Core Points - Heritage Global Partners (HGP), a subsidiary of Heritage Global Inc., has been appointed by the U.S. Bankruptcy Court to auction brewing and restaurant equipment from nine former Iron Hill Brewery & Restaurant locations [1] - The auction is part of the Chapter 7 bankruptcy proceedings of Iron Hill Brewery LLC, filed in the District of New Jersey [1]

Core Insights - Heritage Global Partners has been appointed by the U.S. Bankruptcy Court to conduct an auction of over $4 million in inventory from Seraphine USA, Inc. [1] Company Overview - Heritage Global Partners is a subsidiary of Heritage Global Inc. and is recognized as a leader in asset advisory and auction services [1]. - Seraphine USA, Inc. is the U.S. operations of an internationally recognized maternity apparel brand [1]. Financial Details - The auction will involve over $4 million in brand-new and returned inventory [1].

Financial Data and Key Metrics Changes - The company reported EBITDA of $1.4 million for Q3 2025, a decrease from $1.9 million in the prior year period [3][10] - Consolidated operating income was $1.3 million in Q3 2025, down from $1.5 million in Q3 2024 [7] - Net income for Q3 2025 was approximately $600,000 or $0.02 per diluted share, compared to $1.1 million or $0.03 per diluted share in Q3 2024 [10] - Adjusted EBITDA decreased to $1.6 million from $1.9 million year-over-year [10] - Stockholders' equity increased to $66.5 million as of September 30, 2025, compared to $65.2 million at the end of 2024 [11] Business Line Data and Key Metrics Changes - The industrial assets division reported operating income of approximately $900,000 in Q3 2025, up from approximately $700,000 in the prior year [8] - The financial assets division reported operating income of $1.6 million in Q3 2025, down from $1.8 million in Q3 2024 [8] - The ALT segment improved operating income to approximately $400,000 in Q3 2025 from approximately $200,000 in Q3 2024 [8] Market Data and Key Metrics Changes - The company noted a healthy amount of auctions, primarily smaller-scale activities, as larger companies opted to delay significant transactions due to economic uncertainty [9] - Consumer debt remains high, but credit performance metrics suggest market stabilization [10] - Regional banks are facing increased scrutiny over loan quality, which may lead to higher charge-offs and non-performing loan volumes [10] Company Strategy and Development Direction - The company is focused on M&A as a critical component of its long-term strategy, with a sharpened focus on accretive transactions [11][12] - The CEO emphasized a tactical execution phase for M&A, identifying companies that can plug gaps and create long-term shareholder value [5][13] - The company is nearing completion of a new facility in San Diego, which supports its next growth phase [9] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about future opportunities, particularly in light of increasing distressed assets reported by regional banks [4][10] - The company is prepared to capture market share as opportunities arise, with a strong balance sheet and cash position [11][12] - Management acknowledged the challenges of a wait-and-see economy but highlighted successful smaller transactions that contributed to profitability [4][18] Other Important Information - The company authorized a new share repurchase program allowing for the repurchase of up to $7.5 million in common stock over the next three years [12] - The only remaining debt on the balance sheet is a mortgage for the new headquarters, with a capacity on the line of credit at zero balance [20] Q&A Session Summary Question: Capital allocation strategy regarding M&A versus stock buybacks - Management indicated that while the stock is undervalued, the focus remains on M&A transactions that will drive growth, but they are prepared to buy back stock if necessary [16] Question: Activity in the industrial assets division - Management noted that many companies are in a hold-on mode, releasing surplus assets but delaying significant decisions due to economic uncertainty [18] Question: Update on Heritage Capital portfolio - Management reported progress in aligning with senior lenders and executing a plan to work down the portfolio, with positive initial results [28]

Financial Performance - The gross profit for the three months ended September 30, 2025, was $7.3 million, compared to $7.2 million for the same period in 2024, reflecting a slight increase[112]. - For the nine months ended September 30, 2025, the gross profit was $23.7 million, compared to $23.8 million for the same period in 2024, indicating a marginal decrease[113]. - The Company recorded operating income of $1.3 million for the three months ended September 30, 2025, compared to $1.5 million for the same period in 2024[112]. - The operating income for the nine months ended September 30, 2025, was $4.9 million, down from $7.6 million for the same period in 2024[113]. Investments and Receivables - As of September 30, 2025, the Company held a gross balance of investments in notes receivable of $28.4 million, with the largest borrower's balance at $21.7 million, representing 76% of total gross notes receivable[43]. - The allowance for credit losses as of September 30, 2025, was approximately $1.467 million, with specific allocations of $134,000 for accounts receivable, $346,000 for notes receivable, and $987,000 for equity method investments[47]. - The Company's notes receivable balance related to loans to buyers of charged-off and nonperforming receivable portfolios was $8.9 million as of September 30, 2025, down from $9.6 million as of December 31, 2024[64]. - The Company performed a quarterly review of all outstanding loan receivables to assess credit quality and potential impairment indicators[53]. - The Company engaged in a due diligence process to mitigate concentration risk, requiring security from each borrower and leveraging its valuation expertise[45]. - The Company has not experienced significant collectability issues with its accounts receivable, which are primarily related to well-known academic and financial institutions[49]. Stock and Compensation - The Company issued options to purchase 70,000 shares of common stock and canceled 83,500 options during the nine months ended September 30, 2025[68]. - As of September 30, 2025, there were 2,204,100 outstanding options with a weighted average exercise price of $1.74 and an intrinsic value of $761,000[68]. - Stock-based compensation expense related to common stock options was $0.4 million for both the nine months