Heritage Global Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Report, under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer (the “Certifying Officers”), we conducted an evaluation of our disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officers have concluded that our disclosure controls and procedures were effective as of December 31, 2025. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, in accordance with Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including the Certifying Officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made by us only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its assessment using these criteria, our management concluded that our internal control over financial reporting was effective as of December 31, 2025. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the fourth fiscal quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. During the quarter ended December 31, 2025, no director or Section 16 officer of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K). Item 9C. Di sclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 25 PART III Item 10. Directors, Executive Off icers and Corporate Governance. The information required by this Item regarding the identity and business experience of our directors and executive officers is set forth under the heading “Proposal No. 1: Election of Class II Directors” in the definitive proxy materials of Heritage Global Inc. to be filed in connection with our 2026 Annual Meeting of Stockholders with respect to our directors and is set forth under the heading “Information About Our Executive Officers” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders, as well as in Item 1 of Part I of this Report with respect to our executive officers. The information required by this Item contained in such definitive proxy materials is incorporated herein by reference. Information regarding procedures for stockholder nominations to our Board required by Item 407(c)(3) of Regulation S-K is incorporated by reference to the discussion under the heading “Shareholder Proposals for the 2026 Annual Meeting of Shareholders” in the definitive proxy materials of Heritage Global Inc. to be filed in connection with our 2026 Annual Meeting of Stockholders and is incorporated herein by reference. Information on our Audit and Corporate Governance Committee and Audit Committee Financial Experts required by this Item is contained under the caption “Corporate Governance” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders and is incorporated herein by reference. Information required by Item 408(b) of Regulation S-K is contained under the heading “Insider Trading Policy” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders and is incorporated herein by reference. A copy of the insider trading policy is filed as an exhibit to this Annual Report on Form 10-K. Code of Ethics We have adopted a code of ethics that applies to our employees, including its principal executive, financial and accounting officers or persons performing similar functions. The Code of Conduct (the “Code”) can be found on our website at http://www. hginc.com/governance-documents/ , or a copy of the Code can be requested, free of charge, by writing to the following address: Heritage Global Inc., 6130 Nancy Ridge Drive, San Diego, California 92121, Attention: Investor Relations. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendments to, or waivers from, a provision of the Code that applies to our principal executive, financial and accounting officers or persons performing similar functions by posting such information on its website at the website address set forth above. The information provided on our website is not part of this report, and is therefore not incorporated by reference unless such information is specifically referenced elsewhere in this report. Item 11. Executi ve Compensation. The information required by this Item is set forth under the headings “Executive Compensation” and “Compensation Committee” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Benef icial Owners and Management and Related Stockholder Matters. Information about security ownership of certain beneficial owners required by this Item is set forth under the heading “Security Ownership of Certain Beneficial Owners and Management” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders, which information is incorporated herein by reference. Item 13. Certain Relationships and Relate d Transactions, and Director Independence. The information required by this Item is set forth under the headings “Certain Relationships and Related Party Transactions” and “Corporate Governance” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders, which information is incorporated herein by reference. Item 14. Principal Accou ntant Fees and Services. The information required by this Item is set forth under the heading “Ratification of Appointment of Independent Auditor” in the definitive proxy materials to be filed in connection with our 2026 Annual Meeting of Stockholders, which information is incorporated herein by reference. 26 PART IV Item 15. Exhibits and Fina ncial Statement Schedules (a) The following financial statements and those financial statement schedules required by “Item 8. Financial Statements and Supplementary Data” hereof are filed as part of this Report: 1. Financial Statements: Report of UHY LLP, Independent Registered Public Accounting Firm (PCAOB ID: 1195 ) Consolidated Balance Sheets as of December 31, 2025 and 2024 Consolidated Statements of Income for the years ended December 31, 2025 and 2024 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 Notes to Consolidated Financial Statements 2. Financial Statement Schedules: These schedules are omitted because they are not required, or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. (b) The following exhibits are filed as part of this Report: Exhibit Number Title of Exhibit 3.1 Second Amended and Restated Articles of Incorporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 7, 2024 (File No. 001-39471), and incorporated herein by reference). 3.2 Restated Bylaws (incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-39471) filed on September 30, 2020). 4.1 Description of Securities (filed as Exhibit 4.2 to the Company's Annual Report on form 10-K filed on March 8, 2021 (File No. 001-39471), and incorporated herein by reference). 10.1* 2010 Non-Qualified Stock Option Plan (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on January 24, 2011 (File No. 000-17973), and incorporated herein by reference). 10.2* Form of Option Grant for Options Granted Under 2010 Non-Qualified Stock Option Plan (filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K filed on March 31, 2011 (File No. 000-17973), and incorporated herein by reference) . 10.3* Management Services Agreement between Heritage Global Inc. and Street Capital, effective as of May 1, 2014 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 1, 2014 (File No. 000-17973), and incorporated herein by reference) . 10.4* Employment Agreement between Ross Dove and Heritage Global Partners, Inc. effective as of February 29, 2012 (filed as Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on March 17, 2016 (File No. 000-17973), and incorporated herein by reference) . 10.5* Employment Agreement between James Sklar and Heritage Global Partners, Inc. effective as of June 23, 2013 (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on March 17, 2016 (File No. 000-17973), and incorporated herein by reference) . 10.6* Employment Agreement, by and between Heritage Global Inc. and David Ludwig, effective as of June 1, 2023. (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed on August 10, 2023 (File No. 001-39471), and incorporated herein by reference) 10.7* Employment Agreement, by and between Heritage Global Inc. and Nick Dove, effective as of January 1, 2023 (filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on August 10, 2023 (File No. 001-39471), and incorporated herein by reference). 10.8* Form of Option Grant for Options Granted Under Heritage Global Inc. 2016 Stock Option Plan (filed as Exhibit 10.26 to the Company’s Annual Report on Form 10-K filed on March 13, 2018 (File No. 000-17973), and incorporated herein by reference). 27 10.9* 2016 Stock Option Plan (filed as Exhibit 10.27 to the Company’s Annual Report on Form 10-K filed on March 13, 2018 (File No. 000-17973), and incorporated herein by reference) . 10.10* Addendum to Employment Agreements, effective June 1, 2018, by and between Heritage Global Inc., National Loan Exchange, Inc., Tom Ludwig and David Ludwig (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 24, 2018 (File No. 000-17973), and incorporated herein by reference) . 10.11* Employment Agreement, by and between Heritage Global, Inc. and Kirk Dove, effective as of September 17, 2020 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 21, 2020 (File No. 001-39471), and incorporated herein by reference). 10.12 Business Loan Agreement, dated May 11, 2021, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2021, and incorporated herein by reference). 10.13 Promissory Note, dated May 11, 2021, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2021, and incorporated herein by reference). 10.14 Commercial Security Agreement, dated May 11, 2021, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2021, and incorporated herein by reference). 10.15 Pledge and Security Agreement, dated May 11, 2021, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2021, and incorporated herein by reference). 10.16 Side Letter, dated May 5, 2021, by and between Heritage Global Inc. and C3bank, National Association ((filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2021, and incorporated herein by reference). 10.17 Amended and Restated Promissory Note, by and between Heritage Global Inc. and C3bank, National Association, effective as of May 26, 2023 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 10, 2023 (File No. 001-39471), and incorporated herein by reference). 10.18 Loan Modification Agreement and Reaffirmation of Loan, by and between Heritage Global Inc. and C3bank, National Association, effective as of May 26, 2023 (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 10, 2023 (File No. 001-39471), and incorporated herein by reference). 10.19 Loan Modification Agreement and Reaffirmation of Loan, by and between Heritage Global Inc. and C3bank, National Association, effective as of July 24, 2024 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2024 (File No. 001-39471), and incorporated herein by reference). 10.20 Loan Modification Agreement and Reaffirmation of Loan, by and between Heritage Global Inc. and C3bank, National Association, effective as of October 4, 2024 (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 7, 2024 (File No. 001-39471), and incorporated herein by reference). 10.21 Loan Modification Agreement and Reaffirmation of Loan, by and between Heritage Global Inc. and C3bank, National Association, effective as of December 27, 2024 (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on March 13, 2025 (File No. 001-39471) and incorporated herein by reference). 10.22 Business Loan Agreement, dated February 6, 2025, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2025 (File No. 001-39471), and incorporated herein by reference). 10.23 Promissory Note, dated February 6, 2025, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2025 (File No. 001-39471), and incorporated herein by reference) 10.24 Commercial Security Agreement, dated February 6, 2025, by and between Heritage Global Inc. and C3bank, National Association (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2025 (File No. 001-39471), and incorporated herein by reference) 10.25 Asset Purchase Agreement, dated August 18, 2021, by and among Heritage ALT LLC, American Laboratory Trading, Inc., Dante LaTerra and Heritage Global Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on August 24, 2021 (File No. 001-39471), and incorporated herein by reference). 28 10.26 Purchase and Sale Agreement, dated August 18, 2021, between 12 Colton Road, LLC and HG ALT LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 24, 2021 (File No. 001-39471), and incorporated herein by reference). 10.27 2022 Heritage Global Inc. Equity Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 15, 2022) 10.28 Form of Option Grant for Options to Employees Granted Under 2022 Heritage Global Inc. Equity Incentive Plan (filed as Exhibit 10.34 to the Company’s Annual Report on Form 10-K on March 14, 2024 (File No. 001-39471), and incorporated herein by reference). 10.29 Form of Option Grant for Options to Non-employees Granted Under 2022 Heritage Global Inc. Equity Incentive Plan (filed as Exhibit 10.35 to the Company’s Annual Report on Form 10-K on March 14, 2024 (File No. 001-39471), and incorporated herein by reference). 10.30 Form of Restricted Stock Grant for Restricted Stock Granted Under 2022 Heritage Global Inc. Equity Incentive Plan (Non-employee Director) (filed as Exhibit 10.36 to the Company’s Annual Report on Form 10-K on March 14, 2024 (File No. 001-39471), and incorporated herein by reference). 10.31 Form of Restricted Stock Grant for Restricted Stock Granted Under 2022 Heritage Global Inc. Equity Incentive Plan (Employee) (filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K on March 13, 2025 (File No. 001-39471), and incorporated herein by reference). 19 Statement of Company Policy Regarding Insider Trading and Company Policy Regarding Special Trading Procedures (filed as Exhibit 19 to the Company’s Annual Report on Form 10-K on March 13, 2025 (File No. 001-39471), and incorporated herein by reference). 21 List of subsidiaries. 23.1 Consent of UHY LLP 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. 32.2 Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. 97.1 Heritage Global Inc. Compensation Recoupment Policy (Adopted Nov. 7, 2023). 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Indicates a management contract or compensatory plan required to be filed as an exhibit. (c) Financial Statement Schedules The following Schedules are included in our Financial Statements: None. Item 16. For m 10-K Summary None. 29 SIGNA TURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. HERITAGE GLOBAL INC. (Registrant) Dated: March 12, 2026 By: /s/ Ross Dove Ross Dove, Chief Executive Officer (Principal Executive Officer) By: /s/ Brian J. Cobb Brian J. Cobb, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Ross Dove Chief Executive Officer and Director (Principal Executive Officer) March 12, 2026 Ross Dove /s/ David Ludwig Director March 12, 2026 David Ludwig /s/ Michael Hexner Director March 12, 2026 Michael Hexner /s/ William Burnham Director March 12, 2026 William Burnham /s/ Barbara Sinsley Director March 12, 2026 Barbara Sinsley /s/ Kelly Sharpe Director March 12, 2026 Kelly Sharpe /s/ Samuel L. Shimer Chairman of the Board of Directors March 12, 2026 Samuel L. Shimer 30 INDEX OF FINANCIAL STATEMENTS Title of Document Page Report of UHY LLP, Independent Registered Public Accounting Firm F- 1 Consolidated Balance Sheets as of December 31, 2025 and 2024 F- 3 Consolidated Statements of Income for the years ended December 31, 2025 and 2024 F- 4 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024 F- 5 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F- 6 Notes to Consolidated Financial Statements F- 7 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Heritage Global Inc Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Heritage Global Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F- 1 Allowance for Credit Losses over Nonaccrual Loans As described in Notes 2 and 3, the Company has recognized an allowance for credit losses for notes receivable of $0.4 million and within the Company’s portion of equity method investments of $1.0 million. The allowance is a valuation account that is deducted from the carrying amount of notes receivable and equity method investments to present the net amount of notes receivable and equity method investments expected to be collected. The Company’s analysis uses forecasts of expected cash receipts provided by an external specialist, which are then adjusted for additional assumptions based on expected future actions meant to improve collections. The resulting cash flows are then applied to a cash flow waterfall to project expected cash receipts for the Company. The shortfall in projected cash receipts is used as the Company’s estimate of the allowance. We identified the use of specialist and forecasts of cash receipts as a critical audit matter as auditing the forecasts required significant auditor judgment. The primary procedures we performed to address this critical audit matter include the following: • Obtained an understanding of management’s estimate regarding the allowance for credit losses including the method, assumptions, and data used to develop the estimate by reviewing management prepared memorandum and analysis. • Evaluated management’s assessment of the external specialist. • Examined the underlying data used in determining the allowance for credit losses, including forecasts provided by the external specialist and additional assumptions factored in to the analysis. • Evaluated the Company’s waterfall calculations and the application of forecasted cash receipts. /s/ UHY LLP We have served as the Company's auditor since 2022. West Des Moines, Iowa March 12, 2026 F- 2 HERITAGE GLOBAL INC. CONSOLIDATED B ALANCE SHEETS (In thousands of US dollars, except share and per share amounts) December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 20,522 $ 21,749 Accounts receivable, net 1,857 1,559 Current portion of notes receivable, net 4,528 3,416 Inventory – equipment 5,931 5,348 Other current assets 756 1,056 Total current assets 33,594 33,128 Non-current portion of notes receivable, net 4,893 6,558 Equity method investments, net 21,060 20,892 Right-of-use assets 1,518 2,208 Property and equipment, net 10,884 1,643 Intangible assets, net 3,100 3,362 Goodwill 7,446 7,446 Deferred tax assets 4,402 6,008 Other assets 1,542 64 Total assets $ 88,439 $ 81,309 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities $ 6,487 $ 5,429 Payables to sellers 7,273 7,417 Current portion of third party debt — 395 Current portion of lease liabilities 829 807 Other current liabilities 948 550 Total current liabilities 15,537 14,598 Non-current portion of third party debt 4,100 — Non-current portion of lease liabilities 790 1,510 Other non-current liabilities 1,029 — Total liabilities 21,456 16,108 Commitments and contingencies (Note 12 and Note 15) Stockholders’ equity: Preferred stock, $ 10.00 par value, authorized 10,000,000 shares; issued and outstanding 563 shares of Series N as of both December 31, 2025 and December 31, 2024, with liquidation preference over common stockholders equivalent to $ 1,000 per share 6 6 Common stock, $ 0.01 par value, authorized 300,000,000 shares; issued 37,639,211 and 37,380,944 shares as of December 31, 2025 and December 31, 2024, respectively; and outstanding 34,741,553 and 35,718,361 shares as of December 31, 2025 and December 31, 2024, respectively 376 374 Additional paid-in capital 296,477 295,657 Accumulated deficit ( 224,257 ) ( 227,844 ) Treasury stock at cost, 2,897,658 shares as of December 31, 2025 and 1,662,583 shares as of December 31, 2024 ( 5,619 ) ( 2,992 ) Total stockholders’ equity 66,983 65,201 Total liabilities and stockholders’ equity $ 88,439 $ 81,309 The accompanying notes are an integral part of these consolidated financial statements. F- 3 HERITAGE GLOBAL INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands of US dollars, except share and per share amounts) Year Ended December 31, 2025 2024 Revenues: Services revenue $ 33,281 $ 32,607 Asset sales 17,697 12,754 Total revenues 50,978 45,361 Operating costs and expenses: Cost of services revenue 7,953 5,805 Cost of asset sales 11,993 8,321 Selling, general and administrative 24,972 24,266 Depreciation and amortization 472 591 Total operating costs and expenses 45,390 38,983 Earnings of equity method investments 123 2,688 Operating income 5,711 9,066 Interest income (expense), net 134 ( 93 ) Income before income tax expense 5,845 8,973 Income tax expense 2,258 3,791 Net income $ 3,587 $ 5,182 Weighted average common shares outstanding – basic 34,834,540 36,430,211 Weighted average common shares outstanding – diluted 35,434,939 37,131,115 Net income per share – basic $ 0.10 $ 0.14 Net income per share – diluted $ 0.10 $ 0.14 The accompanying notes are an integral part of these consolidated financial statements. F- 4 HERITAGE GLOBAL INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands of US dollars, except share amounts) Additional Preferred stock Common stock paid-in Accumulated Treasury stock Shares Amount Shares Amount capital deficit Shares Amount Total Balance as of December 31, 2023 563 $ 6 37,157,616 $ 372 $ 294,522 $ ( 233,026 ) 396,175 $ ( 794 ) $ 61,080 Issuance of common stock from stock option awards — — 45,752 1 ( 42 ) — — — ( 41 ) Issuance of restricted common stock — — 177,576 1 ( 76 ) — — — ( 75 ) Stock-based compensation expense — — — — 1,253 — — — 1,253 Repurchase of common stock — — — — — — 1,266,408 ( 2,198 ) ( 2,198 ) Net income — — — — — 5,182 — — 5,182 Balance as of December 31, 2024 563 6 37,380,944 374 295,657 ( 227,844 ) 1,662,583 ( 2,992 ) 65,201 Issuance of common stock from stock option awards — — 1,445 — ( 1 ) — — — ( 1 ) Issuance of restricted common stock — — 256,822 2 ( 79 ) — — — ( 77 ) Stock-based compensation expense — — — — 900 — — — 900 Repurchase of common stock — — — — — — 1,235,075 ( 2,627 ) ( 2,627 ) Net income — — — — — 3,587 — — 3,587 Balance as of December 31, 2025 563 $ 6 37,639,211 $ 376 $ 296,477 $ ( 224,257 ) 2,897,658 $ ( 5,619 ) $ 66,983 The accompanying notes are an integral part of these consolidated financial statements. F- 5 HERITAGE GLOBAL INC. CONSOLIDATED STATEM ENTS OF CASH FLOWS (In thousands of US dollars) Year Ended December 31, 2025 2024 Cash flows from operating activities: Net income $ 3,587 $ 5,182 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred issuance costs and fees, net ( 9 ) ( 90 ) Earnings of equity method investments ( 123 ) ( 2,688 ) Noncash credit loss (recovery) expense ( 20 ) ( 267 ) Amortization of right-of-use assets 691 657 Depreciation and amortization 472 591 Deferred taxes 1,606 3,107 Stock-based compensation expense 900 1,253 Changes in operating assets and liabilities: Accounts receivable ( 322 ) 351 Inventory – equipment ( 583 ) ( 274 ) Other assets 303 ( 605 ) Accounts payable and accrued liabilities 476 ( 1,257 ) Payables to sellers ( 144 ) 2,442 Lease liabilities ( 697 ) ( 657 ) Net cash provided by operating activities 6,137 7,745 Cash flows from investing activities: Investment in notes receivable ( 5,931 ) ( 5,675 ) Payments received on notes receivable 6,536 11,041 Investment in participating interest ( 1,575 ) — Return on investment in participating interest 94 — Investment in equity method investments ( 1,575 ) ( 343 ) Return of investment in equity method investments 1,407 3,299 Cash distributions from equity method investments 123 2,688 Purchase of property and equipment ( 8,470 ) ( 137 ) Net cash (used in) provided by investing activities ( 9,391 ) 10,873 Cash flows from financing activities: Proceeds from debt payable to third parties 4,100 — Repayment of debt payable to third parties ( 395 ) ( 6,833 ) Proceeds from secured borrowing 1,050 — Repayments of secured borrowing ( 21 ) — Payments of tax withholdings related to issuance of restricted stock and cashless exercises of stock option awards ( 80 ) ( 117 ) Repurchase of common stock ( 2,627 ) ( 2,198 ) Net cash provided by (used in) financing activities 2,027 ( 9,148 ) Net change in cash and cash equivalents ( 1,227 ) 9,470 Cash and cash equivalents as of beginning of period 21,749 12,279 Cash and cash equivalents as of end of period $ 20,522 $ 21,749 Supplemental cash flow information: Cash paid for taxes $ 700 $ 640 Cash paid for interest $ 43 $ 91 Noncash capital expenditures $ 979 $ — Noncash transfer of notes receivable to equity method investments $ — $ 2,487 Noncash change in lease liabilities and right-of-use assets $ — $ 327 The accompanying notes are an integral part of these consolidated financial statements. F- 6 HERITAGE GLOBAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Description of Business and Principles of Consolidation These consolidated financial statements include the accounts of Heritage Global Inc. ("HG") together with its subsidiaries, including Heritage Global Partners, Inc. (“HGP”), National Loan Exchange Inc. (“NLEX”), Heritage Global LLC (“HG LLC”), Heritage Global Capital LLC (“HGC”), and Heritage ALT LLC (“ALT”). These entities, collectively, are referred to as the “Company,” “we” or “our” in these consolidated financial statements. These consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and include the assets, liabilities, revenues, and expenses of all subsidiaries over which HG exercises control. All significant intercompany accounts and transactions have been eliminated upon consolidation. The Company began its operations in 2009 with the establishment of HG LLC. The business was subsequently expanded by the acquisitions of HGP, NLEX, and ALT in 2012, 2014, and 2021 respectively, and the creation of HGC in 2019. As a result, the Company is positioned to provide an array of value-added capital and financial asset solutions: auction and appraisal services, traditional asset disposition sales, and specialty financing solutions. The Company’s reportable segments consist of Auction and Liquidation, through HGP, Refurbishment & Resale, through ALT, Brokerage, through NLEX and Specialty Lending, through HGC. Repurchase Program The Company’s Board of Directors previously authorized a share repurchase program (“2022 Repurchase Program”), which permitted the Company to purchase up to an aggregate of $ 6.0 million in common shares over a three year period ended on June 30, 2025. The Company repurchased 1,235,075 shares in the open market for a purchase price of approximately $ 2.6 million during the year ended December 31, 2025. The 2022 Repurchase Program ended on June 30, 2025, with the Company utilizing approximately $ 5.6 million of the authorized $ 6.0 million for the repurchase of 2,897,658 common shares in the open market. Following the expiration of the 2022 Repurchase Program on June 30, 2025, the Company’s Board of Directors authorized a new share repurchase program (the “2025 Repurchase Program”) on July 31, 2025. The 2025 Repurchase Program authorizes the repurchase of up to $ 7.5 million of the Company’s outstanding common stock through June 30, 2028. The timing and actual number of shares repurchased will depend on various factors, including share price, general business and market conditions, and the opportunities within the Company’s operations. As of December 31, 2025, no shares have been repurchased under the 2025 Repurchase Program. Note 2 – Summary of Significant Accounting Policies Use of estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable and notes receivable, inventory, investments, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities including projecting future years’ taxable income, and stock-based compensation. These estimates have the potential to significantly impact our consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature. F- 7 Reclassifications Certain prior year balances within the consolidated financial statements have been reclassified to conform to current year presentation. Nature of Business The Company earns revenue both from commission or fee-based services, and from the sale of distressed or surplus assets. With respect to the former, revenue is recognized as the services are provided. With respect to the latter, the majority of the asset sale transactions are conducted directly by the Company and the revenue is recognized in the period in which the asset is sold. Fee based revenue is reported as services revenue, and the associated direct costs are reported as cost of services revenue. At the balance sheet date, any unsold assets which the Company owns are reported as inventory, any outstanding accounts receivable are included in the Company’s accounts receivable, and any associated liabilities are included in the Company’s accrued liabilities. The remaining asset sale transactions involve the Company acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company agreement (collectively, “Joint Ventures”). Transactions in which the Company’s ownership share meets the criteria for the equity method investments under ASC Topic 323, Equity Method and Joint Ventures (“ASC 323”), are accounted for as equity method investments, and, accordingly, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. At each balance sheet date, the Company’s investments in these Joint Ventures are reported in the consolidated balance sheet as equity method investments. These investments are classified on the balance sheet as non-current assets due to the uncertainties relating to the timing of resale of the underlying assets as a result of the Joint Venture relationship. The Company monitors the value of the Joint Ventures’ underlying assets and liabilities and records a write down of its investments if the Company concludes that there has been a decline in the value of the net assets. As the activity of the Joint Ventures involves asset purchase/resale transactions, which is similar in nature to the Company’s other activities, the earnings (losses) of the Joint Ventures are included in the operating income in the accompanying consolidated income statements. Through HGC, a wholly owned subsidiary of HG, the Company provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. Specialty Lending - Concentration and credit risk As of December 31, 2025, the Company held a gross balance of investments in notes receivable of $ 28.3 million, recorded in both notes receivable and equity method investments. The Company's portfolio includes one borrower’s gross notes receivable balance of approximately $ 21.5 million, representing 76 % of our total gross notes receivable balance as of December 31, 2025, as compared to 74 % as of December 31, 2024. The Company does not evaluate concentration risk solely based on balance due from specific borrowers, but also considers the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $ 21.5 million, there are 11 distinct loan agreements, the underlying portfolio of accounts are diversified throughout FinTech loans, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios. The Company mitigates this concentration risk by requiring, and monitoring, security from each borrower consisting of their charged off and nonperforming receivable portfolios. The Company engages in a due diligence process that leverages its valuation expertise, knowledge and experience in the underlying nonperforming receivable portfolios marketplace. In the event of default, the Company is entitled to call the unpaid interest and principal balances and receive all net collections directly. The Company may also recover its investment by engaging a third party to collect on the underlying charged off or nonperforming receivable portfolio or the underlying portfolio can be sold through the Company's Brokerage segment. In certain cases, the Company’s recovery options are subject to concurrence of the originator or other prior holder of the assets. F- 8 Cash and cash equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company also considers certificate of deposit accounts with original maturity dates of 12 months or less and no significant early redemption cost to be cash equivalents. The Company maintains its cash and cash equivalents with financial institutions in the United States. These accounts may from time to time exceed federally insured limits. The Company has not experienced any losses on such accounts. Accounts receivable, net The Company’s accounts receivable primarily relate to the operations of its asset liquidation business. They generally consist of three major categories: (1) fees, commissions and retainers relating to appraisals and auctions, (2) receivables from asset sales, and (3) receivables from Joint Venture partners. The initial value of an account receivable corresponds to the fair value of the underlying goods or services. To date, a majority of the receivables have been classified as current and, due to their short-term nature, any decline in fair value would be due to issues involving collectability. At each financial statement date the collectability of each outstanding account receivable is evaluated, and an allowance is recorded if the book value exceeds the amount that is deemed collectable. The Company accrues interest income in Accounts Receivable for the current month’s remittance process related to its notes receivable. The Company does not apply a credit loss rate against its Accounts Receivable balance for accrued interest income due to the timing of collections shortly after period end and prior to the financial statement filing date. Accrued interest on loans totaled $ 0.1 million at both December 31, 2025 and 2024. See Note 10 for more detail regarding the Company’s accounts receivable. Notes receivable, net The Company’s notes receivable balance consists of loans to buyers of charged-off and nonperforming receivable portfolios through HGC and financing of laboratory equipment sales through ALT. These loans are measured at historical costs and reported at their outstanding principal balances net of any unamortized deferred fees and costs on originated loans. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Allowance for credit losses The Company applies a current expected credit loss model, which is an impairment model based on expected losses rather than incurred losses. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from, or added to, the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected. The table below summarizes the allowance for credit loss balance as of, and the changes made during the years ending December 31, 2025 and 2024 (in thousands): Accounts Receivable Notes Receivable Equity Method Investments Total Balance as of December 31, 2023 $ 132 $ 650 $ 898 $ 1,680 (Recovery) provision for credit losses — ( 267 ) 88 ( 179 ) Balance as of December 31, 2024 132 383 986 1,501 (Recovery) provision for credit losses 23 ( 43 ) 5 ( 15 ) Balance as of December 31, 2025 $ 155 $ 340 $ 991 $ 1,486 F- 9 Accounts receivable The Company carries accounts receivable at the face amounts less an allowance for estimated credit losses. The Company estimates its reserve for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company only extends credit to entities and institutions of significance, such as well-known academic and financial institutions and U.S. government agencies. Consequently, historical accounts receivable credit losses are nearly zero, which provides the starting point for management’s assessment of the reserve for credit losses for its accounts receivable. The Company estimates its expected credit losses for accounts receivable based on historical credit loss experience, its assessment of current conditions, and other relevant available information from internal and external sources on a quarterly basis. Notes receivable The Company evaluates notes receivable as a single pool, for individual notes receivable and borrowers with similar risk characteristics. Notes receivable and borrowers that do not share risk characteristics are evaluated on an individual basis. Management evaluates the Company's notes receivables related to financing laboratory equipment sales within the notes receivable pool. Management estimates the reserve balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience typically provides the basis for an estimation of expected credit losses; however, the Company lacks sufficient data upon which to base a historical estimation. Lacking historical internal data upon which to base a reserve for credit losses to notes receivable, the Company estimates its reserve using external credit loss experience data. Management observes that the Company's notes receivable are similar in character to transactions undertaken by smaller banking institutions. The Company estimates its expected credit losses based on the Scaled Current Expected Credit Loss (CECL) Allowance Loss Estimator ("SCALE rate") available from the Federal Reserve. The SCALE rate methodology is endorsed by the FASB and the Conference of State Bank Supervisors. Management determined that the SCALE rate, a generally applicable rate, may be appropriately adjusted by its assessment of observable facts and relevant circumstances indicating that the factors analyzed in the determination of the SCALE rate may not conform to the Company's operations and borrower assessments. As of December 31, 2025, the SCALE rate increased to 1.3767 % from 1.3644 % as of December 31, 2024, and the Company's credit loss allowance rate specific to notes receivable was 3.5 %. The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. In order to evaluate the need for an adjustment to the receivable balance related to credit losses, or impairment, the Company performs a review of all outstanding loan receivables on a quarterly basis to determine if any indicators exist that suggest the loan will not be fully recoverable and assess the credit quality of the loan receivables. This review includes monthly and cumulative key performance indicators for each loan and borrower, as well as evaluation of borrower's financial condition. Equity method investments Similar to notes receivable, the loans held by the joint ventures are evaluated on a quarterly basis to determine if an adjustment to the allowance for credit losses is needed. As of December 31, 2025, the SCALE rate increased to 1.3767 % from 1.3644 % as of December 31, 2024, and the credit loss rate specific to equity method investments was 4.5 %. The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. Inventory - equipment The Company’s inventory consists of assets acquired for resale or auction. Assets acquired to be sold at auction are generally expected to be sold within 90 days while assets acquired for refurbishment and resale are generally expected to be sold within a two-year operating cycle. All inventory is recorded at the lower of cost or net realizable value. F- 10 Equity method investments As noted above, the Company conducts a portion of its business through Joint Ventures. Transactions in which the ownership share meets the criteria for the equity method investments under ASC 323 are accounted for using the equity method of accounting whereby the Company's proportionate share of the Joint Venture’s net income (loss) is reported in the consolidated income statement as earnings of equity method investments. At the balance sheet date, the Company's investments in these Joint Ventures are reported in the consolidated balance sheet as equity method investments. The Company monitors the value of each Joint Ventures’ underlying assets and liabilities, and records a write down of the investments should the Company conclude that there has been a decline in the value of the net assets. These investments have historically been classified as non-current in the Company's consolidated financial statements due to the uncertainties relating to the timing of resale of the underlying assets as a result of the Joint Venture relationship. See Note 4 for further detail. Fair value of financial instruments The fair value of financial instruments is the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. At December 31, 2025 and 2024, the carrying values of the Company’s cash and cash equivalents, accounts receivable, other assets, and accounts payable approximate fair value given the short term nature of these instruments. The Company’s notes receivable and debt obligations approximate fair value as a result of the interest rate on the receivable or debt obligation approximating prevailing market rates. There are three levels within the fair value hierarchy: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – significant other observable inputs; and Level 3 – significant unobservable inputs. At December 31, 2025 and 2024, the Company had no material financial instruments requiring fair value measurement on a recurring basis. Intangible assets Intangible assets are recorded at fair value upon acquisition. Those with an estimated useful life are amortized, and those with an indefinite useful life are unamortized. Subsequent to acquisition, the Company monitors events and changes in circumstances that require an assessment of intangible asset recoverability. Indefinite-lived intangible assets are assessed at least annually to determine both if they remain indefinite-lived and if they are impaired. The Company assesses whether or not there have been any events or changes in circumstances that suggest the value of the asset may not be recoverable. Amortized intangible assets are not tested annually, but are assessed when events and changes in circumstances suggest the assets may be impaired. If an assessment determines that the carrying amount of any intangible asset is not recoverable, an impairment loss is recognized in the income statement, determined by comparing the carrying amount of the asset to its fair value. All of the Company’s identifiable intangible assets at December 31, 2025 and 2024 have been acquired as part of the acquisitions of HGP in 2012, NLEX in 2014 and ALT in 2021, and are discussed in more detail in Note 9. No impairment charges were necessary during 2025 and 2024. Goodwill Goodwill, which results from the difference between the purchase price and the fair value of net identifiable tangible and intangible assets acquired in a business combination, is not amortized but, in accordance with GAAP, is tested at least annually for impairment. The Company performs its annual impairment test as of October 1. In testing goodwill, the Company initially uses a qualitative approach and analyzes relevant factors to determine if events and circumstances have affected the value of the goodwill. If the result of this qualitative analysis indicates it is more likely than not that the value has been impaired, the Company then applies a quantitative approach to calculate the difference between the goodwill’s recorded value and its fair value. An impairment loss is recognized to the extent that the recorded value exceeds its fair value. Goodwill, in addition to being tested for impairment annually, is tested for impairment at interim periods if an event occurs or circumstances change such that it is more likely than not that the carrying amount of goodwill may be impaired. No impairment charges were necessary during 2025 and 2024. All of the Company’s goodwill relates to its acquisitions of HGP in 2012, NLEX in 2014 and ALT in 2021, and is discussed in more detail in Note 9. F- 11 Deferred income taxes The Company recognizes deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. In 2014, as a result of incurring losses in previous years, the Company recorded a valuation allowance against all of its net deferred tax assets. In 2024, the Company increased the valuation allowance by $ 1.3 million, resulting in a net deferred tax asset balance of approximately $ 6.0 million, to align with the Company's updated forecasts. The change to the valuation allowance was primarily due to the application of our nonaccrual loan policy, which resulted in a decrease to our estimates related to the utilization of net operating loss carry forwards in 2025. As of December 31, 2025, approximately $ 18.9 million of federal net operating loss carry forwards were unused and expired and the Company recorded discrete expense (tax effected at 21 %) of $ 0.5 million during 2025, reflecting the difference between our valuation allowance estimate at December 31, 2024 and actual results in 2025. The Company expects to utilize its remaining net operating loss carry forwards, and as such has removed the valuation allowance against its deferred tax assets. For further discussion of our income taxes, see Note 13. Liabilities and contingencies The Company is involved from time to time in various legal matters arising out of its operations in the normal course of business. On a case by case basis, the Company evaluates the likelihood of possible outcomes for this litigation. Based on this evaluation, the Company determines whether a loss accrual is appropriate. If the likelihood of a negative outcome is probable, and the amount can be reasonably estimated, the Company accounts for the estimated loss in the current period. See Note 12 for further discussion. Revenue recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and ASC Topic 310, Receivables (“ASC 310”). Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions, and secured lending. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. With the exception of revenue generated within our Specialty Lending segment, revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities. All services and asset sales revenue from contracts with customers consists of three reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage. Generally, revenue is recognized at the point in time in which the performance obligation has been satisfied and full consideration is received. The exception to recognition at a point in time occurs when certain contracts provide for advance payments recognized over a period of time. Services revenue recognized over a period of time is not material in comparison to total revenues (approximately 1% of total revenues for the year ended December 31, 2025), and therefore not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability”. As of December 31, 2025, 2024 and 2023, the deferred revenue balance was approximately $ 0.9 million, $ 0.6 million and $ 0.5 million, respectively, and is recorded within other current liabilities on the consolidated balance sheet. The deferred revenue balance is primarily related to customer deposits on asset sales within the Refurbishment & Resale segment. The Company records receivables in certain situations based on timing of payments for Auction and Liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations. F- 12 For auction services and brokerage sale transactions, funds are typically collected from buyers and are held by the Company on the seller's behalf. The funds are included in cash and cash equivalents in the consolidated balance sheets. The Company releases the funds to the seller, less the Company's commission and other fees due, after the buyer has accepted the goods. The amount of cash held on behalf of the sellers is recorded as payables to sellers in the accompanying consolidated balance sheets. The Company evaluates revenue from Auction and Liquidation and Brokerage segment transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. The Company has determined that it acts as an agent for its fee based transactions and therefore reports the revenue from transactions in which the Company acts as an agent on a net basis. The Company also earns income through transactions that involve the Company acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement. For these transactions, in which the Company’s ownership share meets the criteria for the equity method investments under ASC Topic 323, the Company does not record revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company. Through its Specialty Lending segment, the Company provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. The Company recognizes revenue generated by lending activity in accordance with ASC 310. Fees collected in relation to the issuance of loans includes loan origination fees, interest income, portfolio monitoring fees, and a backend profit share percentage related to the underlying asset portfolio. The monitoring fees and the backend profit share are considered a separate earnings process as compared to the origination fees and interest income. Monitoring fees are recorded at the agreed upon rate, and at the moment in which payments are made by the borrower. The backend profit share is recognized in accordance with the agreed upon rate at the time in which the amount is realizable and earned. The recognition policy was established due to the uncertainty of timing of the amount of backend profit share which will be realized. Through its Refurbishment and Resale segment, the Company offers financing on its standard laboratory equipment sales. The Company recognizes revenue upon shipment of its financed products in accordance with ASC 606. The Company records a loan receivable for the unpaid balance of the order. A loan amortization table is created upon shipment outlining the principal and interest income portion of each future payment. These loans are classified as held-for-investment and accounted for under the guidelines of ASC 310. For both the Specialty Lending and Refurbishment and Resale segments, loan origination fees are offset with any direct origination costs and are deferred upon issuance of the loan and amortized over the lives of the related loans, as an adjustment to interest income. The interest method is used to arrive at a periodic interest cost (including amortization) that will represent a level effective rate on the sum of the face amount of the debt and (plus or minus) the unamortized premium or discount and expense at the beginning of each period. Nonaccrual Loans The Company determines a loan to be in a default status when the minimum payment amount has not been received within the grace period of the payment due date. The status of default does not solely trigger nonaccrual loan status. The Company considers quantitative and qualitative factors when evaluating a loan in default status to determine the likelihood of recovering the outstanding principal balance and contractual interest payments. The Company also monitors its borrowers’ financial standing and performance on an ongoing basis and regularly updates the collection forecasts for the underlying charged off or nonperforming receivable portfolios related to each outstanding loan. If management determines (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows, the Company will place the loans on nonaccrual status. If, based on its analysis, the Company elects to maintain accrual status after initial payment default, the loan will generally be placed on nonaccrual status if principal or interest payments become 90 days past due. F- 13 The accrual of interest is generally discontinued when a loan is placed in nonaccrual status. Interest received on such loans is accounted for using the cost-recovery or the cash-basis method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest payments received by the creditor are recorded as interest income provided the amount does not exceed the amount that would have been earned at the loan’s original effective interest rate. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and all remaining principal and interest payments are deemed probable. Pursuant to the terms of existing credit agreements, the Company's largest borrower was required to collect on underlying charged off and nonperforming consumer loan portfolios and remit a required minimum monthly payment to the Company. However, this borrower became unable to make the required minimum monthly payments beginning in June 2024 and therefore is in default. This borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios and remit net collections to the Company and senior lenders. The Company has determined (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows. While the Company continues to work closely with the borrower and its senior lenders in an effort to mitigate the default in an efficient and effective manner, the impacted loans were placed in nonaccrual status in June 2024. In addition, there was a balance of $ 1.5 million from the Company’s share of other loans within its affiliated joint ventures that are impacted by the default with this borrower and were placed in nonaccrual status in June 2024. The Company's share of payments received from the nonaccrual loans, including interest, will be applied against the outstanding loan balance. As of December 31, 2025, the amortized cost basis of loans in nonaccrual status was $ 23.9 million, of which $ 4.9 million is recorded within notes receivable and $ 19.0 million is recorded within equity method investments. As of December 31, 2024, the amortized cost basis of loans in nonaccrual status was $ 23.5 million, of which $ 5.3 million is recorded within notes receivable and $ 18.3 million is recorded within equity method investments. The Company, in coordination with senior lenders, is actively engaged in a workout process with respect to loans currently in nonaccrual status, with the objective of maximizing recoveries over the remaining economic life of the underlying collateral. Its recovery strategy is centered on the monetization of the charged-off and nonperforming consumer receivable portfolios securing these loans and is expected to occur over multiple years. The primary component of the workout strategy involves transitioning a greater portion of the underlying consumer accounts into legal collection channels. During the fourth quarter of 2025, the Company reached a restructuring agreement with the senior lender for HGC MPG Funding LLC. As a result of this restructuring agreement and the Company's regular quarterly portfolio analysis, the Company has determined it appropriate to place all loans associated with its joint ventures with senior lenders in nonaccrual status given the senior lender’s priority position in cash flows generated from the underlying portfolios. As of December 31, 2025, additional loan balances placed in nonaccrual status was approximately $ 1.7 million. Cost of services revenue and asset sales Cost of services revenue generally includes the direct costs associated with generating commissions and fees from the Company’s auction and appraisal services, merger and acquisition advisory services, and brokering of charged-off receivable portfolios. The Company recognizes these expenses in the period in which the revenue they relate to is recorded. Cost of asset sales generally includes the cost of purchased inventory and the related direct costs of selling inventory. The Company recognizes these expenses in the period in which title to the inventory passes to the buyer, and the buyer assumes the risk and reward of the inventory. F- 14 Stock-based compensation The Company’s stock-based compensation is primarily in the form of options to purchase common shares and issuances of restricted stock. The grant date fair value of stock options is calculated using the Black-Scholes option pricing model. The determination of the fair value of the Company’s stock options is based on a variety of factors including, but not limited to, the price of the Company’s common stock, the expected volatility of the stock price over the expected life of the award, and expected exercise behavior. The grant date fair value of the awards is subsequently expensed over the vesting period, net of estimated forfeitures. The provisions of the Company’s stock-based compensation plans do not require the Company to settle any options by transferring cash or other assets, and therefore the Company classifies the option awards as equity. See Note 16 for further discussion of the Company’s stock-based compensation. Advertising The Company expenses advertising costs in the period in which they are incurred. Advertising and promotion expense included in selling, general and administrative expense for the year ended December 31, 2025 was $ 0.7 million, as compared to $ 0.6 million for the year ended December 31, 2024. Recently adopted accounting pronouncements On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with adoption permitted on a prospective basis. The Company adopted this standard for the year ended December 31, 2025 and applied the new disclosure requirements prospectively. See Note 13 Income Taxes in the accompanying notes to the consolidated financial statements for further detail. Future accounting pronouncements On November 4, 2024, the FASB issued ASU 2024-03, "Reporting Comprehensive Income—Expense Disaggregation Disclosures" ("ASU 2024-03") which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for all public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company anticipates that ASU 2024-03 will have no accounting impact but will require additional disclosure to further detail certain income statement expense information. Note 3 – Notes Receivable, net The Company’s notes receivable, net consists of investments in loans to buyers of charged-off and nonperforming receivable portfolios through HGC and financing of laboratory equipment sales through ALT. As of December 31, 2025 and 2024, the Company’s outstanding notes receivable balance related to loans to buyers of charged-off and nonperforming receivable portfolios, net of unamortized deferred fees and costs on originated loans and adjusted for the allowance for credit losses, was $ 8.8 million and $ 9.6 million, respectively. The activity during 2025 includes the additional investment in notes receivable of approximately $ 5.2 million, which was offset by principal payments made by borrowers of approximately $ 6.1 million. As of December 31, 2025 and 2024, the Company’s outstanding notes receivable balance related to financing of laboratory equipment sales, net of unamortized deferred fees and costs on originated loans and adjusted for the allowance for credit losses, was $ 0.6 million and $ 0.4 million, respectively. The activity during 2025 includes investment in notes receivable of approximately $ 0.7 million, which was offset by principal payments made by purchasers of $ 0.5 million and an immaterial amount of deferred financing fees, and allowance for credit losses. F- 15 The table below shows the Company’s lending activity: 2025 2024 Notes receivable, beginning of year $ 10,409 $ 18,262 Investment in notes receivable 5,931 5,675 Noncash transfer of notes receivable to equity method investments — ( 2,487 ) Principal repayments ( 6,536 ) ( 11,041 ) Notes receivable, end of year 9,804 10,409 Deferred financing fees and costs, net ( 43 ) ( 52 ) Allowance for credit losses ( 340 ) ( 383 ) Notes receivable, net, end of year $ 9,421 $ 9,974 In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis. During the year ended December 31, 2025, the Company recorded a recovery for credit losses related to notes receivable of approximately $ 43,000 in selling, general and administrative expense on the consolidated statement of income. As of December 31, 2025 and 2024, the amortized cost basis of notes receivable in nonaccrual status was $ 4.9 million and $ 5.3 million, respectively. Note 4 – Equity Method Investments In November 2018, CPFH LLC, of which the Company holds a 25 % share, was formed to purchase certain real estate assets among partners in a joint venture. In March 2020, HGC Origination I LLC and HGC Funding I LLC were formed as joint ventures with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In April 2022, KNFH LLC, of which the Company holds a 25 % share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. In December 2022, DHC8 LLC, of which the Company holds a 13.33 % share was formed to provide funding and receive principal and interest payments as a result of the initial investment. In May 2023, HGC MPG Funding LLC, of which the Company holds a 25 % share, was formed as a joint venture with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In December 2023, KNFH II LLC, of which the Company holds a 25 % share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. CPFH LLC, KNFH LLC, DHC8 LLC and KNFH II LLC are joint ventures formed in connection with the Company’s Industrial Assets division, whereas HGC Origination I LLC, HGC Funding I LLC, and HGC MPG Funding LLC were formed in connection with the Financial Assets division. The Company has significant influence over the operations and financial policies of each of its equity method investments. In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis for each of its specialty lending investments. For both the years ended December 31, 2025 and 2024, the Company’s share of the joint venture’s allowance for credit losses was approximately $ 1.0 million, representing a credit loss rate of 4.5 % specific to its equity method investments, which was primarily related to HGC Origination I LLC and HGC MPG Funding LLC. As of December 31, 2025 and 2024, the amortized cost basis of the Company's share of loans in nonaccrual status recorded in equity method investments was $ 19.0 million and $ 18.3 million, respectively. F- 16 Based on the nature of our equity method investments, the joint venture entities' revenues and gross profit are not materially different and furthermore, operating income and net income have no material differences. The table below details the Company’s joint venture revenues, earnings, assets, and liabilities as of December 31, 2025 (in thousands): Year Ended December 31, 2025 DHC8 LLC KNFH II LLC DLZ Solutions LLC HGC Origination I LLC and HGC Funding I LLC HGC MPG Funding LLC Total Revenue $ 140 $ 21 $ 662 $ 4,679 $ 5,470 $ 10,972 Gross profit 140 21 662 4,679 10,941 16,443 Operating income 54 ( 155 ) 541 4,205 5,452 10,097 Net income 54 ( 155 ) 541 4,211 5,452 10,103 Assets 67 7,254 7,695 22,904 29,154 67,074 Liabilities 67 2,019 143 1 — 2,230 F- 17 The table below details the Company’s joint venture revenues, earnings, assets, and liabilities as of December 31, 2024 (in thousands): Year Ended December 31, 2024 DHC8 LLC KNFH II LLC HGC Origination I LLC and HGC Funding I LLC HGC MPG Funding LLC Total Revenues $ 2,478 $ 13,263 $ 5,002 $ 5,416 $ 26,159 Gross profit 2,478 5,226 5,002 5,416 18,122 Operating income 2,018 5,044 4,971 5,412 17,445 Net income (loss) 2,018 5,044 4,986 5,412 17,460 Assets 1,310 7,957 24,034 32,508 65,809 Liabilities 624 2,267 5 — 2,896 Note 5 - Lessor Arrangement In December 2023, the Company, with certain partners making up the KNFH II LLC joint venture, entered into a purchase and sale agreement for a pharmaceutical plant in Fenton, Missouri, including land, a building, and all machinery and equipment held within with a purchase price of $ 8.0 million. In April 2024, KNFH II LLC entered into a purchase and sale agreement for the machinery and equipment within the pharmaceutical plant with a purchase price of $ 5.0 million. Additionally, KNFH II LLC entered into a lease agreement for the lease of the real estate assets; the building and land. This lease agreement includes a purchase option with a purchase price of $ 8.0 million that is expected to be exercised by the lessee. The lessor arrangement is classified as a sales-type lease, and, therefore, the present value of future lease payments, including the purchase option, has been recognized as revenue and a lease receivable as of the effective date. As of December 31, 2025, the Company has recognized approximately $ 1.2 million in earnings from equity method investments related to the Company’s share of net income attributable to KNFH II LLC. On January 29, 2025, DLZ, a joint venture in which the Company holds a 20 % share, entered into a purchase agreement for a pharmaceutical plant in Huntsville, Alabama, including land and a building, with a purchase price of approximately $ 7.8 million. Simultaneously, DLZ entered into a lease agreement with the Seller, for the lease of the real estate assets, the building and land. This lease agreement includes a purchase option exercisable prior to the end of the first 18-month lease term with a purchase price of approximately $ 9.7 million. Concurrently, the Company sold a one-third economic interest in cash flows related to the DLZ investment, which is reflected as a secured borrowing on its balance sheet within other non-current liabilities. As of December 31, 2025, the Company has recorded approximately $ 108,000 in earnings in equity method investments and approximately $ 36,000 in cost of services revenue related to the investment on the consolidated statement of income. Additionally, on January 29, 2025, the Company purchased a 20 % participating interest in a financial asset for approximately $ 1.6 million. The participants’ investment was used to purchase machinery and equipment at the same pharmaceutical plant in Huntsville, Alabama for approximately $ 7.8 million. The participants entered into a lease agreement to lease the purchased machinery and equipment back to the seller with an 18-month lease term which includes purchase option exercisable prior to the end of the term with a purchase price of approximately $ 9.5 million. As of December 31, 2025, the Company reflects its participating interest of $ 1.5 million on its balance sheet within other long-term assets. Concurrently, the Company sold a one-third economic interest in cash flows related to its participating interest, which is reflected as a secured borrowing on its balance sheet within other non-current liabilities. As of December 31, 2025, the Company has recorded approximately $ 112,000 in services revenue and approximately $ 37,000 in costs of services revenue related to the investment on the consolidated statement of income. F- 18 Note 6 – Earnings per Share The Company is required, in periods in which it has net income, to calculate basic earnings per share (“basic EPS”) using the two-class method. The two-class method is required because the Company’s shares of Series N preferred stock, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares. For 2025 and 2024, the earnings allocated to the preferred shares outstanding were not material. In periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method is not used in periods in which the Company has a net loss because the preferred stock does not participate in losses. Stock options and other potential common shares are included in the calculation of diluted earnings per share (“diluted EPS”). The Company uses the treasury stock method for calculating dilutive potential common shares. In calculating diluted EPS, such shares are assumed to be exercised or converted, except when their effect would be anti-dilutive. The table below shows the calculation of the shares used in computing diluted EPS: Year Ended December 31, Weighted Average Shares Calculation: 2025 2024 Basic weighted average shares outstanding 34,834,540 36,430,211 Treasury stock effect of common stock options and restricted stock awards 600,400 700,904 Diluted weighted average common shares outstanding 35,434,939 37,131,115 For both 2025 and 2024 there were potential common shares relating to common stock options totaling approximately 0.9 million that were excluded from the computation of diluted EPS as the inclusion of such shares would have been anti-dilutive. Note 7 – Leases The Company leases office and warehouse space primarily in four locations: Del Mar, CA; Hayward, CA; San Diego, CA and Edwardsville, IL. As each contract does not meet any of the criteria for financing lease classification, the Company has determined that each lease arrangement should be classified as an operating lease. On August 12, 2022, the Company entered into an agreement (the “Lease”) with Liberty Industrial Park, LLC (“Landlord”) pursuant to which the Company leases 6,627 square feet of industrial space in San Diego, California from Landlord. The Lease has a commencement date of September 1, 2022 and ends on August 31, 2027 . The Lease provides for an initial monthly base rent of $ 11,266 , which increases on an annual basis to $ 13,180 per month in the final year. In addition, the Company is obligated to pay its share of maintenance costs of common areas. On June 1, 2023, the Company amended its Edwardsville office building lease with David Ludwig, extending the term of the agreement to May 31, 2027 and setting rent amounts for the new term. It provides for an initial monthly base rent of $ 9,412 , which increases on an annual basis to $ 9,914 per month in the final year. On September 23, 2024, the Company amended its Del Mar office lease with OF 09 Hacienda, LLC, extending the term of the agreement by 24 months to February 28, 2027 and setting rent amounts for the new term. The amended Del Mar office lease provides for an initial monthly base rent of $ 14,660 beginning March 1, 2025 and increases on an annual basis to $ 15,099 per month in the final year. F- 19 The right-of-use assets and lease liabilities for each location are as follows (in thousands): December 31, December 31, Right-of-use assets: 2025 2024 Del Mar, CA $ 197 $ 357 Hayward, CA 933 1,236 San Diego, CA 231 357 Edwardsville, IL 157 258 Total right-of-use assets $ 1,518 $ 2,208 December 31, December 31, Lease liabilities: 2025 2024 Del Mar, CA $ 205 $ 364 Hayward, CA 1,003 1,311 San Diego, CA 250 381 Edwardsville, IL 161 261 Total lease liabilities $ 1,619 $ 2,317 The Company’s leases generally do not provide an implicit rate, and, therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used its incremental borrowing rate as of January 1, 2019 for operating leases that commenced prior to that date. As of January 1, 2019, the Company’s incremental borrowing rate was 5.25 %. For leases commencing after January 1, 2019 the Company uses its incremental borrowing rate at time of commencement. On September 1, 2022, June 1, 2023, and September 23, 2024, the Company’s incremental borrowing rate was 5.50 %, 7.25 %, and 6.25 %, respectively. The weighted average remaining lease term for operating leases was 2.3 years and the weighted average discount rate was 5.42 % as of December 31, 2025. The weighted average remaining lease term for operating leases was 3.2 years and the weighted average discount rate was 5.50 % as of December 31, 2024. Lease expense for leases determined to be operating leases is recognized on a straight-line basis over the lease term. For both 2025 and 2024, lease expense was approximately $ 0.8 million. Cash paid for operating leases in 2025 and 2024 was $ 0.8 million and $ 0.9 million, respectively. The Company had no short-term or variable leases in 2025 or 2024. The lease expense for each location are as follows (in thousands): December 31, December 31, 2025 2024 Del Mar, CA $ 179 $ 160 Hayward, CA 361 361 San Diego, CA 144 144 Edwardsville, IL 116 116 Total $ 800 $ 781 As of December 31, 2025, undiscounted future minimum lease payments related to leases that have initial or remaining lease terms in excess of one year are as follows (in thousands): 2026 829 2027 573 2028 299 Total undiscounted future minimum lease payments 1,701 Less imputed interest ( 82 ) Present value of lease liabilities $ 1,619 F- 20 Note 8 – Property and Equipment, net Property and equipment are recorded at historical cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives on a straight-line basis. The life of the building acquired in connection with the ALT purchase transaction was determined to be 25 years. Leasehold improvements are amortized over the useful life of the asset or the lease term, whichever is shorter. Estimated service lives are five years for furniture, fixtures and office equipment and three years for software and technology assets. Expenditures for repairs and maintenance not considered to substantially lengthen the life of the asset or increase capacity or efficiency are charged to expense as incurred. On February 11, 2025, the Company purchased real estate for $ 7.4 million consisting of land and a building which is used as the Company’s corporate headquarters and as warehouse and office space for the operations of HGP. The Company allocated $ 2.8 million of the purchase price to the building and $ 4.6 million to the land. The life of the building was determined to be 30 years and depreciation will begin when the building is placed into service upon the completion of construction in progress. As of December 31, 2025, the Company capitalized $ 2.0 million of construction in progress related to ongoing building improvements. Also included in the purchase transaction was an agreement for a short-term leaseback to the seller, which ended on March 31, 2025, and resulted in a credit within the closing statement of approximately $ 0.1 million. This credit is considered rental income and classified as service revenue on our consolidated statement of income, and reflected as gross profit within our Corporate and other segment. The following summarizes the components of the Company’s property and equipment (in thousands): December 31, 2025 December 31, 2024 Building $ 3,797 $ 985 Land 4,985 397 Furniture, fixtures and office equipment 352 352 Software and technology assets 461 443 Vehicles 11 11 Construction in process 2,031 — 11,637 2,188 Accumulated depreciation ( 753 ) ( 545 ) Property and equipment, net $ 10,884 $ 1,643 Depreciation expense related to property and equipment for both the years ended December 31, 2025 and 2024 was $ 0.2 million. Note 9 – Intangible Assets and Goodwill Intangible assets The details of identifiable intangible assets as of December 31, 2025 and 2024 are shown below (in thousands except for lives): Amortized & Unamortized Intangible Assets Original Life (years) Remaining Life (years) Carrying Value December 31, 2023 Amortization Carrying Value December 31, 2024 Amortization Carrying Value December 31, 2025 Trade Name (HGP) 14 — $ 128 $ ( 128 ) $ — $ — $ — Trade Name (ALT) 20 15.7 575 ( 33 ) 542 ( 32 ) 510 Vendor Relationship (ALT) 5 0.7 613 ( 230 ) 383 ( 230 ) 153 Unamortized Trade Name (NLEX) — — 2,437 — 2,437 — 2,437 Total $ 3,753 $ ( 391 ) $ 3,362 $ ( 262 ) $ 3,100 F- 21 Amortization expense during 2025 and 2024 was $ 0.3 million and $ 0.4 million, respectively. No significant residual value is estimated for these intangible assets. The estimated amortization expense during future years is shown below (in thousands): Year Amount 2026 $ 186 2027 33 2028 33 2029 33 2030 33 Thereafter 345 Total $ 663 Goodwill Goodwill consisted of the following at December 31, 2025 and 2024 (in thousands): Acquisition December 31, 2025 December 31, 2024 ALT $ 1,861 $ 1,861 HGP 2,041 2,041 NLEX 3,544 3,544 Total goodwill $ 7,446 $ 7,446 The Company performed its annual impairment test for the year ended December 31, 2025 and 2024, and determined that no impairment charges were necessary. Note 10 – Accounts Receivable and Accounts Payable Accounts receivable, net As described in Note 2, the Company’s accounts receivable are primarily related to the operations of its business. With respect to auction proceeds and asset dispositions, including NLEX’s brokerage transactions, the assets are not released to the buyer until payment has been received. The Company, therefore, is not exposed to significant collectability risk relating to these receivables. Given this experience, together with the ongoing business relationships between the Company and its joint venture partners, the Company has not historically required a formal credit quality assessment in connection with these activities. The Company has not experienced any significant collectability issues with its accounts receivable. As the Company’s business expands, more comprehensive credit assessments may be required. In accordance with ASC 326, the Company performs a review of accounts receivables on a quarterly basis. During the years ended December 31, 2025 and 2024, the Company recorded no material adjustments for credit losses in selling, general and administrative expense on the condensed consolidated statement of income related to accounts receivable. As of both December 31, 2025 and 2024, the allowance for credit losses related to accounts receivable was approximately $ 0.2 million. Accounts payable and accrued liabilities Accounts payable and accrued liabilities consisted of the following (in thousands): F- 22 2025 2024 Remuneration and benefits 3,236 3,354 Accrued auction and liquidation expenses 585 908 Due to Joint Venture partners 341 254 Construction in process 979 — Sales and other taxes 556 493 Accounting, tax and legal professional fees 528 171 Other 262 249 Total accounts payable and accrued liabilities $ 6,487 $ 5,429 Note 11 – Debt Outstanding debt is summarized as follows (in thousands): December 31, 2025 December 31, 2024 Current portion of third party debt: ALT note $ — $ 395 2021 credit facility — — Total — 395 Non-current portion of third party debt: Mortgage 4,100 — Total 4,100 — Total third party debt $ 4,100 $ 395 The Company's weighted average interest rate on debt borrowings as of December 31, 2025 and December 31, 2024 was 6.42 % and 8.75 %, respectively. 2021 Credit Facility On May 5, 2021, the Company entered into a promissory note, business loan agreement, commercial security agreement and pledge agreement (the “2021 Credit Facility”) with C3bank, National Association ("Lender") for a $ 10.0 million revolving line of credit. The Company is permitted to use the proceeds of the loan solely for its business operations. The Company is the borrower under the 2021 Credit Facility. The 2021 Credit Facility is secured by a security interest in certain of the Company’s subsidiaries’ current and future tangible and intangible assets, inventory, chattel paper, accounts, equipment and general intangibles, and a pledge of the equity of the direct and indirect subsidiaries of the Company. F- 23 Per the Loan Modification Agreement and Reaffirmation of Loan (the “2023 Modification Agreement”), effective as of May 26, 2023, by and between the Company and Lender, the applicable interest rate spread and floor of the 2021 Credit Facility was modified to be the Wall Street Journal Prime rate plus 1.00 % (such rate not to be less than 6.75 % per annum). Additionally, the 2023 Modification Agreement modified the loan covenants to provide that the Company shall pay the Lender an annual unused line fee, payable on the earlier of (a) bi-annually every six (6) months in arrears, within ten (10) days thereof, commencing on October 27, 2023, or (b) the payment in full of the 2021 Credit Facility, but only if the average balance of the 2021 Credit Facility for the respective nine months is below $ 5.0 million. The availability of additional draws under the 2021 Credit Facility is conditioned, among other things, on the compliance with certain customary representations and warranties, including default, insolvency or bankruptcy, material adverse change in financial condition and any guarantor’s attempt to revise its guarantee. The agreement governing the 2021 Credit Facility also contains customary affirmative covenants regarding, among other things, the maintenance of records, maintenance of certain insurance coverage, compliance with governmental requirements and maintenance of several financial covenants. The 2021 Credit Facility contains certain customary financial covenants and negative covenants that, among other things, include restrictions on the Company’s ability to create, incur or assume indebtedness for borrowed money, including capital leases or to sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of the Company’s assets. The Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Fourth Modification Agreement”), effective as of December 27, 2024, to extend the maturity date of the 2021 Credit Facility to June 27, 2026. The Fourth Modification Agreement also raises the interest rate floor by 0.25 % to 7.0 % and modifies certain compliance covenants. As of December 31, 2025 and 2024 there was no outstanding balance on the 2021 Credit Facility and the Company was in compliance with all financial and negative covenants. ALT Note On August 23, 2021, the Company entered into a $ 2.0 million subordinated promissory note with an interest rate of 3 % per annum and a maturity date of August 23, 2025 (the “ALT Note”) as part of the aggregate purchase price paid to acquire certain assets and liabilities of American Laboratory Trading. The ALT Note requires 48 equal installments of approximately $ 44,000 on the first day of each month beginning September 23, 2021 with the final payment due on August 23, 2025. As of December 31, 2025, there was no outstanding balance on the ALT Note. 2023 Credit Facility On May 26, 2023, the Company entered into a promissory note, a business loan agreement and commercial security agreement (collectively, the “2023 Credit Facility”) with C3 Bank. The 2023 Credit Facility provided for a new $ 7.0 million term loan (the "Term Loan") which was repayable in monthly installments of principal and interest until the maturity date of April 27, 2028. On July 24, 2024, the Company paid $ 5.8 million for the full remaining principal balance outstanding of $ 5.7 million on its Term Loan agreement with C3 Bank, in advance of the loan’s April 27, 2028 maturity date, and $ 0.1 million in interest accrued to July 24, 2024. Mortgage On February 6, 2025, Heritage Nancy Ridge LLC (“Heritage Nancy Ridge”), an indirect and wholly owned subsidiary of the Company entered into a promissory note, a business loan agreement and commercial security agreement (collectively, the “Mortgage Loan Agreement”) with C3bank, National Association (the “Lender”). The Mortgage Loan Agreement provides for a $ 4.1 million term loan (the “Mortgage”). Heritage Nancy Ridge used the proceeds of the Mortgage to purchase real property and the building located at 6130 Nancy Ridge Drive in San Diego, California (the “Nancy Ridge Property”) on February 11, 2025, which is used as the Company’s corporate headquarters and as warehouse and office space for the operations of Heritage Global Partners, Inc., a subsidiary of the Company that operates the Auction and Liquidation segment of the Company. The maturity date of the Mortgage is February 5, 2035 . The Mortgage Loan Agreement sets the interest rate to accrue at a rate of 6.5 % for the first three years of the Mortgage. For the remainder of the term, the Mortgage Loan Agreement sets the interest rate spread and interest rate floor to accrue at a variable interest rate, which is based on the one-month Term SOFR (Secured Overnight Finance Rate) as published daily by CME Group, plus a margin of F- 24 2.25 %. Additionally, the Mortgage Loan Agreement provides that in the event of prepayment, Heritage Nancy Ridge shall pay the Lender a prepayment fee during the first year of the Mortgage equal to three percent ( 3 %) of the amount prepaid, followed by two percent ( 2 %) of the amount prepaid in year two of the Mortgage, and one percent ( 1 %) of the amount prepaid in year three of the Mortgage. Heritage Ridge Nancy is the borrower and the Company is the guarantor under the Mortgage Loan Agreement. The Mortgage Loan Agreement is secured by a security interest in the Nancy Ridge Property. The Mortgage Loan Agreement contains customary affirmative covenants regarding, among other things, the maintenance of records, maintenance of certain insurance coverage, compliance with governmental requirements and maintenance of several financial covenants. The Mortgage Loan Agreement also contains certain customary financial covenants and negative covenants. The outstanding balance of the Mortgage as of December 31, 2025 was $ 4.1 million. Note 12 – Commitments and Contingencies At December 31, 2025 the Company does not expect any potential contingent liabilities, individually or in the aggregate, to have a material adverse effect on its assets or results of operations. Note 13 – Income Taxes In 2014 the Company recorded a valuation allowance against its deferred tax assets, reducing the carrying value of those assets to zero as a result of historical losses. The following table summarizes the change in the valuation allowance during 2024 and 2025, (in thousands): Balance as of December 31, 2023 $ 2,223 Change during 2024 1,290 Balance as of December 31, 2024 3,513 Change during 2025 ( 3,513 ) Balance as of December 31, 2025 $ — As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. At December 31, 2024 management reevaluated the Company's performance and forecast for the following five years and concluded that it is more likely than not that the Company would be able to use $ 24.3 million of the remaining $ 41.0 million federal net operating loss carry forwards. Based on management's estimate at December 31, 2024, the Company believed it was appropriate to increase the valuation allowance to a total of $ 3.5 million, recognizing $ 1.3 million as a discrete expense (tax effected at 21 %) at December 31, 2024. As of December 31, 2025, approximately $ 18.9 million of federal net operating loss carry forwards were unused and expired. The Company recorded discrete expense (tax effected at 21 %) of $ 0.5 million during 2025, reflecting the difference between the Company's valuation allowance estimate at December 31, 2024 and actual results in 2025. As of December 31, 2025, the Company has aggregate federal net operating loss carry forwards of approximately $ 15.5 million. These net operating loss carry forwards begin to expire in 2026. The Company expects to utilize all remaining federal net operating loss carry forwards and no longer records a valuation allowance against its deferred tax assets. The Company’s utilization of restricted net operating tax loss carry forwards against future income for tax purposes is restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years. All loss taxation years remain open for audit pending the application of the respective tax losses against income in a subsequent taxation year. In general, the statute of limitations expires three years from the date that a company files a tax return applying prior year tax loss carry forwards against income for tax purposes in the later year. The 2022 through 2024 taxation years remain open for audit. F- 25 The Company is subject to state income tax in multiple jurisdictions. In most states, the Company does not have tax loss carry forwards available to shield income attributable to a particular state from being subject to tax in that particular state. The reported tax expense varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to the income before income tax expense for the following reasons in each of the years ended December 31, (in thousands except for percentages): 2025 2024 Dollars Percent Dollars Percent Expected income tax expense at federal statutory rate $ 1,227 21.0 % $ 1,885 21.0 % Increase (reduction) in taxes resulting from: State income taxes 537 9.2 % 656 7.3 % Non-deductible expenses (permanent differences) ( 45 ) ( 0.8 )% ( 22 ) ( 0.2 )% Change in valuation allowance Release of valuation allowance ( 3,513 ) ( 60.1 )% 1,290 13.9 % Expiration of net operating loss carry forwards 3,990 68.3 % — 0.0 % Other 62 1.0 % ( 18 ) ( 0.2 )% Effective tax rate $ 2,258 38.6 % $ 3,791 41.9 % Cash paid by the Company in 2025 related to state income tax (net of refunds received) was $ 0.7 million. In 2025, the states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California and Illinois. The states and local jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received) are Illinois, where $ 0.3 million was paid for income taxes, and California where $ 0.2 million was paid for income taxes. The Company did not incur or pay any foreign income taxes in 2025. Income tax expense (benefit) for the years ended December 31, 2025 and 2024 was comprised of the following (in thousands): 2025 2024 Current provision for income taxes: Federal $ — $ — State 652 684 Total 652 684 Deferred provision for income taxes: Federal 1,823 3,145 State ( 217 ) ( 38 ) Total 1,606 3,107 Total provision for income taxes $ 2,258 $ 3,791 The components of the net deferred tax assets as of December 31, 2025 and 2024 are as follows (in thousands): F- 26 2025 2024 Deferred tax assets: Net operating loss carry forwards $ 3,733 $ 9,059 Stock based compensation 681 551 Intangibles 347 282 Operating lease liabilities 424 617 Equity method investments 412 194 Allowance for credit loss 113 104 Accruals 149 120 Other 88 118 Total gross deferred tax assets 5,947 11,045 Deferred tax liabilities: Trade names $ ( 651 ) $ ( 681 ) Customer relationships ( 88 ) ( 68 ) Equity method investments ( 258 ) ( 20 ) Operating lease right-of-use assets ( 398 ) ( 588 ) Other ( 151 ) ( 167 ) Total gross deferred tax liabilities ( 1,545 ) ( 1,524 ) Total deferred tax assets 4,402 9,521 Less: valuation allowance — ( 3,513 ) Deferred tax assets, net of valuation allowance $ 4,402 $ 6,008 Note 14 – Related Party Transactions As part of the operations of NLEX, the Company leases office space in Edwardsville, IL that is owned by the President of the Financial Assets Division, David Ludwig. The total amount paid to the related party was approximately $ 0.1 million for both years ended December 31, 2025 and 2024, and is included in selling, general and administrative expenses in the consolidated income statement. All of the payments in both 2025 and 2024 were made to David Ludwig. Note 15 – Legal Proceedings The Company is involved in various legal matters arising out of its operations in the normal course of business, none of which are expected, individually or in the aggregate, to have a material adverse effect on the Company. Note 16 – Stockholders’ Equity Capital Stock The Company’s authorized capital stock consists of 300,000,000 common shares with a par value of $ 0.01 per share and 10,000,000 preferred shares with a par value of $ 10.00 per share. During 2025 and 2024 the Company issued 1,445 and 45,752 shares of common stock, respectively, pursuant to the exercise of stock options. Each share of Series N preferred stock has a voting entitlement equal to 40 common shares, votes with the common stock on an as-converted basis and is senior to all other preferred stock of the Company. Dividends, if any, will be paid on an as-converted basis equal to common stock dividends. The conversion value of each share of Series N preferred stock is $ 1,000 , and each share is convertible to 40 common shares at the rate of $ 25.00 per common share. The holders of shares of Series N preferred stock are entitled to liquidation preference over common stockholders equivalent to $ 1,000 per share. No shares of the Company’s Series N preferred stock were converted during 2025 or 2024. F- 27 Stock-Based Compensation Plans At December 31, 2025, the Company had four active stock-based compensation plans which are described below. The fourth of these plans received approval at the Company’s 2022 Annual Meeting of Shareholders, and replaces the 2016 Plan for awards made after June 8, 2022. 2010 Non-Qualified Stock Option Plan In 2010, the Company’s Board approved the 2010 Non-Qualified Stock Option Plan (the “2010 Plan”) to induce certain key employees of the Company or any of its subsidiaries who are in a position to contribute materially to the Company’s prosperity to remain with the Company, to offer such persons incentives and rewards in recognition of their contributions to the Company’s progress, and to encourage such persons to continue to promote the best interests of the Company. The Company reserved 1,250,000 shares of common stock (subject to adjustment under certain circumstances) for issuance or transfer upon exercise of options granted under the 2010 Plan. Options may be issued under the 2010 Plan to any key employees or consultants selected by the Company’s Board (or an appropriately qualified committee). Options may not be granted with an exercise price less than the fair market value of the common stock of the Company as of the day of the grant. Options granted pursuant to the plan are subject to limitations on transfer and execution and may be issued subject to vesting conditions. Options may also be forfeited in certain circumstances. No awards under this plan were granted during 2025 or 2024. 2010 Plan 2025 2024 Options outstanding, beginning of year 217,500 238,750 Options exercised — ( 21,250 ) Options outstanding, end of year 217,500 217,500 The outstanding options vest over four years at exercise prices ranging from $ 0.40 to $ 2.77 per share. Other Options Issued In 2021, the Company’s Board approved the issuance of options to purchase 150,000 shares at an exercise price of $ 1.78 to certain accredited personnel. In 2020, the Company’s Board approved the issuance of options to purchase 90,000 shares at an exercise price of $ 1.41 to certain accredited personnel. Shares issued upon exercise of these options are not registered for public sale. No awards under this plan were granted during 2025 or 2024. Other Options 2025 2024 Options outstanding, beginning of year 293,125 383,125 Options exercised — ( 90,000 ) Options outstanding, end of year 293,125 293,125 The outstanding options vest over four years at exercise prices ranging from $ 0.70 to $ 1.78 per share. Heritage Global Inc. 2016 Stock Option Plan In 2016, the Company adopted the Heritage Global Inc. 2016 Stock Option Plan (the “2016 Plan”) which provided for the issuance of incentive stock options and non-qualified stock options up to an aggregate of 3,150,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events). Options may be forfeited in certain circumstances. On June 8, 2022 the 2016 plan was replaced by the 2022 Heritage Global Inc. Equity Incentive Plan, and as such, no awards under this plan were granted during 2025 or 2024. 2016 Plan 2025 2024 Options outstanding, beginning of year 1,065,850 1,079,850 Options exercised ( 4,500 ) ( 10,000 ) Options forfeited ( 33,000 ) ( 4,000 ) Options outstanding, end of year 1,028,350 1,065,850 F- 28 The outstanding options under the 2016 Plan vest over four years at exercise prices ranging from $ 0.45 to $ 3.33 per share. 2022 Heritage Global Inc. Equity Incentive Plan In 2022, at the Company's 2022 Annual Meeting of Shareholders, the Company's shareholders approved the 2022 Heritage Global Inc. Equity Incentive Plan, which replaces the Heritage Global Inc. 2016 Plan and authorized the issuance of an aggregate of 3.5 million shares of Common Stock for awards made after June 8, 2022. Options may not be granted with an exercise price less than the fair market value of the common stock of the Company as of the day of the grant. Options granted pursuant to the plan are subject to limitations on transfer and execution and may be issued subject to vesting conditions. Options may also be forfeited in certain circumstances. In 2025 and 2024, the Company issued options to purchase 70,000 and 112,500 shares of common stock to certain of the Company's employees under this plan, respectively. 2022 Plan 2025 2024 Options outstanding, beginning of year 655,125 563,625 Options granted 70,000 112,500 Options exercised ( 9,500 ) ( 3,750 ) Options forfeited ( 82,000 ) ( 17,250 ) Options outstanding, end of year 633,625 655,125 The outstanding options under the 2022 Plan vest over four years at exercise prices ranging from $ 1.60 to $ 3.55 per share. Stock-Based Compensation Expense Total compensation cost related to stock options was $ 0.4 million in 2025 and $ 0.7 million in 2024. These amounts were recorded in selling, general and administrative expense in both years. During 2025 and 2024, options to purchase 14,000 and 125,000 shares were exercised, respectively. There was an immaterial tax benefit recognized by the Company related to these option exercises in 2025, as compared to a $ 0.1 million tax benefit recognized in 2024. In connection with the stock option grants during 2025 and 2024, the fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions: 2025 2024 Risk-free interest rate 4 % 4 % Expected life (years) 6 7 Expected volatility 69 % 73 % Expected dividend yield Zero Zero The risk-free interest rates are those for U.S. Treasury constant maturities for terms matching the expected term of the option. The expected life of the options is calculated according to the simplified method for estimating the expected term of the options, based on the vesting period and contractual term of each option grant. Expected volatility is based on the Company’s historical volatility. The Company has never paid a dividend on its common stock and therefore the expected dividend yield is zero. F- 29 The following summarizes the changes in common stock options: 2025 2024 Options Weighted Average Exercise Price Aggregate Intrinsic Value (In thousands) Options Weighted Average Exercise Price Aggregate Intrinsic Value (In thousands) Outstanding at beginning of year 2,231,600 $ 1.77 2,265,350 $ 1.71 Granted 70,000 2.11 112,500 2.01 Exercised ( 14,000 ) 1.88 ( 125,000 ) 0.83 Forfeited ( 115,000 ) 2.27 ( 21,250 ) 1.88 Outstanding at end of year 2,172,600 $ 1.76 $ 408 2,231,600 $ 1.77 $ 971 Options exercisable at year end 1,794,975 $ 1.62 $ 408 1,536,725 $ 1.48 $ 926 Weighted-average fair value of options granted during the year $ 1.39 $ 1.46 As of December 31, 2025, the Company had unvested options for the purchase of 377,625 shares with a weighted average grant date fair value of $ 1.81 per share. As of December 31, 2024, the Company had unvested options for the purchase of 694,875 shares with a weighted average grant date fair value of $ 1.81 per share. At December 31, 2025 and 2024, the aggregate intrinsic value of exercisable options was $ 0.4 million and $ 0.9 million, respectively. At December 31, 2025 and 2024, the aggregate intrinsic value of options exercised was approximately $ 2,500 and $ 0.1 million, respectively. As of December 31, 2025, the total unrecognized stock-based compensation expense related to unvested stock options was $ 0.5 million, which is expected to be recognized over a weighted-average period of 1.4 years. The total fair value of options vesting during 2025 and 2024 was $ 0.5 million and $ 0.6 million, respectively. The unvested options have no associated performance conditions. In general, the Company’s employee turnover is low, and the Company expects that the majority of the unvested options will vest according to the standard four-year timetable. The following table summarizes information about all stock options outstanding as of December 31, 2025: Exercise price Options Outstanding Weighted Average Remaining Life (years) Weighted Average Exercise Price Number Exercisable Weighted Average Remaining Life (years) Weighted Average Exercise Price $ 0.40 to $ 0.53 401,350 1.1 $ 0.45 401,350 1.1 $ 0.45 $ 0.70 to $ 0.85 180,625 3.5 $ 0.73 180,625 3.5 $ 0.73 $ 1.37 to $ 1.90 828,125 5.8 $ 1.66 728,000 5.6 $ 1.66 $ 2.11 to $ 3.55 762,500 6.7 $ 2.80 485,000 6.1 $ 2.86 2,172,600 1,794,975 Restricted Stock Restricted stock awards represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of restricted stock awards or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Compensation cost for these awards is based on the fair value of the shares of common stock on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period. F- 30 The following summarizes the restricted stock awards and related stock based compensation expense in 2025 and 2024 (in thousands, except share count and award fair value): Compensation Expense for the year ended, Unrecognized Compensation Expense as of, Grant Date Vesting Date Restricted Stock Granted Grant Date Fair Value 2024 2025 December 31, 2025 Employees March 1, 2023 March 1, 2024 97,290 $ 2.53 $ — $ — $ — Non-executive directors March 31, 2023 March 31, 2024 90,000 $ 2.87 45 — — Employees March 7, 2024 March 7, 2025 128,044 $ 2.93 308 67 — Non-executive directors March 7, 2024 March 7, 2025 75,000 $ 2.93 180 40 — Employees January 1, 2025 December 31, 2028 [1] 125,000 $ 1.85 — 58 173 Employees March 6, 2025 March 6, 2026 68,051 $ 2.11 — 118 26 Non-executive directors March 6, 2025 March 6, 2026 [2] 100,000 $ 2.11 — 173 38 Total $ 533 $ 456 $ 237 [1] These restricted stock awards vest 25 % annually over four years, until fully vested on December 31, 2028. [2] These restricted stock awards vest 25 % quarterly over one year, until fully vested on March 6, 2026. The Company's unrecognized stock-based compensation expense related to restricted stock as of December 31, 2025 is expected to be recognized over a weighted average period of 1.4 years. The tax benefit recognized by the Company related to restricted stock awards was approximately $ 0.4 million in both 2025 and 2024. Note 17 – Segment Information The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by the Chief Operating Decision Maker (CODM), which was determined to be Ross Dove, CEO, for making decisions and assessing performance as the source of the Company’s reportable segments. The Company manages its business primarily on differentiated revenue streams for services offered. The Company’s reportable segments consist of the Auction and Liquidation segment, Refurbishment & Resale segment, Brokerage segment, and Specialty Lending segment. The Auction and Liquidation segment, through HGP, operates as a global full-service auction, appraisal and asset advisory firm, including the acquisition of turnkey manufacturing facilities and used industrial machinery and equipment. The Refurbishment & Resale segment, through ALT, acquires, refurbishes and supplies specialized laboratory equipment. The Brokerage segment, through NLEX, brokers charged-off receivables in the U.S. and Canada on behalf of financial institutions. The Specialty Lending segment, through HGC, provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. F- 31 Our CODM evaluates the performance of the Company's reportable segments based primarily on gross profit and operating income. The CODM routinely receives internal reports that analyze these metrics for the reporting segments. The CODM is not routinely provided detailed information regarding significant operating expenses by segment, and such information is not considered critical for allocating resources or assessing the performance of each segment. The Company’s operating expenses are comprised mainly of fixed and variable compensation, marketing, outside services such as audit, legal and information technology, occupancy, and other regulatory costs incurred as a public entity. Additionally, earnings from equity method investments related to significant transactions involving real estate, machinery and equipment in the Company's Auction and Liquidation segment and Joint Venture lending activity related to the Company's Specialty Lending segment are significant in the computation of segment operating income and reported separately as shown in the table below. Notwithstanding the foregoing, the reported segment operating income for ALT and HGC represents incremental costs for managing these segments as part of their sister segments (HGP for ALT and NLEX for HGC). As such, the reported operating income for ALT and HGC does not represent their true standalone contribution, as the Company does not attempt to allocate existing fixed divisional overhead costs of the sister divisions to the newer segments. Similarly, corporate overhead cost is not allocated to the operating divisions for management reporting purposes. Further, the Company does not utilize segmented asset information to evaluate the performance of its reportable segments and does not include intercompany transfers between segments for management reporting purposes. The following table sets forth certain financial information for the Company's reportable segments (in thousands): Year Ended December 31, 2025 Auction and Liquidation Refurbishment & Resale Brokerage Specialty Lending Corporate and other Consolidated Gross profit [1] $ 10,941 $ 5,827 $ 12,844 $ 1,355 $ 65 $ 31,032 Operating expenses [2] ( 8,336 ) ( 4,168 ) ( 6,728 ) ( 1,182 ) ( 5,030 ) $ ( 25,444 ) Earnings from equity method investments 66 — — 57 — 123 Operating income (loss) $ 2,671 $ 1,659 $ 6,116 $ 230 $ ( 4,965 ) $ 5,711 Year Ended December 31, 2024 Auction and Liquidation Refurbishment & Resale Brokerage Specialty Lending Corporate and other Consolidated Gross profit [1] $ 10,560 $ 4,103 $ 14,069 $ 2,503 $ — $ 31,235 Operating expenses [2] ( 7,911 ) ( 3,655 ) ( 6,717 ) ( 1,800 ) ( 4,774 ) ( 24,857 ) Earnings from equity method investments 1,391 — — 1,297 — 2,688 Operating income (loss) $ 4,040 $ 448 $ 7,352 $ 2,000 $ ( 4,774 ) $ 9,066 [1] Within the Company’s Industrial Asset division, management allocates gross profit resulting from certain auctions from Auctions and Liquidation (HGP) to Refurbishment & Resale (ALT). From time to time, ALT may source and refer an auction project to HGP or directly sell lab equipment inventory through the auction channel. In these instances, the profits relates to these transactions are allocated to ALT rather than accounted for under the segment profit or loss of HGP. In 2025, the total amount of gross profit allocated to ALT from F- 32 HGP was approximately $ 1.8 million, as compared to the total amount of gross profit allocated to ALT in 2024 of approximately $ 1.3 million . [2] All financing arrangements are originated with Corporate and other. Management may determine from time to time that interest incurred from financing arrangements are directly attributable to a specific segment. As a result, interest incurred may be charged to the segment and included in that segment’s profit or loss as a charge to operating expense. In 2025, no interest was allocated to Specialty Lending (HGC) from Corporate and other, as compared to the total amount of interest allocated to HGC in 2024 of approximately $ 0.3 million . Note 18 – Subsequent Events The Company has evaluated events subsequent to December 31, 2025 for potential recognition or disclosure in its condensed consolidated financial statements. There have been no material subsequent events requiring recognition or disclosure in this Annual Report on Form 10-K, other than noted below. Asset Purchase Agreement On January 9, 2026, Heritage DebtX LLC (“Heritage DebtX LLC”), a Delaware limited liability company and wholly owned subsidiary of the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with The Debt Exchange, Inc., a Delaware corporation (“DebtX”), pursuant to which, among other things, Heritage DebtX LLC acquired, effective January 1, 2026, substantially all of the assets and certain liabilities of DebtX, including the assets utilized in the operation of DebtX’s business of providing loan-portfolio advisory and valuation, proprietary market-transaction data, and end-to-end execution support for banks, specialty-finance companies, government agencies, and institutional investors (the “Transaction”). HG paid DebtX an aggregate purchase price of $ 8,450,000 in cash. The source of funds used for the purchase price was cash on hand. The Transaction closed on January 9, 2026. Following the Transaction, Heritage DebtX LLC will operate within the Financial Assets Division of the Company. The Purchase Agreement contains customary representations and warranties and covenants by each party. The Company and DebtX are obligated, subject to certain limitations, to indemnify the other under the Purchase Agreement for losses arising from certain breaches of the Purchase Agreement and for certain other liabilities, subject to applicable limitations set forth in the Purchase Agreement. The Purchase Agreement also imposes customary confidentiality, non-solicitation and non-compete obligations upon DebtX. The above summary of certain terms and conditions of the Purchase Agreement does not purport to be a complete discussion of that agreement or related documents and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on January 12, 2026. The Company is currently in the process of evaluating the fair values of the assets acquired and liabilities assumed and has not completed the initial accounting for the business combination. Accordingly, the allocation of the purchase price to the underlying assets acquired and liabilities assumed has not yet been finalized. For the year ended December 31, 2025, The Debt Exchange, Inc. reported, on a standalone basis, revenues of approximately $ 6.6 million and operating income of approximately $ 0.8 million. As the acquisition was effective on January 1, 2026, these unaudited results were not included in the Company’s consolidated results of operations for the year ended December 31, 2025. The Company has not yet completed the information necessary to present pro forma financial information reflecting the acquisition as if it had occurred at the beginning of the periods presented. Pro forma adjustments are expected to be primarily related to stock based and other compensation, and amortization of intangible assets. F- 33 Employment Agreement with Bruce Hounsell In connection with the consummation of the Transaction, Heritage DebtX LLC entered into an employment agreement (the “Hounsell Employment Agreement”) on January 9, 2026 with Bruce Hounsell (“Mr. Hounsell”). Pursuant to the terms of the Hounsell Employment Agreement, Heritage DebtX LLC engaged Mr. Hounsell as a consultant and independent contractor of Heritage DebtX LLC until January 26, 2026 (the “Hounsell Employment Date”). Effective as of the Hounsell Employment Date, Heritage DebtX LLC employs Mr. Hounsell to serve as Co-President until March 31, 2026, after which Mr. Hounsell will transition into the role of President of Heritage DebtX LLC. The Hounsell Employment Agreement is effective through January 26, 2029 and includes optional one-year extension periods. The Hounsell Employment Agreement sets forth the terms of Mr. Hounsell’s employment with Heritage DebtX LLC, including the following: • An annual base salary of $ 400,000 . • Eligibility to receive an annual, percentage-based performance bonus determined based on the achievement of certain net operating income metrics of Heritage DebtX LLC. • A one-time grant of 500,000 non-qualified stock options (the “NQSOs”) pursuant to the 2022 Heritage Global Inc. Equity Incentive Plan. The NQSOs will vest ratably over three years. • An arrangement among MaisieDog LLC, an entity co-owned by Mr. Hounsell (“MaisieDog”), Heritage DebtX LLC, and Mr. Hounsell (the “MaisieDog Arrangement”), pursuant to which (i) Heritage DebtX LLC will pay Mr. Hounsell a commission for customer relationships that Mr. