Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements present the company's financial position and performance as of June 30, 2022, highlighting significant growth in revenues, net income, and total assets [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets increased to **$53.5 million**, with total stockholders' equity growing to **$36.0 million** Balance Sheet Highlights (in thousands of US dollars) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $25,032 | $23,284 | | **Total assets** | $53,479 | $50,464 | | **Total current liabilities** | $14,494 | $14,224 | | **Total liabilities** | $17,506 | $17,825 | | **Total stockholders' equity** | $35,973 | $32,639 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q2 2022, total revenues significantly increased to **$11.1 million**, driving net income to **$2.6 million** ($0.07 per diluted share) Financial Performance (in thousands of US dollars, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $11,065 | $5,176 | $20,422 | $12,277 | | Asset sales | $6,470 | $1,008 | $11,659 | $3,079 | | **Operating income** | $3,624 | $73 | $4,499 | $1,119 | | **Net income** | $2,578 | $587 | $3,223 | $1,619 | | **Net income per share – diluted** | $0.07 | $0.02 | $0.09 | $0.04 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash provided by operating activities was **$1.1 million**, a significant improvement from the prior year Cash Flow Summary (in thousands of US dollars) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,119 | $(4,290) | | Net cash provided by (used in) investing activities | $2,177 | $(780) | | Net cash used in financing activities | $(842) | $(790) | | **Net increase (decrease) in cash** | **$2,454** | **$(5,860)** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, business segments, and financial instruments, highlighting segment performance and changes in debt and notes receivable - The company's reportable segments consist of the Financial Assets Division and the Industrial Assets Division[19](index=19&type=chunk) - The company's notes receivable balance, consisting of loans to buyers of charged-off receivable portfolios, decreased from **$4.0 million** at year-end 2021 to **$2.4 million** as of June 30, 2022[40](index=40&type=chunk) - Total debt decreased from **$3.8 million** at year-end 2021 to **$3.1 million** as of June 30, 2022. The outstanding balance on the **$10.0 million** revolving line of credit was **$1.4 million**[71](index=71&type=chunk)[72](index=72&type=chunk) Net Operating Income by Segment (in thousands of US dollars) | Segment | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Industrial Assets Division | $3,343 | $433 | $4,189 | $1,773 | | Financial Assets Division | $1,183 | $462 | $1,914 | $923 | | Corporate and Other (Loss) | $(902) | $(822) | $(1,604) | $(1,577) | | **Consolidated** | **$3,624** | **$73** | **$4,499** | **$1,119** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong H1 2022 performance to asset liquidation, with significant growth in both Industrial and Financial Assets divisions and improved liquidity - The company operates through two main divisions: the Industrial Assets Division (auction, appraisal, advisory) and the Financial Assets Division (accounts receivable brokerage, specialty financing)[95](index=95&type=chunk) - Management expects increased activity for its NLEX (nonperforming loans) and HGC (specialty financing) businesses as COVID-19 stimulus payments conclude and consumer loan charge-offs trend upward[94](index=94&type=chunk) - Working capital increased to **$10.5 million** as of June 30, 2022, from **$9.1 million** at the end of 2021[115](index=115&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q2 2022 total revenues more than doubled to **$11.1 million**, driven by a **542% increase** in asset sales, leading to a substantial rise in operating income Comparison of Results of Operations (in thousands of US dollars) | Metric | Q2 2022 | Q2 2021 | % Change | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $11,065 | $5,176 | 114% | $20,422 | $12,277 | 66% | | Asset sales | $6,470 | $1,008 | 542% | $11,659 | $3,079 | 279% | | **Operating income** | $3,624 | $73 | 4864% | $4,499 | $1,119 | 302% | | **Net income** | $2,578 | $587 | 339% | $3,223 | $1,619 | 99% | - Selling, general and administrative (SG&A) expenses increased by **35%** in Q2 2022 and **21%** in H1 2022, primarily due to increased compensation from the ALT acquisition and a **204% rise** in travel and entertainment expenses[139](index=139&type=chunk)[140](index=140&type=chunk)[143](index=143&type=chunk) [Key Performance Indicators](index=26&type=section&id=Key%20Performance%20Indicators) Adjusted EBITDA, a key non-GAAP indicator, significantly increased to **$3.9 million** in Q2 2022 and **$5.0 million** for H1 2022, reflecting strong operational performance Reconciliation of Net Income to Adjusted EBITDA (in thousands of US dollars) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income | $2,578 | $587 | $3,223 | $1,619 | | EBITDA | $3,757 | $171 | $4,765 | $1,308 | | **Adjusted EBITDA** | **$3,865** | **$239** | **$4,979** | **$1,719** | [Quantitative and Qualitative Disclosures About Market Risk](index=27&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 quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a