ended September 30, 2025 and 2024[68]. - The Company recognized stock-based compensation expense of approximately $0.4 million for restricted stock awards for the nine months ended September 30, 2025 and 2024[72]. - The unrecognized stock-based compensation expense related to unvested common stock options was approximately $0.6 million as of September 30, 2025[68]. Joint Ventures - The Company's joint ventures generated total revenues of $8.264 million for the nine months ended September 30, 2025, compared to $21.692 million for the same period in 2024[75]. - The net income from joint ventures for the nine months ended September 30, 2025, was $7,875,000, compared to $13,353,000 for the same period in 2024[75]. - As of September 30, 2025, the Company recognized approximately $1.2 million in life-to-date earnings from equity method investments related to KNFH II LLC[77]. Assets and Liabilities - The total right-of-use assets as of September 30, 2025, amounted to $1,694,000, down from $2,208,000 as of December 31, 2024[88]. - The total lease liabilities as of September 30, 2025, were $1,799,000, compared to $2,317,000 as of December 31, 2024[88]. - The Company purchased real estate for $7.4 million on February 11, 2025, which includes $2.8 million allocated to the building and $4.6 million to the land[91]. - As of September 30, 2025, total property and equipment, net, was $9,486,000, an increase from $1,643,000 as of December 31, 2024[92]. - The total estimated principal repayments on outstanding debt as of September 30, 2025, were $4,100,000, with no current debt outstanding[96]. - The Company’s goodwill remained unchanged at $7,446,000 as of September 30, 2025, compared to December 31, 2024[95]. - Amortization expense for the nine months ended September 30, 2025, was $0.2 million, down from $0.3 million for the same period in 2024[93]. Regulatory and Compliance - The Company plans to adopt ASU 2025-05 related to credit losses for accounts receivable and contract assets for the fiscal year beginning January 1, 2026[59]. - The Company anticipates that ASU 2024-03 will require additional disclosures related to income statement expense information starting with the Annual Report for the year ended December 31, 2026[58]. - The Company entered into a Loan Modification Agreement on December 27, 2024, extending the maturity date of the 2021 Credit Facility to June 27, 2026, and raising the interest rate floor by 0.25% to 7.0%[101]. - As of September 30, 2025, there was no outstanding balance on the 2021 Credit Facility, and the Company was in compliance with all financial and negative covenants[102]. - The Company had aggregate federal net operating loss carry-forwards of $41.0 million as of September 30, 2025, with $22.5 million expected to be utilized[107]. - The Company does not expect the One Big Beautiful Bill Act to have a material impact on its annual effective tax rate in 2025[110].

Heritage Global Inc. Conference Summary Company Overview - Heritage Global Inc. trades on NASDAQ with a market cap of approximately $80 million and has a history of profitability, consistently making $1 million to $2 million per quarter [1][2] Core Business Segments - The company operates in two divisions: industrial and financial [2] - The industrial division has evolved from traditional auctioneering to an e-commerce platform, serving large multinational clients such as Pfizer, Boeing, and Halliburton [3][4] Financial Performance - The company has maintained profitability, with quarterly earnings fluctuating between $1 million and $2 million, influenced by mergers and acquisitions (M&A) and larger auctions [4][5] - Current economic conditions have led to a slowdown in asset trading, with many companies in a "wait-and-see" mode regarding surplus asset sales [5][6] Market Dynamics - There is a significant buildup of inventories as companies transition to lean manufacturing and AI-driven processes, which will eventually necessitate the sale of older equipment [6][19] - The financial division, NLEX, has seen growth due to increased credit card debt and non-performing loans, with expectations for substantial growth in the coming years [14][16] Strategic Focus - The company aims to transition from making $1 million to $2 million per quarter to achieving $3 million to $5 million through strategic M&A [7][8] - Heritage Global has been preparing for M&A opportunities without incurring debt, currently holding a $10 million credit line [9][20] Competitive Landscape - The industrial auction market is competitive, with several large players, but Heritage Global believes it can outperform them in transactions due to its niche focus [24][25] - The company is also exploring expansion into Europe and diversifying into commercial real estate non-performing loans [25][26] Regulatory Environment - Changes in government policies, particularly regarding student loans and regional banks, may create new opportunities for Heritage Global [20][21] Future Outlook - The company is optimistic about future growth, particularly in the financial sector, as the market for non-performing loans is expected to expand significantly [14][21] - The management is committed to executing a growth strategy and has a young, dedicated team to support this vision [19] Key Takeaways - Heritage Global is positioned for growth through strategic M&A and a focus on evolving market conditions in both industrial and financial sectors [19][28] - The company has a solid financial foundation with zero debt and a plan for capital allocation, including stock repurchase programs [20][22]

Financial Data and Key Metrics Changes - Consolidated operating income was $2,200,000 in Q2 2025, down from $3,500,000 in Q2 2024 [16] - Adjusted EBITDA decreased to $2,660,000 from $4,000,000 year-over-year [19] - Net income was $1,600,000 or $0.05 per diluted share, compared to $2,500,000 or $0.07 per diluted share in the prior year [19] Business Line Data and Key Metrics Changes - The Industrial Assets division reported operating income of $1,300,000 in Q2 2025, down from $2,100,000 in the prior year [16] - The Financial Assets division's operating income was $2,200,000 in Q2 2025, compared to $2,700,000 in Q2 2024 [17] - The appraisals business achieved operating income of approximately $250,000, recovering from a loss in the first quarter [17] Market Data and Key Metrics Changes - The company noted a healthy spread of large multinational firms managing their surplus diligently, leading to increased surplus assets and plant closures [8][9] - There is a growing trend of new sellers entering the market, particularly among regional banks and alternative lending companies [41][42] Company Strategy and Development Direction - The company is in a serious acquisition mode, actively looking at multiple companies to drive growth [12][14] - The focus is on building a stable operating platform and achieving consistent performance above the $2,000,000 operating income mark [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's stability and capability to navigate the current macroeconomic challenges [6][7] - There is a belief that the company is well-positioned to seize growth opportunities in the coming quarters [21][22] Other Important Information - The company repurchased approximately 750,000 shares for a total of $1,600,000 at an average cost of $2.13 per share [19] - The repurchase program has been extended for an additional three years with an allowable spend of $7,500,000 [19] Q&A Session Summary Question: Is $2,000,000 in operating income a good baseline? - Management indicated that while $2,000,000 is a reasonable expectation, it requires consistent performance and effort to maintain and exceed this level [25][26] Question: Are there more portfolios coming to market? - Management noted an increase in new sellers, particularly regional banks and alternative lenders, entering the market [41][42] Question: How are tariffs affecting demand for used equipment? - Management observed that there is a preliminary increase in demand for modern equipment, with concerns about supply chain issues driving buyers to pay premiums for timely access [33] Question: What types of new sellers are entering the NLEX market? - The company is seeing a mix of regional banks and alternative lenders, with a steady growth in the number of sellers [41][42] Question: Are there still opportunities for acquisitions in Europe? - The company confirmed ongoing interest in expanding internationally, particularly in Europe, with multiple opportunities being evaluated [44][45] Question: Any updates on legal collections for large borrowers? - Management stated that progress is steady, but no significant developments have been disclosed at this time [48][49]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, statements of stockholders' equity, and cash flow statements, along with detailed notes [Key Balance Sheet Metrics (in thousands)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $87,686 | $81,309 | | Total Liabilities | $21,980 | $16,108 | | Total Stockholders' Equity | $65,706 | $65,201 | | Property and equipment, net | $9,126 | $1,643 | | Non-current portion of third party debt | $4,100 | $0 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the six months ended June 30, 2025, total revenues increased by 15% to $27.8 million, but net income decreased by 37% to $2.7 million, primarily due to a 95% drop in equity method investment earnings [Key Income Statement Metrics (in thousands)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (%) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Total Revenues | $27,763 | $24,184 | 15% | | Net Income | $2,701 | $4,296 | (37)% | | Earnings of equity method investments | $123 | $2,522 | (95)% | | Net income per share – basic | $0.08 | $0.12 | (33)% | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased slightly to $65.7 million at June 30, 2025, driven by net income, partially offset by common stock repurchases totaling approximately $5.6 million [Key Stockholders' Equity Metrics (in thousands)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Total Stockholders' Equity | $65,706 | $65,201 | | Accumulated deficit | $(225,143) | $(227,844) | | Treasury stock at cost | $(5,619) | $(2,992) | - The Company repurchased **2,897,658 common shares** for approximately **$5.6 million** under its share repurchase program, which ended on June 30, 2025[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to $4.5 million in H1 2025, while investing activities shifted to using $8.6 million, and financing activities provided $2.2 million from new mortgage debt [Key Cash Flow Metrics (in thousands)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $4,496 | $7,730 | | Net cash (used in) provided by investing activities | $(8,581) | $5,507 | | Net cash provided by (used in) financing activities | $2,182 | $(933) | | Net change in cash and cash equivalents | $(1,903) | $12,304 | | Cash and cash equivalents as of end of period | $19,846 | $24,583 | - Cash used in investing activities during H1 2025 was primarily driven by the purchase of property and equipment ($7.6 million) and investments in notes receivable ($3.0 million)[17](index=17&type=chunk)[162](index=162&type=chunk) - Cash provided by financing activities in H1 2025 included **$4.1 million** in proceeds from a new mortgage and **$1.1 million** from secured borrowing, partially offset by **$2.6 million** in common stock repurchases[17](index=17&type=chunk)[164](index=164&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the Company's financial statements, covering accounting policies, specific asset and liability accounts, equity changes, and segment information [Note 1 – Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) - Heritage Global Inc (HG) consolidates its subsidiaries, including Heritage Global Partners, National Loan Exchange Inc, Heritage Global Capital LLC, and Heritage ALT LLC, operating in Auction and Liquidation, Refurbishment & Resale, Brokerage, and Specialty Lending segments[19](index=19&type=chunk)[20](index=20&type=chunk) - The Company's share repurchase program ended on June 30, 2025, with approximately **$5.6 million** utilized out of the authorized **$6.0 million** for the repurchase of **2,897,658 common shares**[23](index=23&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) - Significant estimates in financial statements include collectability of revenue, valuation of accounts/notes receivable, inventory, investments, goodwill, intangible assets, liabilities, deferred income tax assets/liabilities, and stock-based compensation[26](index=26&type=chunk) - Revenue recognition follows ASC Topic 606 for services and asset sales, and ASC Topic 310 for lending activities[27](index=27&type=chunk)[28](index=28&type=chunk)[33](index=33&type=chunk) - The amortized cost basis of loans in nonaccrual status was **$22.4 million** as of June 30, 2025 (**$4.9 million** in notes receivable and **$17.5 million** in equity method investments), primarily due to the largest borrower's default since June 2024[39](index=39&type=chunk) [Allowance for Credit Loss Summary (in thousands)](index=9&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) | Allowance for Credit Loss | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :----------------------------- | :------------------------------- | | Accounts Receivable | $135 | $132 | | Notes Receivable | $376 | $383 | | Equity Method Investments | $985 | $986 | | **Total** | **$1,496** | **$1,501** | - The Company adopted ASU 2023-07 (Segment Reporting) as of December 31, 2024, and ASU 2023-09 (Income Taxes) effective January 1, 2025. ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 3 – Accounts Receivable, net](index=16&type=section&id=Note%203%20%E2%80%93%20Accounts%20Receivable,%20net) - The reserve for credit losses related to accounts receivable remained approximately **$0.1 million** as of both June 30, 2025, and December 31, 2024, with no material adjustments during H1 2025[47](index=47&type=chunk)[57](index=57&type=chunk) [Note 4 – Notes Receivable, net](index=16&type=section&id=Note%204%20%E2%80%93%20Notes%20Receivable,%20net) [Notes Receivable Summary (in thousands)](index=16&type=section&id=Note%204%20%E2%80%93%20Notes%20Receivable,%20net) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Notes receivable, net | $9,167 | $10,409 | | Amortized cost basis of nonaccrual notes receivable | $4,900 | $5,300 | - During H1 2025, the Company made additional investments in notes receivable of approximately **$3.0 million**, offset by principal payments of approximately **$3.9 million**[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) [Note 5 – Stock-based Compensation](index=17&type=section&id=Note%205%20%E2%80%93%20Stock-based%20Compensation) [Stock Option Summary](index=17&type=section&id=Note%205%20%E2%80%93%20Stock-based%20Compensation) | Stock Options | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Outstanding Options | 2,211,600 | 2,231,600 | | Weighted Average Exercise Price | $1.74 | $1.77 | | Options Exercisable | 1,672,725 | N/A | | Stock-based compensation expense (H1) | $0.3 million | $0.3 million | - Unrecognized stock-based compensation expense for unvested common stock options was approximately **$0.7 million** as of June 30, 2025, expected to be recognized over **1.5 years**[63](index=63&type=chunk) - Stock-based compensation expense related to restricted stock awards was approximately **$0.2 million** for both H1 2025 and H1 2024, with **$0.4 million** unrecognized as of June 30, 2025[68](index=68&type=chunk) [Note 6 – Equity Method Investments](index=19&type=section&id=Note%206%20%E2%80%93%20Equity%20Method%20Investments) - The Company holds significant influence in several joint ventures across Industrial Assets (CPFH LLC, KNFH LLC, DHC8 LLC, KNFH II LLC, DLZ Solutions LLC) and Financial Assets (HGC Origination I LLC, HGC Funding I LLC, HGC MPG Funding LLC)[69](index=69&type=chunk) - As of June 30, 2025, the amortized cost basis of the Company's share of loans in nonaccrual status recorded in equity method investments was **$17.5 million**, with no actual credit losses incurred[70](index=70&type=chunk) [Joint Venture Financial Performance (in thousands)](index=19&type=section&id=Note%206%20%E2%80%93%20Equity%20Method%20Investments) | Joint Venture Financials | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------- | :------------------------------------------ | :------------------------------------------ | | Total Revenue | $5,538 | $18,622 | | Total Net Income (loss) | $5,221 | $10,309 | | Total Assets | $69,602 | $75,759 | | Total Liabilities | $2,861 | $4,318 | - In January 2025, DLZ Solutions LLC (**20% share**) purchased a pharmaceutical plant for approximately **$7.8 million** and entered a lease agreement with a purchase option. Concurrently, the Company purchased a **20% participating interest** in a financial asset for **$1.6 million** to acquire machinery and equipment at the same plant, also with a leaseback and purchase option[74](index=74&type=chunk)[75](index=75&type=chunk) [Note 7 – Earnings Per Share](index=21&type=section&id=Note%207%20%E2%80%93%20Earnings%20Per%20Share) [Shares Outstanding Summary](index=21&type=section&id=Note%207%20%E2%80%93%20Earnings%20Per%20Share) | Shares Outstanding | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Basic weighted average shares outstanding | 35,120,131 | 36,674,620 | | Diluted weighted average common shares outstanding | 35,800,352 | 36,759,995 | - Approximately **0.9 million potential common shares** for H1 2025 (**0.8 million** for H1 2024) were excluded from diluted EPS calculation due to their anti-dilutive effect[79](index=79&type=chunk) [Note 8 – Leases](index=23&type=section&id=Note%208%20%E2%80%93%20Leases) [Lease Assets and Liabilities (in thousands)](index=23&type=section&id=Note%208%20%E2%80%93%20Leases) | Lease Assets & Liabilities | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------- | :----------------------------- | :------------------------------- | | Total right-of-use assets | $1,868 | $2,208 | | Total lease liabilities | $1,975 | $2,317 | - The weighted average remaining lease term for operating leases is **2.7 years**, and the weighted average discount rate is **5.5%** as of June 30, 2025[83](index=83&type=chunk) - Lease expense was approximately **$0.4 million** for both the six-month periods ended June 30, 2025, and 2024[84](index=84&type=chunk) [Note 9 – Property and Equipment, net](index=24&type=section&id=Note%209%20%E2%80%93%20Property%20and%20Equipment,%20net) [Property and Equipment Details (in thousands)](index=24&type=section&id=Note%209%20%E2%80%93%20Property%20and%20Equipment,%20net) | Property and Equipment, net | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Building | $3,797 | $985 | | Land | $4,985 | $397 | | Construction in progress | $182 | $0 | | **Total Property and equipment, net** | **$9,126** | **$1,643** | - On February 11, 2025, the Company purchased real estate for **$7.4 million**, consisting of land and a building, to be used as its future corporate headquarters and warehouse/office space for HGP operations[86](index=86&type=chunk) [Note 10 – Intangible Assets and Goodwill](index=25&type=section&id=Note%2010%20%E2%80%93%20Intangible%20Assets%20and%20Goodwill) [Intangible Assets Summary (in thousands)](index=25&type=section&id=Note%2010%20%E2%80%93%20Intangible%20Assets%20and%20Goodwill) | Intangible Assets | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :----------------------------- | :------------------------------- | | Total amortizable intangible assets | $794 | $925 | | Indefinite-lived intangible assets (Trade Name NLEX) | $2,437 | $2,437 | | **Total intangible assets** | **$3,231** | **$3,362** | - Amortization expense for H1 2025 was **$0.1 million**, compared to **$0.2 million** for H1 2024[89](index=89&type=chunk) [Goodwill by Segment (in thousands)](index=25&type=section&id=Note%2010%20%E2%80%93%20Intangible%20Assets%20and%20Goodwill) | Goodwill | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------- | :----------------------------- | :------------------------------- | | 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 during H1 2025[91](index=91&type=chunk) [Note 11 – Debt](index=26&type=section&id=Note%2011%20%E2%80%93%20Debt) [Debt Summary (in thousands)](index=26&type=section&id=Note%2011%20%E2%80%93%20Debt) | Debt | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Current portion of third party debt | $134 | $395 | | Non-current portion of third party debt | $4,100 | $0 | | **Total third party debt** | **$4,234** | **$395** | - A new **$4.1 million mortgage loan** was entered into on February 6, 2025, to purchase real property for the Company's future corporate headquarters[99](index=99&type=chunk)[101](index=101&type=chunk) - The 2021 Credit Facility had no outstanding balance as of June 30, 2025, and its maturity date was extended to June 27, 2026[96](index=96&type=chunk)[97](index=97&type=chunk) - The outstanding balance of the ALT Note was **$0.1 million** as of June 30, 2025, with a maturity date of August 23, 2025[98](index=98&type=chunk) [Note 12 – Income Taxes](index=29&type=section&id=Note%2012%20%E2%80%93%20Income%20Taxes) - The Company had aggregate federal net operating loss carryforwards of **$40.7 million** as of June 30, 2025, beginning to expire in 2025[102](index=102&type=chunk) - A partial valuation allowance of approximately **$3.5 million** is maintained against net deferred tax assets as of June 30, 2025, and December 31, 2024[104](index=104&type=chunk) - The One Big Beautiful Bill Act (OBBB) is not expected to have a material impact on the Company's annual effective tax rate in 2025[105](index=105&type=chunk) [Note 13 – Related Party Transactions](index=29&type=section&id=Note%2013%20%E2%80%93%20Related%20Party%20Transactions) - Payments to David Ludwig (President of NLEX and board member) for office space lease were approximately **$58,000** for H1 2025, a slight increase from **$57,000** in H1 2024[106](index=106&type=chunk) [Note 14 – Segment Information](index=29&type=section&id=Note%2014%20%E2%80%93%20Segment%20Information) - The Company's reportable segments are Auction and Liquidation, Refurbishment & Resale, Brokerage, and Specialty Lending[168](index=168&type=chunk) [Consolidated Segment Performance (in thousands)](index=29&type=section&id=Note%2014%20%E2%80%93%20Segment%20Information) | Segment Performance (H1) | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :--------- | | Consolidated Gross Profit | $16,422 | $16,572 | (1)% | | Consolidated Operating Income | $3,635 | $6,102 | (40)% | | Earnings from equity method investments | $123 | $2,522 | (95)% | [Segment Operating Income (H1 2025) (in thousands)](index=29&type=section&id=Note%2014%20%E2%80%93%20Segment%20Information) | Segment Operating Income (H1 2025, in thousands) | | :-------------------------- | :----------------------------- | | Auction and Liquidation | $1,639 | | Refurbishment & Resale | $675 | | Brokerage | $3,577 | | Specialty Lending | $260 | | Corporate and other | $(2,516) | [Note 16 – Subsequent Events](index=30&type=section&id=Note%2016%20%E2%80%93%20Subsequent%20Events) - On July 31, 2025, the Board of Directors authorized a new share repurchase program (2025 Repurchase Program) for up to **$7.5 million** of common stock, effective through June 30, 2028, following the termination of the previous program[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, covering history, business segments, competitive landscape, strategic advantages, liquidity, capital resources, cash flows, and results of operations [Overview, History and Recent Developments](index=31&type=section&id=Overview,%20History%20and%20Recent%20Developments) - Heritage Global Inc (HG) was incorporated in 1983 and adopted its current name in 2013 to better reflect its auction and specialty lending business lines[114](index=114&type=chunk) - The Company's corporate structure includes wholly-owned subsidiaries: Heritage Global Partners, Heritage Global LLC, National Loan Exchange, Heritage Global Capital LLC, and Heritage ALT LLC[118](index=118&type=chunk) [Nonaccrual Loans](index=32&type=section&id=Nonaccrual%20Loans) - The Company's largest borrower defaulted in June 2024, leading to **$22.4 million** in nonaccrual loans as of June 30, 2025 (**$4.9 million** in notes receivable and **$17.5 million** in equity method investments)[123](index=123&type=chunk) - The Company does not expect to realize any return from these nonaccrual loans in 2025, and future realization remains uncertain[123](index=123&type=chunk) [Industry and Competition](index=33&type=section&id=Industry%20and%20Competition) - The Company operates in highly fragmented markets for industrial asset disposition and charged-off receivable brokerage/specialty financing, competing with various liquidators, auction companies, dealers, and brokers[124](index=124&type=chunk) - The business is positioned to grow in all economic cycles, benefiting from increased surplus assets and distressed debt during downturns, and leveraging competitive advantages during growth periods[125](index=125&type=chunk) - Joint ventures are a key strategy to access more opportunities, mitigate competition, and contribute to the objective of being a leading resource for clients[126](index=126&type=chunk) [Our Competitive Strengths](index=33&type=section&id=Our%20Competitive%20Strengths) - Differentiated business model with diversified business lines (brokerage, principal-based auction services, refurbishment and resale, advisory services, secured lending) and multiple revenue streams[128](index=128&type=chunk) - Compelling macro growth drivers include increased supply of surplus assets during recessions, rising consumer lending charge-offs, and active M&A markets in manufacturing[129](index=129&type=chunk) - Strong management team with deep domain expertise, including Ross Dove (CEO), Nick Dove (President, Industrial Assets Division), and David Ludwig (President, Financial Assets Division)[132](index=132&type=chunk) [Financial Assets Division](index=35&type=section&id=Financial%20Assets%20Division) - The Brokerage Segment (NLEX) acts as an advisor for sales of charged-off and nonperforming asset portfolios, having sold over **$200 billion** face value of assets since the 1980s[134](index=134&type=chunk) - The Specialty Lending Segment (HGC) provides financing solutions to investors in charged-off and nonperforming asset portfolios, having issued **$157.2 million** in total loans since 2019 (**$70.8 million** funded by the Company)[135](index=135&type=chunk) - As of June 30, 2025, the net balance related to investments in loans to buyers of charged-off portfolios was **$27.1 million** (**$8.7 million notes receivable**, **$18.4 million equity method investments**)[135](index=135&type=chunk) - A significant concentration risk exists with one borrower, whose **$21.8 million note balance** represents **77%** of total gross notes receivable and is currently in nonaccrual status due to default[136](index=136&type=chunk) [Industrial Assets Division](index=36&type=section&id=Industrial%20Assets%20Division) - The Auction and Liquidation Segment (HGP) offers global full-service auction, appraisal, and asset advisory, with fees typically ranging from **15%-50%**[140](index=140&type=chunk) - The Refurbishment & Resale Segment (ALT) specializes in refurbishing and reselling laboratory equipment, particularly in the biotech and pharma sectors[141](index=141&type=chunk) - Growth opportunities include securing ongoing contracts with large multinational sellers, being a first mover in emerging sectors, and expanding valuation services geographically and with existing bank relationships[142](index=142&type=chunk) [Government Regulation and Activities](index=36&type=section&id=Government%20Regulation%20and%20Activities) - The Company is subject to federal, state, and local consumer protection laws, including privacy and trade practices, and regulations for auctions, which may incur substantial compliance costs[143](index=143&type=chunk) - The current domestic and international political environment, including tariffs and trade disputes, contributes to economic uncertainty, potentially increasing demand for used industrial assets but also affecting distressed debt collectability[145](index=145&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management's financial statements rely on significant estimates and assumptions, including collectability of revenue, valuation of accounts/notes receivable, inventory, investments, goodwill, intangible assets, liabilities, deferred income tax assets/liabilities, and stock-based compensation[147](index=147&type=chunk) - There were no material changes to the Company's critical accounting policies during the six months ended June 30, 2025[148](index=148&type=chunk) - The Company has no off-balance sheet arrangements and does not expect to pay any dividends in the future[148](index=148&type=chunk) [Management's Discussion of Financial Condition](index=38&type=section&id=Management's%20Discussion%20of%20Financial%20Condition) [Financial Condition Summary (in millions)](index=38&type=section&id=Management's%20Discussion%20of%20Financial%20Condition) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :-------------------------- | :---------------------------- | | Working capital | $16.4 | $18.5 | | Current assets | $32.1 | $33.1 | | Current liabilities | $15.7 | $14.6 | | Net cash available (net of payables to sellers) | $11.7 | $14.3 | - The Company believes it can fund its operations and debt service obligations for 12 months and beyond through a combination of working capital, cash flows from operations, and its existing line of credit[152](index=152&type=chunk) - Indebtedness includes the ALT Note (**$0.1 million** outstanding) and a new Mortgage (**$4.1 million** outstanding), with no outstanding balance on the 2021 Credit Facility[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [Management's Discussion of Results of Operations](index=40&type=section&id=Management's%20Discussion%20of%20Results%20of%20Operations) [Financial Data Table (in thousands)](index=40&type=section&id=Management's%20Discussion%20of%20Results%20of%20Operations) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change ($k) | Change (%) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------- | :--------- | | Total Revenues | $27,763 | $24,184 | $3,579 | 15% | | Asset sales | $9,849 | $6,720 | $3,129 | 47% | | Cost of services revenue | $4,647 | $2,930 | $1,717 | 59% | | Total operating costs and expenses | $24,251 | $20,604 | $3,647 | 18% | | Earnings of equity method investments | $123 | $2,522 | $(2,399) | (95)% | | Operating income | $3,635 | $6,102 | $(2,467) | (40)% | | Net income | $2,701 | $4,296 | $(1,595) | (37)% | - Gross profit for H1 2025 was **$16.4 million**, a slight decrease of **1%** from **$16.6 million** in H1 2024, primarily due to normal changes in the timing and magnitude of asset liquidation transactions[180](index=180&type=chunk) - Selling, general and administrative expense remained generally consistent at **$12.7 million** for both H1 2025 and H1 2024[181](index=181&type=chunk) [Key Performance Indicators](index=47&type=section&id=Key%20Performance%20Indicators) - Management uses EBITDA and Adjusted EBITDA as key performance indicators (KPIs) to assess results and make strategic decisions, in addition to GAAP operating income[186](index=186&type=chunk) [EBITDA and Adjusted EBITDA Reconciliation (in thousands)](index=47&type=section&id=Key%20Performance%20Indicators) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $2,701 | $4,296 | | Depreciation and amortization | $236 | $288 | | Interest expense, net | $(74) | $200 | | Income tax expense | $1,008 | $1,606 | | **EBITDA** | **$3,871** | **$6,390** | | Stock based compensation | $509 | $518 | | **Adjusted EBITDA** | **$4,380** | **$6,908** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a Smaller Reporting Company, Heritage Global Inc is not required to provide detailed quantitative and qualitative disclosures about market risk in this report - The Company is a Smaller Reporting Company and is not required to provide quantitative and qualitative disclosures about market risk[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of June 30, 2025, as concluded by the Certifying Officers[189](index=189&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the six months ended June 30, 2025[190](index=190&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) There have been no material changes to the legal proceedings previously discussed in the Company's Annual Report on Form 10-K - No material changes to the legal proceedings discussed in the Company's Form 10-K[191](index=191&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) As a Smaller Reporting Company, Heritage Global Inc is not required to provide specific risk factor disclosures in this quarterly report - The Company is a Smaller Reporting Company and is not required to provide risk factor information[192](index=192&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company repurchased **744,424 shares** of common stock for approximately **$1.6 million** during Q2 2025 under its Repurchase Program, which concluded on June 30, 2025, utilizing approximately **$5.6 million** of the authorized **$6.0 million** [Common Stock Repurchases (Q2 2025)](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------------- | :----------------------------- | :--------------------------- | | April 1 through April 30, 2025 | 199,328 | $2.08 | | May 1 through May 31, 2025 | 291,129 | $2.15 | | June 1 through June 30, 2025 | 253,967 | $2.15 | | **Total (Q2 2025)** | **744,424** | **$2.13** | - The Repurchase Program ended on June 30, 2025, with approximately **$5.6 million** utilized out of the authorized **$6.0 million** for the repurchase of **2,897,658 common shares**[195](index=195&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period covered by this report - No defaults upon senior securities were reported[196](index=196&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company's operations - This item is not applicable to the Company[197](index=197&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) James Sklar adopted a Rule 10b5-1 trading plan on June 25, 2025, for the sale of **33,606 shares** between October 1, 2025, and June 25, 2026, with no other directors or officers adopting or terminating trading arrangements during the quarter - James Sklar, Executive Vice President, General Counsel and Secretary, adopted a Rule 10b5-1 trading plan on June 25, 2025, to sell **33,606 shares** of common stock between October 1, 2025, and June 25, 2026[198](index=198&type=chunk) - No other directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[199](index=199&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, a warrant agreement, certifications from executive officers, and various Inline XBRL taxonomy documents - Exhibits include Second Amended and Restated Articles of Incorporation, Restated Bylaws, a Warrant Agreement, Certifications of Principal Executive Officer and Principal Financial Officer (pursuant to Sarbanes-Oxley Act), and Inline XBRL Instance, Schema, Calculation, Definition, Labels, and Presentation Linkbase Documents[201](index=201&type=chunk) [Signature Page](index=51&type=section&id=Signature%20Page) The report is duly signed on behalf of Heritage Global Inc by Ross Dove, Chief Executive Officer, and Brian J Cobb, Chief Financial Officer, on August 7, 2025 - The report was signed by Ross Dove, Chief Executive Officer, and Brian J Cobb, Chief Financial Officer, on August 7, 2025[205](index=205&type=chunk)

Summary of Heritage Global Inc. Conference Call Company Overview - **Heritage Global Inc.** is a leader in valuing and monetizing industrial and financial assets, including both healthy and distressed assets [3][4] - The company operates two main business segments: financial asset sales, primarily charged-off loans, and industrial asset auctions across various sectors [3][5] Financial Assets Segment - The financial assets business is experiencing growth due to record-high consumer debt levels, including credit cards and auto loans [4][10] - The company has seen a strong increase in client activity, particularly in the second half of the first quarter, with expectations for continued strong performance in upcoming quarters [11][12] - There is a significant backlog of consumer debt that is expected to convert into charge-offs over the next 24 months, providing a robust pipeline for the financial assets segment [19][20] - Asset pricing has stabilized after a pandemic-driven spike, leading to a normalized market where competitive bidding is expected [22][23] Industrial Assets Segment - The industrial assets business is influenced by macroeconomic factors such as tariffs and supply chain issues, which can increase demand for used equipment [25][28] - The company is currently experiencing steady auction activity, with a growing number of buyers shifting from new to used equipment due to supply chain delays [29][30] - There is a focus on late-model equipment, which attracts more aggressive bidding compared to older equipment [31] Real Estate and Joint Ventures - The company is involved in real estate transactions, with ongoing deals expected to yield profits in the following year [32][34] - There is a pipeline of potential deals across various sectors, including food processing and cannabis, with a goal to initiate at least one new deal within six months [34] M&A Strategy - Heritage Global is actively pursuing multiple M&A opportunities, with a balanced focus on both financial and industrial asset businesses [38][41] - The company has signed NDAs with several entities and is in advanced discussions for potential acquisitions [39] Legal and Collection Efforts - The company has implemented legal strategies to enhance collection operations, showing early positive results in recovery efforts [42][43] AI and Technology Integration - AI is being utilized to improve asset visibility and predict surplus assets, enhancing the sales process and auction strategies [46][47][48] Capital Allocation Strategy - The company prioritizes growth and earnings per share (EPS) in its capital allocation strategy, weighing stock buybacks against M&A and organic growth opportunities [52][56] Competitive Advantages - Heritage Global has established significant barriers to entry in the financial asset sector, particularly through its secure handling of sensitive information and compliance measures [64][65] Conclusion - The company is optimistic about its revenue streams for the remainder of the year, with strong performance expected in both financial and industrial asset segments [14][12]

Financial Data and Key Metrics Changes - Consolidated operating income decreased to $1,400,000 in Q1 2025 from $2,600,000 in Q1 2024 [8] - Adjusted EBITDA was $1,800,000 compared to $2,900,000 in the prior year period [12] - Net income was $1,100,000 or $0.03 per diluted share, down from $1,800,000 or $0.05 per diluted share in Q1 2024 [12] - Stockholders' equity increased to $65,400,000 as of March 31, 2025, from $65,200,000 at December 31, 2024 [12] - Cash balance was $18,800,000 as of March 31, 2025, with a net available cash balance of $10,200,000 after removing amounts due to clients [12] Business Line Data and Key Metrics Changes - Industrial Assets Division reported operating income of $1,000,000 in Q1 2025, up from $800,000 in the prior year [8] - Financial Assets Division reported operating income of $1,700,000 in Q1 2025, down from $2,900,000 in Q1 2024 [8] - Auction business in the Industrial Assets Division saw increased activity, while the appraisal business generated $300,000 to $400,000 less than anticipated [9] - The Brokerage segment in the Financial Assets Division reached $1,600,000 in operating income, with a shift towards normalized pricing levels for non-performing loans [11] Market Data and Key Metrics Changes - The market sentiment shifted from a "wait and see" approach to a more active selling environment around mid-February 2025 [5][19] - Increased corporate bankruptcy filings have led to a greater demand for auctioneer services [6] - Financial asset sellers are moving quickly to recapture values on non-performing loans, with consumer debt remaining at record levels [6] Company Strategy and Development Direction - The company is focusing on both organic growth and M&A initiatives to fuel growth [5][13] - There is an emphasis on maintaining a strong cash position and being opportunistic in capital deployment [30][32] - The company aims to raise the bar from steady profits to growing profits, indicating a focus on long-term growth [15] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for revenue generation and contract conversion, expecting trends to continue throughout 2025 and into 2026 [6][15] - The geopolitical landscape is influencing asset-based lenders to ensure strong cash positions [6] - Management believes that the supply of assets is growing, with increasing demand for quality used and refurbished industrial assets [15] Other Important Information - The company repurchased approximately 500,000 shares in the open market during Q1 2025 [12] - The company is evaluating strategic opportunities for M&A as part of its growth strategy [13] Q&A Session Summary Question: Can you talk about the type of assets you're seeing in the market? - Management noted that the market sentiment shifted to a more active selling environment around mid-February, leading to a strong second half of the quarter [19] Question: Do you anticipate growth in the financial assets business? - Management indicated that they are in a growth trajectory, with record highs in consumer debt suggesting an increase in asset flow [22] Question: Where does the loan book currently stand? - The gross loans outstanding are around $29,000,000, with cash inflows being observed due to reduced funding [23] Question: What motivated the prepayment with C3? - The company aims to avoid paying interest on unnecessary funds while maintaining available credit for opportunistic transactions [30] Question: How sustainable is the performance of NLEX? - Management believes that while prices have normalized, there is still significant volume to process, indicating a stable performance [34] Question: What growth opportunities do you see? - Management sees opportunities across both financial and industrial sectors, including expanding into new types of loans and international markets [36]

Financial Data and Key Metrics Changes - Consolidated operating income decreased to $1,400,000 in Q1 2025 from $2,600,000 in Q1 2024 [7] - Adjusted EBITDA was $1,800,000 compared to $2,900,000 in the prior year period [12] - Net income was $1,100,000 or $0.03 per diluted share, down from $1,800,000 or $0.05 per diluted share in Q1 2024 [12] - Free cash flow exceeded $1,500,000, providing resources for growth initiatives [4] Business Line Data and Key Metrics Changes - Industrial Assets Division reported operating income of $1,000,000 in Q1 2025, up from $800,000 in the prior year [7] - Financial Assets Division's operating income decreased to $1,700,000 in Q1 2025 from $2,900,000 in Q1 2024 [7] - The auction business within the Industrial Assets Division saw increased activity, while the appraisal business underperformed by approximately $300,000 to $400,000 [8][10] Market Data and Key Metrics Changes - There is a noted increase in corporate bankruptcy filings, with more Chapter 11 filings converting to Chapter 7 liquidations, which increases demand for auctioneer services [5] - Financial asset sellers are moving quickly to recapture values on nonperforming loans, with consumer debt remaining at record levels [5][11] Company Strategy and Development Direction - The company is focusing on both organic growth and M&A initiatives, with a strong emphasis on maintaining a robust cash position [4][13] - The management believes that the supply of assets is growing while demand for quality used and refurbished industrial assets is increasing [15][16] - The company is exploring opportunities in both financial and industrial sectors without favoritism, aiming to expand market share and enter new loan types [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum built in the latter half of Q1 2025, expecting this trend to continue into Q2 and beyond [5][14] - The geopolitical landscape has created a sense of urgency among asset-based lenders to ensure strong cash positions [5] - The management is confident in the company's ability to transition from steady profits to growing profits [16] Other Important Information - The company repurchased approximately 500,000 shares in the open market during Q1 2025 [12] - As of March 31, 2025, stockholders' equity was $65,400,000, reflecting a slight increase from $65,200,000 at the end of 2024 [12] Q&A Session Summary Question: Insights on the financial assets business and market trends - Management noted that the initial slow start was due to a "wait and see" sentiment, but activity picked up significantly in the latter half of Q1 [19][20] Question: Anticipated growth in the financial assets business - Management indicated that while pricing has stabilized, there is a growth trajectory expected due to high levels of consumer debt [22][23] Question: Status of the loan book and non-accrual lending - The gross loans outstanding were reported at just over $29,000,000, with cash inflows being observed due to reduced funding [25] Question: Performance and sustainability of NLEX - NLEX performance was high during the pandemic but has normalized; management believes there is still significant volume to process [35][36] Question: Growth opportunities in specific sectors - Management is exploring growth in both financial and industrial sectors, including expanding into new types of loans and international markets [37]