit share percentage related to the underlying asset portfolio. The loan origination fees are offset with any direct origination costs and are deferred upon issuance of the loan and amortized over the lives of the related loans, as an adjustment to interest income. 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. The monitoring fees and the backend profit share are considered a separate earnings process as compared to the origination fees and interest income. Monitoring fees are recorded at the agreed upon rate, and at the moment in which payments are made by the borrower. The backend profit share is recognized in accordance with the agreed upon rate at the time in which the amount is realizable and earned. The recognition policy was established due to the uncertainty of timing of the amount of backend profit share which will be realized. Through our Refurbishment and Resale segment, the Company offers financing on its standard laboratory equipment sales. The Company recognizes revenue upon shipment of its financed products in accordance with ASC 606. The Company records a loan receivable for the unpaid balance of the order. A loan amortization table is created upon shipment outlining the principal and interest income portion of each future payment. These loans are classified as held-for-investment and accounted for under the guidelines of ASC 310. Direct loan origination fees are offset by the expenses incurred and the net amount is amortized over the life of the related loan using the interest method described in ASC 835.
Nonaccrual Loans	Nonaccrual Loans The Company determines 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. The Company considers 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. The Company also monitors its borrowers’ financial standing and performance on an ongoing basis and regularly updates the collection forecasts for the underlying charged off or nonperforming receivable portfolios related to each outstanding loan. 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. If, based on its analysis, the Company elects 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 on nonaccrual status. Interest received on such loans is accounted for using the cost-recovery or the cash-basis method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest payments received by the creditor are recorded as interest income provided the amount does not exceed the amount that would have been earned at the loan’s original effective interest rate. 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. In November 2023, the Company and its affiliated joint ventures restructured loans with its largest borrower by restructuring certain outstanding loans (the "Restructured Loans") with an amortized cost basis of $51.6 million or 59% of the amortized cost basis of the total charged-off asset portfolio loans of HGC and its affiliated joint ventures. The Company’s share of the Restructured Loans amortized cost basis was $22.2 million, or 57% of HGC’s share of the loan book. All Restructured Loans were restructured by term extension, adding a weighted average of 1.5 years to the life of the Restructured Loans, which reduced the monthly payments for the borrower. As of September 30, 2023, the Company increased its allowance for credit losses related to its largest borrower experiencing financial difficulties. This resulted in an allowance for credit losses on the loans later restructured of $1.0 million as of September 30, 2023. As of September 30, 2024, the Company’s 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. The Company's largest borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios and remit net collections to the Company and senior lenders, however this borrower's June remittance did not meet the minimum required payment amount. The Company has 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. While the Company continues 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. In addition, there was a balance of $1.5 million from the Company’s share of other loans within its affiliated joint ventures that are impacted by the default with the largest borrower and were placed in nonaccrual status in June 2024. The Company's share of payments received from the nonaccrual loans, including interest, will be applied against the outstanding loan balance. As of September 30, 2024, the amortized cost basis of loans in nonaccrual status was $24.0 million, of which $5.4 million is recorded within notes receivable and $18.6 million is recorded within equity method investments. There were no loans in nonaccrual status as of December 31, 2023.
Specialty Lending - Concentration and Credit risk	Specialty Lending - Concentration and credit risk As of September 30, 2024, the Company held a gross balance of investments in notes receivable of $32.0 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $22.5 million, or 70% as of September 30, 2024, as compared to 62% as of December 31, 2023. The Company does not intend to hold highly concentrated balances due from one borrower as part of its long-term strategy but may, in the short term, have concentration risk on its path to an established and diversified portfolio. The Company does not evaluate concentration risk solely based on balance due from specific borrowers, but also considers the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $22.5 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. The Company mitigates this concentration risk by requiring, and monitoring, security from each borrower consisting of their charged off and nonperforming receivable portfolios. The Company engages in a due diligence process that leverages its valuation expertise and knowledge in the underlying nonperforming receivable portfolios marketplace. In the event of default, the Company is entitled to call the unpaid interest and principal balances and receive all net collections directly. The Company may also recover its investment by engaging a third party to collect on the underlying charged off or nonperforming receivable portfolio or the underlying portfolio can be sold through the Company's Brokerage segment. In certain cases, the Company’s recovery options may be subject to concurrence of the originator or other prior holder of the assets.
Accounts Receivable	Accounts receivable The Company carries accounts receivable at the face amounts less an allowance for estimated credit losses. The Company estimates its reserve for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company only extends credit to entities and institutions of significance, such as well-known academic and financial institutions and U.S. government agencies. Consequently, historical accounts receivable credit losses are nearly zero, which provides the starting point for management’s assessment of the reserve for credit losses for its accounts receivable. The Company estimates its expected credit losses for accounts receivable based on historical credit loss experience, its assessment of current conditions, and other relevant available information from internal and external sources on a quarterly basis. As of both September 30, 2024 and December 31, 2023, the reserve for credit losses related to accounts receivable was approximately $0.1 million.
Notes Receivable	Notes receivable Under ASC 326, 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. 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. Additionally, since the Company began recording notes receivable on the condensed consolidated balance sheets, the Company has recorded no actual credit losses to notes receivable. Lacking historical internal data upon which to base a reserve for credit losses to notes receivable, the Company, under ASC 326, estimates its reserve using external credit loss experience data. Management observes that the Company's notes receivable are similar in character to transactions undertaken by smaller banking institutions. The Company estimates its expected credit losses based on the Scaled Current Expected Credit Loss (CECL) Allowance Loss Estimator ("SCALE rate") available from the Federal Reserve. The SCALE rate methodology is endorsed by the FASB and the Conference of State Bank Supervisors. Management determined under ASC 326 that the SCALE rate, a generally applicable rate, may be appropriately adjusted by its assessment of observable facts and relevant circumstances indicating that the factors analyzed in the determination of the SCALE rate may not conform to the Company's operations and borrower assessments. As of September 30, 2024, the SCALE rate was 1.3834% and the Company's credit loss allowance rate specific to notes receivable was 3.6%. 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 September 30, 2024 and December 31, 2023, the Company's allowance for credit losses related to notes receivable outstanding was $0.4 million and $0.7 million, respectively. 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. This review includes monthly and cumulative key performance indicators for each loan and borrower, as well as evaluation of borrower's financial condition.
Equity Method Investments	Equity method investments 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 September 30, 2024, the SCALE rate was 1.3834% and the credit loss allowance rate specific to equity method investments was 4.8%. 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 September 30, 2024 and December 31, 2023, the Company's allowance for credit losses related to its equity method investments was $1.0 million and $0.9 million, respectively.
Future Accounting Pronouncements	Future accounting pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which, among other updates, requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company anticipates that ASU 2023-07 will have no accounting impact, but will require additional disclosure for each of its reportable segments. In December 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. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company anticipates that ASU 2023-09 will have no accounting impact but will require additional disclosure related to certain income tax calculations.

Notes Receivable, net (Tables)

9 Months Ended

Sep. 30, 2024

Receivables [Abstract]

Schedule of Company's Lending Activity

The table below shows the Company’s lending activity as of September 30, 2024 (in thousands):



	September 30, 2024
Notes receivable as of December 31, 2023	$	18,262
Investment in notes receivable		5,047
Noncash transfer of notes receivable to equity method investments		(2,487	)
Principal repayments		(9,039	)
Notes receivable, as of September 30, 2024		11,783
Deferred financing fees and costs, net		(65	)
Allowance for credit losses		(422	)
Notes receivable, net, September 30, 2024	$	11,296

Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Schedule of Changes in Common Stock Options

The following summarizes the changes in common stock options for the nine months ended September 30, 2024:


	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding as of December 31, 2023		2,265,350		$	1.71		6.8	$	907
Granted		35,000		$	2.70
Exercised		(13,750	)	$	1.02
Forfeited		(12,750	)	$	1.87
Outstanding as of September 30, 2024		2,273,850		$	1.73		6.1	$	897

Options exercisable as of September 30, 2024		1,626,600		$	1.42		5.3	$	879

Equity Method Investments (Tables)

9 Months Ended

Sep. 30, 2024

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Joint Venture Revenues and Net Income (Loss)

The tables below details the Company’s joint venture revenues and earnings during the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30, 2024
	KNFH LLC		DHC8 LLC		KNFH II LLC		HGC Origination I LLC and HGC Funding I LLC		HGC MPG Funding LLC
Revenue	$	—	$	751	$	13,249	$	3,705	$	3,987
Gross profit		—		751		5,213		3,705		3,987
Operating income		—		590		5,120		3,656		3,987
Net income	$	—	$	590	$	5,120	$	3,668	$	3,987


	Nine Months Ended September 30, 2023
	KNFH LLC			DHC8 LLC		KNFH II LLC		HGC Origination I LLC and HGC Funding I LLC		HGC MPG Funding LLC
Revenue	$	303		$	1,183	$	—	$	3,769	$	552
Gross profit		303			1,183		—		3,769		552
Operating income (loss)		(144	)		1,009		—		2,374		548
Net income (loss)	$	(144	)	$	1,009	$	—	$	2,374	$	548

Schedule of the Components of Assets and Liabilities

The table below details the summarized components of assets and liabilities of the Company’s joint ventures, as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30,		December 31,
	2024		2023
Assets:
KNFH LLC	$	—	$	292
DHC8 LLC		2,068		7,061
KNFH II LLC		7,966		8,150
HGC Origination I LLC and HGC Funding I LLC		26,113		28,389
HGC MPG Funding LLC		33,066		38,081
Total assets	$	69,213	$	81,973

Liabilities:
KNFH LLC	$	—	$	289
DHC8 LLC		1,038		1,102
KNFH II LLC		2,200		4,000
HGC Origination I LLC and HGC Funding I LLC		972		10
HGC MPG Funding LLC		—		—
Total liabilities	$	4,210	$	5,401

Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

Schedule of Calculation of the Shares Used in Computing Diluted EPS

The table below shows the calculation of the number of shares used in computing diluted EPS:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic weighted average shares outstanding		36,576,931		36,742,018		36,641,820		36,675,838
Treasury stock effect of common stock options and restricted stock awards		612,098		905,303		650,380		929,525
Diluted weighted average common shares outstanding		37,189,029		37,647,321		37,292,200		37,605,363

Leases (Tables)

9 Months Ended

Sep. 30, 2024

Leases [Abstract]

Schedule of Right-of-Use Assets and Lease Liabilities

The right-of-use assets and lease liabilities for each lease location are as follows (in thousands):


	September 30,		December 31,
	2024		2023
Right-of-use assets:
Del Mar, CA	$	402	$	186
Hayward, CA		1,310		1,525
San Diego, CA		387		477
Edwardsville, IL		282		351
Total right-of-use assets	$	2,381	$	2,539

Lease liabilities
Del Mar, CA	$	402	$	203
Hayward, CA		1,384		1,594
San Diego, CA		412		498
Edwardsville, IL		285		353
Total lease liabilities	$	2,483	$	2,648

Schedule of Undiscounted Future Minimum Lease Commitments

As of September 30, 2024, undiscounted future minimum lease payments related to leases that have initial or remaining lease terms in excess of one year are as follows (in thousands):


2024 (remainder of year from October 1, 2024 to December 31, 2024)	$	199
2025		807
2026		829
2027		573
2028		299
Total undiscounted future minimum lease payments		2,707
Less: imputed interest		(224	)
Present value of lease liabilities	$	2,483

Intangible Assets and Goodwill (Tables)

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets


	Remaining		Carrying Value					Carrying Value
	Life		December 31,					September 30,
	(years)		2023		Amortization			2024
Amortizable intangible assets:
Trade Name (HGP)		0.3	$	128	$	(96	)	$	32
Trade Name (ALT)		16.9		575		(24	)		551
Vendor Relationship (ALT)		1.9		613		(173	)		440
Total amortizable intangible assets				1,316		(293	)		1,023

Indefinite-lived intangible assets:
Trade Name (NLEX)	N/A			2,437		—			2,437
Total intangible assets			$	3,753	$	(293	)	$	3,460

Schedule of Estimated Amortization Expense Intangible Assets

As of September 30, 2024, the estimated amortization expense for the remainder of the current fiscal year and the next five fiscal years and thereafter is shown below (in thousands):


Year	Amount
2024 (remainder of year from October 1, 2024 to December 31, 2024)	$	98
2025		263
2026		186
2027		32
2028		32
Thereafter		412
Total estimated amortization expense	$	1,023

Schedule of Goodwill

The Company’s goodwill relates to its acquisition of various entities. Goodwill consists of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
ALT	$	1,861	$	1,861
HGP		2,041		2,041
NLEX		3,544		3,544
Total goodwill	$	7,446	$	7,446

Debt (Tables)

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Schedule Of Debt

Outstanding debt as of September 30, 2024 and December 31, 2023 is summarized as follows (in thousands):


	September 30, 2024		December 31, 2023
Current:
ALT Note	$	525	$	511
2021 Credit Facility		—		—
2023 Credit Facility		—		1,222
Total third party debt, current		525		1,733

Non-current:
ALT Note		—		395
2023 Credit Facility		—		5,100
Total third party debt, non-current		—		5,495

Total third party debt	$	525	$	7,228

Segment Information (Tables)

9 Months Ended

Sep. 30, 2024

Segment Reporting Information, Additional Information [Abstract]

Schedule of Financial Information for the Company's Reportable Segments

The following table sets forth certain financial information for the Company's reportable segments (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Industrial Assets Division:
Auction and Liquidation	$	583		$	1,099		$	3,500		$	3,282
Refurbishment & Resale		153			1,001			172			2,838
Total divisional operating income		736			2,100			3,672			6,120

Financial Assets Division:
Brokerage		1,655			2,055			5,662			6,217
Specialty Lending		156			(344	)		1,749			739
Total divisional operating income		1,811			1,711			7,411			6,956

Corporate operating expense		(1,068	)		(1,042	)		(3,502	)		(3,312	)

Consolidated operating income	$	1,479		$	2,769		$	7,581		$	9,764

Basis of Presentation (Additional Information) (Details) - Common Stock [Member] - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2024	Sep. 13, 2024
Common share purchased, amount	$ 4.0	$ 4.0	$ 6.0
Stock Repurchase Program, Number of Shares Authorized to be Repurchased	601,449	601,449
Remained share purchase amount under the programme	$ 4.1	$ 4.1
Share repurchase price amount	$ 1.1	$ 1.1

Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2024 USD ($) Segment Portfolio	Sep. 30, 2023 USD ($)	Dec. 31, 2023 USD ($)	Nov. 30, 2023 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Allowance for doubtful accounts as of December 31, 2022	$ 130		$ 132
Accumulated deficit	(227,641)		(233,026)
Reserve balance for credit loss	100		100
Deferred revenue	500		500
Nonaccrual loans	24,000		$ 0
Notes receivable, principal amount	32,000
Borrower's note balance	$ 22,500
Borrower's note balance, percentage	70.00%		62.00%
Due from borrower	$ 22,500
Number of distinct portfolio purchases and loan agreements \| Portfolio	11
Amortization Cost				$ 51,600
Percentage of Amortization Cost				59.00%
Weighted average of years to the life of the Restructured Loans				1.50%
Allowances for Credit Losses	$ 1,100	$ 1,000
Notes Receivables	300
Equity method investments	21,447		$ 21,361
Other loans placed in nonaccrual status	1,500
Beginning balance of reserve for credit losses as of January 1, 2023	100		100
Allowance for credit loss	(422)
HGC Ltd.[Member]
Summary Of Significant Accounting Policies [Line Items]
Amortization Cost				$ 22,200
Percentage of Amortization Cost				57.00%
Equity method investments	800
Notes Receivable [Member]
Summary Of Significant Accounting Policies [Line Items]
Notes Receivables	5,400
Equity Method Investments [Member]
Summary Of Significant Accounting Policies [Line Items]
Equity method investments	$ 18,600
Consolidated [Member]
Summary Of Significant Accounting Policies [Line Items]
Number of reporting segment \| Segment	3
Accounting Standards Update 2022-02 [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of service revenue that is recognized over a period of time against total revenue	1.3834%
Note receivable outstanding	$ 400		700
Accounting Standards Update 2022-02 [Member] \| Notes Receivable [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of service revenue that is recognized over a period of time against total revenue	3.60%
Accounting Standards Update 2022-02 [Member] \| Equity Method Investments [Member]
Summary Of Significant Accounting Policies [Line Items]
Percentage of service revenue that is recognized over a period of time against total revenue	1.3834%
Credit loss rate	4.80%
Allowance for credit loss	$ 1,000		$ 900

Accounts Receivable, net (Additional Information) (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Accounts Receivable, after Allowance for Credit Loss [Abstract]
Accounts Receivable, after Allowance for Credit Loss, Noncurrent	$ 0.1	$ 0.1

Notes Receivable, Net - (Additional Information) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Dec. 31, 2023
Receivables with Imputed Interest [Line Items]
Notes receivables, net of unamortized	$ 10.9	$ 17.5
Provision for credit losses	0.3
Notes issued	4.5
Principal payments received	8.8
Allowance for Credit Losses	0.4	0.7
Net Investment in Lease, Nonaccrual	24.0	0.0
Equity method investments	2.5
Outstanding Notes Receivables [Member]
Receivables with Imputed Interest [Line Items]
Notes receivables, net of unamortized	0.4	$ 0.0
Notes issued	0.6
Principal payments received	0.2
Net Investment in Lease, Nonaccrual	$ 5.4

Notes Receivable, Net - Schedule of Company's Lending Activity (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2024 USD ($)
Receivables [Abstract]
Notes receivable as of December 31, 2023	$ 18,262
Investment in notes receivable	5,047
Noncash transfer of notes receivable to equity method investments	(2,487)
Principal repayments	(9,039)
Notes receivable, as of September 30, 2024	11,783
Deferred financing fees and costs, net	(65)
Allowance for credit loss	(422)
Notes receivable, net, September 30, 2024	$ 11,296

Stock-based Compensation (Narrative) (Details) - USD ($) $ in Thousands		9 Months Ended
	Mar. 07, 2024	Sep. 30, 2024	Sep. 30, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options to purchase, Granted (in shares)		35,000
Options cancelled to purchase common stock		12,750
Stock-based compensation expense		$ 801	$ 582
Common Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense		400	600
Unrecognized stock-based compensation		$ 1,000
Unrecognized stock-based compensation, Period for recognition		1 year 7 months 6 days
Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense		$ 400	$ 100
Unrecognized stock-based compensation		$ 300
Unrecognized stock-based compensation, Period for recognition		4 months 24 days
Employees [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options to purchase, Granted (in shares)		35,000
Employees [Member] \| Equity Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted common stock granted	128,044
Non Executive Directors [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted common stock granted	75,000

Stock-based Compensation - Schedule of Changes in Common Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2024	Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]
Options, Outstanding at the beginning of the period	2,265,350
Options, Granted	35,000
Options, Exercised	(13,750)
Forfeited	(12,750)
Options, Outstanding at the end of the period	2,273,850	2,265,350
Options, Exercisable at the end of the period	1,626,600
Weighted Average Exercise Price, Outstanding at the beginning of the period	$ 1.71
Weighted Average Exercise Price, Granted	2.7
Weighted Average Exercise Price, Exercised	1.02
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	1.87
Weighted Average Exercise Price, Outstanding at the end of the period	1.73	$ 1.71
Weighted Average Exercise Price, Exercisable at the end of the period	$ 1.42
Options Outstanding Weighted Average Contractual Life (years)	6 years 1 month 6 days	6 years 9 months 18 days
Options Exercisable Weighted Average Contractual Life (years)	5 years 3 months 18 days
Aggregate Intrinsic Value, Outstanding	$ 897	$ 907
Aggregate Intrinsic Value, Exercisable	$ 879

Equity Method Investments - Schedule of Joint Venture Revenues and Net Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Schedule Of Equity Method Investments [Line Items]
Operating income (loss)	$ 1,479			$ 2,769			$ 7,581	$ 9,764
Net Income (Loss)	$ 1,089	$ 2,497	$ 1,799	$ 1,977	$ 2,779	$ 2,829	5,385	7,585
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| KNFH LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Revenue							0	303
Gross profit							0	303
Operating income (loss)							0	(144)
Net Income (Loss)							0	(144)
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| DHC8 LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Revenue							751	1,183
Gross profit							751	1,183
Operating income (loss)							590	1,009
Net Income (Loss)							590	1,009
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| KNFH II LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Revenue							13,249	0
Gross profit							5,213	0
Operating income (loss)							5,120	0
Net Income (Loss)							5,120	0
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| HGC Funding I LLC and Origination I LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Revenue							3,705	3,769
Gross profit							3,705	3,769
Operating income (loss)							3,656	2,374
Net Income (Loss)							3,668	2,374
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| HGC MPG Funding LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Revenue							3,987	552
Gross profit							3,987	552
Operating income (loss)							3,987	548
Net Income (Loss)							$ 3,987	$ 548

Equity Method Investments (Additional Information) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Dec. 31, 2023	May 31, 2023	Dec. 31, 2022	Apr. 30, 2022	Nov. 14, 2018
Schedule of Equity Method Investments [Line Items]
Provision for credit losses	$ 300
Equity method investments	21,447	$ 21,361
HGC Funding I LLC and Origination I LLC [Member]
Schedule of Equity Method Investments [Line Items]
Provision for credit losses	100
Reserve for credit losses	1,000
Equity method investments	$ 18,500
CPFH LLC [Member] \| Other Investees Member
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage						25.00%
KNFH LLC [Member] \| Other Investees Member
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage					25.00%
DHC8 LLC [Member] \| Other Investees Member
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage				13.33%
Hgc Mpg Funding Llc Member \| Other Investees Member
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage			25.00%
Knfh Ii Llc Member \| Other Investees Member
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage		25.00%

Equity Method Investments- Schedule of the Components of Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Schedule Of Equity Method Investments [Line Items]
Total assets	$ 88,528	$ 83,168
Total liabilities	22,401	22,088
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member]
Schedule Of Equity Method Investments [Line Items]
Total assets	69,213	81,973
Total liabilities	4,210	5,401
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| KNFH LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Total assets	0	292
Total liabilities	0	289
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| DHC8 LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Total assets	2,068	7,061
Total liabilities	1,038	1,102
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| KNFH II LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Total assets	7,966	8,150
Total liabilities	2,200	4,000
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| HGC Funding I LLC and Origination I LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Total assets	26,113	28,389
Total liabilities	972	10
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] \| HGC MPG Funding LLC [Member]
Schedule Of Equity Method Investments [Line Items]
Total assets	33,066	38,081
Total liabilities	$ 0	$ 0

Earnings Per Share (Narrative) (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Earnings Per Share [Abstract]
Convertible Preferred Stock, Shares Issuable upon Conversion			the Company’s shares of Series N preferred stock, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock.
Anti-dilutive common shares	0.6	0.9	0.7	0.9

Earnings Per Share - Schedule of Calculation of the Shares Used in Computing Diluted EPS (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Earnings Per Share [Abstract]
Basic weighted average shares outstanding	36,576,931	36,742,018	36,641,820	36,675,838
Treasury stock effect of common stock options and restricted stock awards	612,098	905,303	650,380	929,525
Diluted weighted average common shares outstanding	37,189,029	37,647,321	37,292,200	37,605,363

Leases (Narrative) (Details) $ in Thousands				9 Months Ended
Leases (Narrative) (Details) $ in Thousands	Sep. 23, 2024 USD ($)	Jun. 01, 2023 USD ($)	Aug. 12, 2022 USD ($) ft²	Sep. 30, 2024 USD ($) Location	Sep. 30, 2023 USD ($)	Sep. 01, 2022	Jan. 01, 2019
Lessee, Lease, Description [Line Items]
Number of locations \| Location				4
Lessee operating lease, incremental borrowing rate	6.25%	7.25%				5.50%	5.25%
Lease expense				$ 600	$ 600
Weighted average remaining lease term				3 years 4 months 24 days
Weighted average discount rate				5.51%
Liberty industrial park Llc [Member]
Lessee, Lease, Description [Line Items]
Lease term expire period			Aug. 30, 2027
Area of lease \| ft²			6,627
Initial monthly base rent			$ 11,266
Liberty industrial park Llc [Member] \| Maximum [Member]
Lessee, Lease, Description [Line Items]
Initial monthly base rent			$ 13,180
Edwardsville office [Member]
Lessee, Lease, Description [Line Items]
Initial monthly base rent		$ 9,412
Edwardsville office [Member] \| Maximum [Member]
Lessee, Lease, Description [Line Items]
Initial monthly base rent		$ 9,914
Del mar office [Member]
Lessee, Lease, Description [Line Items]
Initial monthly base rent	$ 14,660
Term of agreement	24 months
Del mar office [Member] \| Maximum [Member]
Lessee, Lease, Description [Line Items]
Initial monthly base rent	$ 15,099

Leases - Schedule of Right-of-Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Lessee Lease Description [Line Items]
Right-of-use assets	$ 2,381	$ 2,539
Lease liabilities	2,483	2,648
Del Mar, CA [Member]
Lessee Lease Description [Line Items]
Right-of-use assets	402	186
Lease liabilities	402	203
Hayward, CA [Member]
Lessee Lease Description [Line Items]
Right-of-use assets	1,310	1,525
Lease liabilities	1,384	1,594
San Diego, CA [Member]
Lessee Lease Description [Line Items]
Right-of-use assets	387	477
Lease liabilities	412	498
Edwardsville, IL [Member]
Lessee Lease Description [Line Items]
Right-of-use assets	282	351
Lease liabilities	$ 285	$ 353

Leases - Schedule of Undiscounted Future Minimum Lease Commitments (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract]
2024 (remainder of year from October 1, 2024 to December 31, 2024)	$ 199
2025	807
2026	829
2027	573
2028	299
Total undiscounted future minimum lease payments	2,707
Less: imputed interest	(224)
Present value of lease liabilities	$ 2,483	$ 2,648

Lessor Arrangement (Additional Information) (Details) - KNFH II LLC [Member] - Machinery and Equipment [Member] - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Apr. 30, 2024	Dec. 31, 2023
Lessor, Lease, Description [Line Items]
Total purchase price		$ 5.0	$ 8.0
Earnings from equity method investments	$ 1.3
Real Estate [Member]
Lessor, Lease, Description [Line Items]
Total purchase price		$ 8.0

Intangible Assets and Goodwill (Additional Information) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 293	$ 300
Acquired Finite-Lived Intangible Asset, Residual Value	0
Goodwill, Impairment Loss	0
Impairment charges	$ 0

Intangible Assets and Goodwill - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amortization	$ (293)	$ (300)
Total estimated amortization expense	1,023		$ 1,316
Intangible assets, net	3,460		3,753
NLEX [Member] \| Trade Name [Member]
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items]
Indefinite-lived intangible assets	2,437		2,437
ALT [Member] \| Trade Name [Member]
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amortization	(24)
Total estimated amortization expense	551		$ 575
Intangible Assets, Amortizable Period			16 years 10 months 24 days
HGP Trade Name [Member]
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amortization	(96)
Total estimated amortization expense	32		$ 128
Intangible Assets, Amortizable Period			3 months 18 days
Vendor Relationships [Member] \| ALT [Member]
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items]
Amortization	(173)
Total estimated amortization expense	$ 440		$ 613
Intangible Assets, Amortizable Period			1 year 10 months 24 days

Intangible Assets and Goodwill - Schedule of Estimated Amortization Expense Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
2024 (remainder of year from October 1, 2024 to December 31, 2024)	$ 98
2025	263
2026	186
2027	32
2028	32
Thereafter	412
Total estimated amortization expense	$ 1,023	$ 1,316

Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Finite Lived Intangible Assets [Line Items]
Goodwill	$ 7,446	$ 7,446
ALT [Member]
Finite Lived Intangible Assets [Line Items]
Goodwill	1,861	1,861
H G P
Finite Lived Intangible Assets [Line Items]
Goodwill	2,041	2,041
NLEX [Member]
Finite Lived Intangible Assets [Line Items]
Goodwill	$ 3,544	$ 3,544

Schedule of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current:
Third party debt current	$ 525	$ 1,733
Non-current:
Third party debt	0	5,495
Total third party debt	525	7,228
2021 Credit Facility
Current:
Third party debt current	0	0
2023 Credit Facility
Current:
Third party debt current	0	1,222
Non-current:
Third party debt	0	5,100
ALT Note
Current:
Third party debt current	525	511
Non-current:
Third party debt	$ 0	$ 395

Debt (Narrative) (Details) - USD ($) $ in Thousands				9 Months Ended
Debt (Narrative) (Details) - USD ($) $ in Thousands	Jul. 24, 2024	May 26, 2023	Aug. 23, 2021	Sep. 30, 2024	Dec. 31, 2023	May 05, 2021
Heritage Global LLC [Member]
Debt Instrument [Line Items]
Line of credit			$ 2,000
Debt instrument, Maturity date			Aug. 23, 2025
Interest rate per annum			3.00%
Litigation settlement installments amount due			$ 44,000
Debt outstanding amount				$ 500
2021 Credit Facility
Debt Instrument [Line Items]
Interest rate per annum		1.00%
Line of Credit Facility, Average Outstanding Amount				5,000
2023 Credit Facility \| Heritage Global LLC [Member]
Debt Instrument [Line Items]
Interest rate per annum		0.25%
C3bank [Member]
Debt Instrument [Line Items]
Line of credit						$ 10,000
Debt instrument, Maturity date	Apr. 27, 2028	Oct. 27, 2024
Accrued interest	$ 100
Company paid Full Amount	5,800
Debt outstanding amount	$ 5,700			$ 0
Short-Term Debt, Weighted Average Interest Rate, at Point in Time				8.75%	9.51%
C3bank [Member] \| Maximum [Member]
Debt Instrument [Line Items]
Interest rate per annum		6.75%
C3bank [Member] \| 2023 Credit Facility
Debt Instrument [Line Items]
Line of credit		$ 7,000

Income Taxes (Narrative) (Details) - USD ($) $ in Millions	9 Months Ended	192 Months Ended
Income Taxes (Narrative) (Details) - USD ($) $ in Millions	Sep. 30, 2024	Dec. 31, 2023
Income Taxes [Line Items]
Operating loss carryforwards	$ 50.3
Operating Loss Carryforward Limitations On Use	$ 1.7	$ 2.5
Operating Loss CarryForwards Expiring Year	2024
Description of Income Tax Credit Carryforwords	These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years.
Valuation allowance	$ 2.2	$ 2.2
Ownership Percentage [Member]
Income Taxes [Line Items]
Ownership Percentage	5.00%

Related Party Transactions (Narrative) (Details) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Senior Officer of NLEX [Member] \| Lease Amounts [Member] \| Edwardsville, IL [Member] \| Selling, General and Administrative Expenses [Member]
Related Party Transaction [Line Items]
Payment to related party	$ 85,000	$ 85,000

Segment Information - Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Net operating income (loss)	$ 1,479	$ 2,769	$ 7,581	$ 9,764
Industrial Assets Division [Member]
Net operating income (loss)	736	2,100	3,672	6,120
Financial Assets Division [Member]
Net operating income (loss)	1,811	1,711	7,411	6,956
Auction and Liquidation [Member]
Net operating income (loss)	583	1,099	3,500	3,282
Refurbishment & Resale [Member]
Net operating income (loss)	153	1,001	172	2,838
Brokerage [Member]
Net operating income (loss)	1,655	2,055	5,662	6,217
Specialty Lending [Member]
Net operating income (loss)	156	(344)	1,749	739
Corporate and Other [Member]
Net operating income (loss)	(1,068)	(1,042)	(3,502)	(3,312)
Consolidated [Member]
Net operating income (loss)	$ 1,479	$ 2,769	$ 7,581	$ 9,764