Smaller Reporting Company[149](index=149&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed effective as of June 30, 2022, with no material changes in internal control over financial reporting during the quarter - The Certifying Officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[150](index=150&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[151](index=151&type=chunk) Part II. Other Information [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings have occurred since the last Annual Report on Form 10-K filing - No material changes to legal proceedings have occurred since the last Form 10-K filing[153](index=153&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) As a Smaller Reporting Company, Heritage Global Inc. is not required to provide risk factor disclosures - The company is not required to provide risk factor disclosures as it qualifies as a Smaller Reporting Company[154](index=154&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased **71,512 shares** of common stock as part of a **$4.0 million** repurchase program, with **$3.9 million** remaining - On May 5, 2022, the Board of Directors authorized a **$4.0 million** share repurchase program, which expires in June 2025[156](index=156&type=chunk) Common Stock Repurchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | June 1 - June 30, 2022 | 71,512 | $1.46 | $3,895,592 | [Exhibits](index=29&type=section&id=Item%206.%20Exhibits) The report includes various exhibits such as corporate governance documents, the 2022 Equity Incentive Plan, and officer certifications - Exhibits filed with the report include the 2022 Heritage Global Inc. Equity Incentive Plan and certifications from the Principal Executive Officer and Principal Financial Officer[161](index=161&type=chunk)

Financial Data and Key Metrics Changes - The company reported net operating income of $875,000 for Q1 2022, a decrease from $1 million in Q1 2021 [8] - Adjusted EBITDA for Q1 2022 was $1.1 million, down from $1.5 million in Q1 2021 [8] - Net income for Q1 2022 was $645,000 or $0.02 per diluted share, compared to $1 million or $0.03 per diluted share in Q1 2021 [8] Business Line Data and Key Metrics Changes - In the industrial assets division, net operating income was $846,000 in Q1 2022, down from $1.3 million in Q1 2021 [7] - The financial assets division saw net operating income of $731,000, a 59% increase from $461,000 in Q1 2021 [7] Market Data and Key Metrics Changes - The company anticipates closing two remaining Huntsville real estate transactions in Q2 or Q3, expected to contribute over $2.5 million in combined net profit [9] - The company has aggregate tax net operating loss carry forwards of approximately $78 million, which could be valuable as it generates positive results [10] Company Strategy and Development Direction - The company is optimistic about growth across all five revenue streams and expects Q2 to be a record quarter [13] - The focus is on capitalizing on anticipated market conditions and increasing demand for both financial and industrial assets [6][13] - A $4 million stock repurchase plan has been instituted, indicating confidence in the company's future [19] Management's Comments on Operating Environment and Future Outlook - Management noted a significant rise in consumer spending, which is expected to lead to increased defaults and charge-offs, benefiting the company's operations [14] - The company is seeing an increase in supply from sellers who are now monetizing surplus assets due to stronger ESG metrics [26][27] - Management expressed confidence that 2022 will be the most profitable year since the company's founding [41] Other Important Information - The balance sheet remains strong with stockholders' equity of $33.4 million as of March 31, 2022, compared to $32.6 million at the end of 2021 [11] - The company has renewed a $100 million partnership line with a New York hedge fund, enhancing its lending capabilities [29] Q&A Session Summary Question: Can you break down the revenue contribution from financial assets versus industrial assets? - Financial assets contributed $746,000 in net operating income, while industrial assets contributed $846,000 for the quarter [22][23] Question: Are you seeing more portfolios come to market? - Management noted a tremendous amount of growth and expects sequential growth for the next couple of years due to rising consumer spending [24] Question: How does the current economic environment affect industrial assets? - An increase in layoffs is producing surplus assets, and companies are now pressured to monetize these assets due to ESG metrics [26][27] Question: What is the company's position regarding capital deployment? - The company is comfortable deploying capital and is underwriting more deals than in the past, indicating a solid position for future opportunities [29][30] Question: Can you provide more details about the St. Louis acquisition? - The St. Louis acquisition involves two facilities with high-end processing equipment, and the company plans to monetize these assets similarly to the Huntsville transactions [36]

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Heritage Global Inc [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Heritage Global Inc. as of March 31, 2022, and for the three-month period then ended [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $52.1 million as of March 31, 2022, from $50.5 million at year-end 2021, driven by a rise in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $15,097 | $13,622 | | Total current assets | $24,148 | $23,284 | | Goodwill | $7,446 | $7,446 | | **Total assets** | **$52,108** | **$50,464** | | **Liabilities & Equity** | | | | Payables to sellers | $9,774 | $6,451 | | Total current liabilities | $15,381 | $14,224 | | Total liabilities | $18,741 | $17,825 | | Total stockholders' equity | $33,367 | $32,639 | | **Total liabilities and stockholders' equity** | **$52,108** | **$50,464** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2022, total revenues increased by 31.7% year-over-year to $9.4 million, but net income decreased to $0.6 million Condensed Consolidated Statement of Income (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues | $9,357 | $7,101 | | Operating income | $875 | $1,046 | | Net income | $645 | $1,032 | | Net income per share – diluted | $0.02 | $0.03 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased from $32.6 million at the end of 2021 to $33.4 million as of March 31, 2022, primarily due to net income - Stockholders' equity grew to **$33.4 million** at March 31, 2022, up from **$32.6 million** at December 31, 2021, mainly due to net income of **$0.6 million**[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated $3.1 million in cash from operating activities in Q1 2022, a significant improvement from the $5.8 million used in Q1 2021 Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,093 | $(5,827) | | Net cash used in investing activities | $(978) | $(1,588) | | Net cash used in financing activities | $(640) | $(118) | | **Net increase (decrease) in cash** | **$1,475** | **$(7,533)** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the basis of presentation, significant accounting policies, and specific financial accounts, including segment performance and a new share repurchase program - The company's reportable segments are the Financial Assets Division and the Industrial Assets Division[19](index=19&type=chunk) - The company anticipates positive impacts as COVID-19 stimulus payments conclude, including increased activity for NLEX and HGC due to expanding volumes of nonperforming loans and increased funding opportunities[24](index=24&type=chunk) - As of March 31, 2022, the company had outstanding notes receivable of **$3.2 million**, net of unamortized fees and costs, down from **$4.0 million** at year-end 2021[42](index=42&type=chunk) - Total debt decreased to **$3.2 million** as of March 31, 2022, from **$3.8 million** at year-end 2021, including a **$10.0 million** revolving line of credit and a **$2.0 million** subordinated promissory note[71](index=71&type=chunk)[72](index=72&type=chunk) - Subsequent to the quarter end, on May 5, 2022, the Board of Directors authorized a share repurchase program for up to **$4.0 million** of the company's common stock over a three-year period[81](index=81&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, financial condition, and outlook, highlighting revenue growth driven by asset sales despite a decline in operating income [Overview, History and Recent Developments](index=17&type=section&id=Overview%2C%20History%20and%20Recent%20Developments) Heritage Global Inc. operates through several subsidiaries, including HGP for auctions, NLEX for brokering receivables, HGC for specialty financing, and ALT for refurbished lab equipment - The company's core businesses include HGP (global auction/advisory), NLEX (broker of charged-off receivables), HGC (specialty financing), and ALT (supplier of refurbished lab equipment)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [COVID-19 Impact](index=18&type=section&id=COVID-19) While the COVID-19 pandemic had a negative impact in 2021, the company does not expect material negative impacts going forward and anticipates positive effects as stimulus programs end - The company expects positive impacts as stimulus payments conclude, including increased activity for NLEX and HGC, more funding opportunities for HGC, and more valuation opportunities for its valuation business[92](index=92&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) The company's working capital stood at $8.8 million as of March 31, 2022, with cash increasing by $1.5 million during the quarter, and management believes current resources are sufficient for the next 12 months - Working capital was **$8.8 million** as of March 31, 2022, compared to **$9.1 million** as of December 31, 2021[113](index=113&type=chunk) - Cash provided by operations was **$3.1 million** for the three months ended March 31, 2022, a significant turnaround from **$5.8 million** used in the same period in 2021[121](index=121&type=chunk) - On May 5, 2022, the Board authorized a share repurchase program of up to **$4.0 million** over a three-year period[125](index=125&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) For Q1 2022, total revenues increased 32% year-over-year to $9.4 million, driven by a 151% surge in asset sales, though operating income decreased 16% Consolidated Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Services revenue | $4,168 | $5,030 | (17)% | | Asset sales | $5,189 | $2,071 | 151% | | **Total revenues** | **$9,357** | **$7,101** | **32%** | | Total operating costs and expenses | $8,564 | $6,055 | 41% | | Operating income | $875 | $1,046 | (16)% | | **Net income** | **$645** | **$1,032** | **(38)%** | Net Operating Income by Segment (in thousands) | Segment | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Industrial Assets Division | $846 | $1,340 | | Financial Assets Division | $731 | $461 | | Corporate and Other (Loss) | $(702) | $(755) | | **Consolidated Net Operating Income** | **$875** | **$1,046** | EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $645 | $1,032 | | EBITDA | $1,008 | $1,137 | | **Adjusted EBITDA** | **$1,114** | **$1,480** | [Quantitative and Qualitative Disclosures About Market Risk](index=25&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 quantitative and qualitative disclosures about market risk - As a Smaller Reporting Company, Heritage Global Inc. is not required to provide quantitative and qualitative disclosures about market risk[140](index=140&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) The Chief Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - The Certifying Officers concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[142](index=142&type=chunk) - No changes in internal control over financial reporting occurred during the three months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[142](index=142&type=chunk) [Part II. Other Information](index=27&type=section&id=Part%20II.%20Other%20Information) This section covers other required disclosures, including legal proceedings, risk factors, unregistered sales of equity securities, and exhibits [Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) There have been no material changes to the legal proceedings as discussed in the company's Annual Report on Form 10-K - There have been no material changes to the legal proceedings discussed in our Form 10-K[143](index=143&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) As a Smaller Reporting Company, the company is not required to provide the information for this item - As a Smaller Reporting Company, we are not required to provide the information required by this item[144](index=144&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[145](index=145&type=chunk) [Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including corporate governance documents, a warrant agreement, officer certifications, and Inline XBRL data files - Exhibits filed include officer certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101 series)[150](index=150&type=chunk)

ERITAGE An Asset Services company specializing in financial and industrial asset transactions Investor Presentation March 2022 FORWARD LOOKING STATEMENTS This communication includes forward-looking statements based on our current expectations and projections about future events. All statements contained in this communication other than statements of historical fact, including any statements regarding our future operating results and financial position, our business strategy and plans, potential acquisitions ...

Heritage Global, Inc. (NASDAQ:HGBL) Q4 2021 Earnings Conference Call March 17, 2022 5:00 PM ET Company Participants John Nesbett - Institutional Marketing Services Ross Dove - CEO Brian Cobb - VP, Finance & Interim Principal Financial Officer Conference Call Participants Michael Diana - Maxim Group Operator Good day, and welcome to the Heritage Global Inc. Fourth Quarter and Year-end Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the co ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) Heritage Global Inc. is an asset services company operating through Financial and Industrial Assets Divisions, enhanced by the 2021 ALT acquisition and expecting future growth from nonperforming loans - The company provides a full suite of asset services, including market making, acquisitions, dispositions, valuations, and secured lending across over twenty-five global sectors[11](index=11&type=chunk) - On August 23, 2021, the Company acquired American Laboratory Trading (ALT), a supplier of refurbished lab equipment, to strengthen its service offerings in the life sciences sector[14](index=14&type=chunk)[38](index=38&type=chunk) - The Financial Assets division includes National Loan Exchange, Inc. (NLEX), a major broker of charged-off receivables, and Heritage Global Capital LLC (HGC), which provides specialty financing[13](index=13&type=chunk)[14](index=14&type=chunk)[32](index=32&type=chunk) - The COVID-19 pandemic negatively impacted 2021 performance but is expected to create positive impacts going forward, such as increased activity for NLEX and HGC due to expanding volumes of nonperforming consumer loans[19](index=19&type=chunk)[21](index=21&type=chunk) - The company operates in a highly fragmented market and competes with other liquidators, auction companies, dealers, and brokers, some of whom have greater financial resources[24](index=24&type=chunk) [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant competitive, operational, and financial risks, including intense competition, fluctuating operating results, dependence on key personnel, and potential goodwill impairment - The company faces significant competition from numerous other organizations, some of which are larger and better-capitalized[45](index=45&type=chunk) - Operating results are subject to significant fluctuation due to the unpredictable nature and timing of discrete asset liquidation deals[47](index=47&type=chunk) - Operations are substantially dependent on key executive officers, and the loss of their services could have a material adverse effect on the business[52](index=52&type=chunk) - As of December 31, 2021, goodwill represented approximately **15% of total assets**, and an impairment of this goodwill would result in a reduction in net income[73](index=73&type=chunk) - The company's ability to utilize approximately **$77.8 million** in income tax loss carryforwards may be restricted due to 'change in ownership' tax rules[74](index=74&type=chunk)[320](index=320&type=chunk) - The company's common stock is listed on Nasdaq, and failure to meet listing criteria could result in delisting, harming liquidity and the ability to raise capital[80](index=80&type=chunk) [Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[87](index=87&type=chunk) [Properties](index=15&type=section&id=Item%202.%20Properties) The company leases office spaces in San Diego, Hayward, and Edwardsville, and acquired warehouse and office space in East Lyme, CT, with the ALT acquisition - The company leases principal office locations in San Diego, CA, Hayward, CA, and Edwardsville, IL, with the Edwardsville office leased from a related party[88](index=88&type=chunk) - On August 23, 2021, the company acquired the warehouse and office space used by ALT's business in East Lyme, CT[88](index=88&type=chunk) [Legal Proceedings](index=15&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal matters in the normal course of business, none of which are expected to have a material adverse effect on its operations or financial results - There are no legal matters expected to have a material adverse effect on the company's business and results of operations[89](index=89&type=chunk) [Mine Safety Disclosures](index=15&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[90](index=90&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under '**HGBL**', with approximately **340** record holders as of March 2022, and no dividends have been paid or are anticipated - Common stock is traded on the Nasdaq Stock Market under the symbol '**HGBL**'[93](index=93&type=chunk) - As of March 1, 2022, there were approximately **340 holders** of common stock of record[94](index=94&type=chunk) - The company has not paid dividends to date and does not anticipate paying them in the foreseeable future[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital and cash decreased in 2021 due to operational and investing activities, including the ALT acquisition, though management believes current resources and a **$10.0 million** credit line are sufficient for 2022 Working Capital and Cash Position (in millions) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Working Capital | $9.1 | $13.0 | | Cash and cash equivalents | $13.6 | $23.4 | Cash Flow Summary (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Operating Activities | ($2.6) | $9.1 | | Investing Activities | ($10.2) | $4.5 | | Financing Activities | $3.1 | $7.0 | - The company has a **$10.0 million** revolving line of credit with C3bank, with an outstanding balance of **$1.9 million** as of December 31, 2021[107](index=107&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) In 2021, total revenues slightly decreased to **$25.8 million**, while gross profit increased, but operating income and net income significantly declined, primarily due to a non-recurring 2020 tax benefit, with Adjusted EBITDA also decreasing Consolidated Results of Operations (in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total revenues | $25,792 | $26,183 | | Operating income | $3,014 | $6,059 | | Income tax benefit | ($61) | ($3,644) | | Net income | $3,053 | $9,658 | Segment Net Operating Income (in thousands) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Industrial Assets Division | $3,393 | $5,764 | | Financial Assets Division | $2,024 | $2,637 | Adjusted EBITDA Reconciliation (in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net income | $3,053 | $9,658 | | EBITDA | $3,474 | $6,421 | | Adjusted EBITDA | $4,082 | $6,774 | - Selling, general and administrative expense increased by **3%** to **$14.8 million** in 2021, driven by expenses related to the ALT acquisition and a separation agreement, partially offset by an employee retention credit[126](index=126&type=chunk) [Critical Accounting Policies](index=22&type=section&id=Critical%20Accounting%20Policies) The company's financial statements rely on critical accounting policies requiring significant estimates, including revenue recognition, annual goodwill and intangible asset impairment testing, deferred tax asset valuation, and the 2021 recognition of a **$0.6 million** Employee Retention Credit - Significant estimates are required for valuing accounts receivable, inventory, goodwill, intangible assets, and deferred tax assets[136](index=136&type=chunk) - Revenue is recognized based on the ASC 606 standard, where the company acts as an agent for fee-based transactions and reports this revenue on a net basis[139](index=139&type=chunk)[141](index=141&type=chunk) - Goodwill is not amortized but is tested for impairment annually on October 1 using a qualitative approach initially[160](index=160&type=chunk) - The company recognized a **$0.6 million** receivable for the Employee Retention Credit (ERC) in 2021, which reduced payroll tax expense[155](index=155&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a Smaller Reporting Company, Heritage Global Inc. is not required to provide the information for this item - The company has elected scaled reporting obligations and is not required to provide this information[165](index=165&type=chunk) [Financial Statements and Supplementary Data](index=27&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) [Consolidated Balance Sheets](index=39&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2021, total assets increased to **$50.5 million**, driven by the ALT acquisition's impact on goodwill and intangibles, while total liabilities rose to **$17.8 million** and stockholders' equity increased to **$32.6 million** Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $13,622 | $23,385 | | Goodwill | $7,446 | $5,585 | | Total assets | $50,464 | $44,555 | | Total liabilities | $17,825 | $14,612 | | Total stockholders' equity | $32,639 | $29,943 | [Consolidated Statements of Income](index=40&type=section&id=Consolidated%20Statements%20of%20Income) For 2021, net income significantly decreased to **$3.1 million** (**$0.08** per diluted share) from **$9.7 million** in 2020, primarily due to a non-recurring **$3.6 million** income tax benefit in the prior year Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total revenues | $25,792 | $26,183 | | Operating income | $3,014 | $6,059 | | Net income | $3,053 | $9,658 | | Net income per share – diluted | $0.08 | $0.30 | [Consolidated Statements of Cash Flows](index=42&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In 2021, cash and cash equivalents decreased by **$9.8 million**, with **$2.6 million** used in operations and **$10.2 million** in investing activities, primarily for the ALT acquisition, partially offset by **$3.1 million** from financing activities Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($2,631) | $9,148 | | Net cash (used in) provided by investing activities | ($10,197) | $4,508 | | Net cash provided by financing activities | $3,065 | $7,001 | | Net (decrease) increase in cash | ($9,763) | $20,657 | [Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=27&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no disagreements with its auditors on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure during the fiscal years 2021 and 2020 - During 2021 and 2020, the company had no disagreements with its auditors and no reportable events[168](index=168&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes in the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[169](index=169&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[173](index=173&type=chunk) - No changes in internal control over financial reporting occurred during the fourth fiscal quarter of 2021 that materially affected, or are reasonably likely to materially affect, internal controls[175](index=175&type=chunk) [Other Information](index=28&type=section&id=Item%209B.%20Other%20Information) The company reported no other information for this item - None[176](index=176&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=29&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 proxy statement, and the company has adopted a code of ethics - The required information for this item is incorporated by reference from the definitive proxy materials for the 2022 Annual Meeting of Stockholders[178](index=178&type=chunk) - The company has adopted a code of ethics (the HGI Code of Conduct) applicable to its employees and principal officers, which is available on its website[181](index=181&type=chunk) [Executive Compensation](index=29&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item concerning executive compensation is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders - The required information is incorporated by reference from the definitive proxy materials for the 2022 Annual Meeting of Stockholders[182](index=182&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=29&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item concerning security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders - The required information is incorporated by reference from the definitive proxy materials for the 2022 Annual Meeting of Stockholders[183](index=183&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=29&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item concerning certain relationships, related party transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders - The required information is incorporated by reference from the definitive proxy materials for the 2022 Annual Meeting of Stockholders[184](index=184&type=chunk) [Principal Accountant Fees and Services](index=30&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this item concerning principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders - The required information is incorporated by reference from the definitive proxy materials for the 2022 Annual Meeting of Stockholders[186](index=186&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=30&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K, including consolidated financial statements and various agreements - This item lists the financial statements and exhibits filed with the report, including the Report of Baker Tilly US, LLP and consolidated financial statements[188](index=188&type=chunk)[189](index=189&type=chunk) [Form 10-K Summary](index=34&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary was provided - None[194](index=194&type=chunk)

Financial Data and Key Metrics Changes - The company achieved operating income of $533,000 for Q3 2021, down from $1.6 million in Q3 2020, primarily due to low asset flow volumes [5] - Net income was $474,000 or $0.01 per diluted share for Q3 2021, compared to $1.3 million or $0.04 per diluted share in Q3 2020 [6] - EBITDA for Q3 2021 was $638,000, down from $1.7 million in Q3 2020, with adjusted EBITDA at $740,000 for the quarter [7] Business Line Data and Key Metrics Changes - The company noted strong progress in developing customer relationships despite low asset supply, with expectations for improved performance in revenue streams due to increased asset supply [4] - The financial segment has not grown in the last 18 months due to low consumer spending, but there are signs of recovery with increased consumer activity anticipated [15] - The industrial auction division and valuation division have held solid during the pandemic, with expectations for Q4 to potentially be one of the largest quarters ever for industrial asset auctions [16] Market Data and Key Metrics Changes - The company reported a strong balance sheet with stockholders' equity of $32 million as of September 30, 2021, up from $30 million at the end of 2020 [10] - Aggregate tax net operating loss carryforwards were approximately $78 million, with most expiring between 2024 and 2037 [9] Company Strategy and Development Direction - The company is focused on growth across its five revenue streams, with a bullish outlook for the next two years [14] - The acquisition of American Lab Trading (ALT) is seen as a strategic move to enhance capabilities in the biopharma sector, aligning with increasing focus on ESG practices [17][32] - The company aims to repurpose and reposition assets in the biopharma sector, leveraging ALT's expertise to drive premium prices through warranties on refurbished assets [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future growth, citing a dynamic business environment and the potential for increased asset supply [11] - The CEO highlighted the correlation between rising consumer spending and increased charge-offs, suggesting a positive outlook for the financial segment in the coming year [24] - The company anticipates a surge in asset dispositions from plant closings earlier in the year, contributing to increased market activity [25] Other Important Information - Cash used in investing activities during the nine-month period was $7.3 million, primarily for the acquisition of ALT and related real estate purchases [10] Q&A Session Summary Question: What is the status of financial assets on the balance sheet? - Management explained that different types of financial institutions have varying regulations on charge-offs, but rising consumer spending is expected to correlate with increased charge-offs in the future [24] Question: What is driving the demand in the industrial side of the business? - The CEO noted that plant closings earlier in the year are now leading to asset dispositions as companies rationalize their decisions [25] Question: How is the integration of ALT being handled? - The company is leaving ALT as a stand-alone business while integrating its services, with ongoing collaboration on auctions of surplus assets [27]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements show a significant cash decrease due to the ALT acquisition and operations [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew slightly as the ALT acquisition's goodwill offset a significant decrease in cash Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $13,234 | $23,385 | | Goodwill | $7,262 | $5,585 | | Total assets | $45,352 | $44,555 | | **Liabilities & Equity** | | | | Total current liabilities | $9,931 | $13,989 | | Total liabilities | $13,768 | $14,612 | | Total stockholders' equity | $31,584 | $29,943 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q3 2021 revenue and net income declined, while nine-month revenue grew slightly but net income fell Financial Performance (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $5,991 | $7,566 | $18,268 | $17,927 | | Operating income | $533 | $1,612 | $1,652 | $2,730 | | Net income | $474 | $1,264 | $2,093 | $3,341 | | Net income per share – diluted | $0.01 | $0.04 | $0.06 | $0.11 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased to $31.6 million, primarily driven by net income of $2.1 million - Total stockholders' equity **increased by $1.64 million** during the first nine months of 2021, from $29.94 million to $31.58 million[13](index=13&type=chunk) - The increase in equity was primarily due to the cumulative **net income of $2.093 million** recorded during the nine-month period[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash decreased by $10.2 million due to outflows from operating and investing activities Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(4,126) | $2,806 | | Net cash (used in) provided by investing activities | $(7,258) | $620 | | Net cash provided by (used in) financing activities | $1,233 | $(359) | | **Net (decrease) increase in cash** | **$(10,151)** | **$3,067** | - Investing activities included **$4.3 million for the acquisition of ALT**, net of cash acquired, and $5.9 million for investments in notes receivable[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the $4.3M ALT acquisition, a new $10M credit facility, and the pandemic's impact - The COVID-19 pandemic negatively impacted performance in the first three quarters of 2021, but the company expects a **future increase in distressed and surplus assets**[21](index=21&type=chunk)[22](index=22&type=chunk) - On August 23, 2021, the company acquired American Laboratory Trading (ALT) for an aggregate purchase price of approximately **$4.3 million**[83](index=83&type=chunk) - The ALT acquisition resulted in the recognition of **$1.7 million in goodwill** and **$1.4 million in intangible assets**[87](index=87&type=chunk)[88](index=88&type=chunk) - The company entered into a new **$10.0 million revolving line of credit** which matures in May 2023, with no outstanding balance as of September 30, 2021[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses declining Q3 performance, decreased liquidity from the ALT acquisition, and future optimism - The acquisition of American Laboratory Trading (ALT) in 2021 is a key development, **expanding the company's services in the life sciences sector**[99](index=99&type=chunk) - **Working capital decreased from $13.0 million to $9.9 million** as of September 30, 2021, mainly due to cash used for the ALT acquisition and operations[130](index=130&type=chunk)[132](index=132&type=chunk) Comparison of Results of Operations (in thousands) | Metric | Q3 2021 | Q3 2020 | Change | 9 Months 2021 | 9 Months 2020 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenues | $5,991 | $7,566 | (21)% | $18,268 | $17,927 | 2% | | Operating income | $533 | $1,612 | (67)% | $1,652 | $2,730 | (39)% | | Net income | $474 | $1,264 | (63)% | $2,093 | $3,341 | (37)% | Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $474 | $1,264 | $2,093 | $3,341 | | EBITDA | $638 | $1,704 | $1,946 | $3,002 | | **Adjusted EBITDA** | **$740** | **$1,801** | **$2,459** | **$3,260** | [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a Smaller Reporting Company, this disclosure is not required - As a Smaller Reporting Company, Heritage Global Inc. is **not required to provide** quantitative and qualitative disclosures about market risk[165](index=165&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective with no material changes in internal controls - The Certifying Officers concluded that the company's **disclosure controls and procedures were effective** as of September 30, 2021[166](index=166&type=chunk) - **No material changes** in internal control over financial reporting occurred during the nine months ended September 30, 2021[167](index=167&type=chunk) [Part II. Other Information](index=32&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings were reported since the last annual report - **No material changes** to legal proceedings have occurred since the last Form 10-K filing[169](index=169&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) As a Smaller Reporting Company, this disclosure is not required - The company is **not required to provide** risk factor disclosures in this report[170](index=170&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[171](index=171&type=chunk) [Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[172](index=172&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[173](index=173&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[174](index=174&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed, including ALT acquisition agreements and officer certifications - Exhibits filed include agreements related to the acquisition of American Laboratory Trading and **certifications by the Principal Executive Officer and Principal Financial Officer**[176](index=176&type=chunk)

ERITAGE An Asset Services company specializing in financial and industrial asset transactions Investor Presentation September 2021 FORWARD LOOKING STATEMENTS This communication includes forward-looking statements based on our current expectations and projections about future events. All statements contained in this communication other than statements of historical fact, including any statements regarding our future operating results and financial position, our business strategy and plans, potential acquisit ...

Heritage Global Inc. (NASDAQ:HGBL) Q2 2021 Earnings Conference Call August 12, 2021 5:00 PM ET Company Participants John Nesbett – IMS Investor Relations Ross Dove – Chief Executive Officer Brian Cobb – Vice President-Finance and Controller Conference Call Participants Mark Argento – Lake Street Michael Diana – Maxim Group Operator Good day ladies and gentlemen and welcome to the Heritage Global Inc. Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder this conference is being ...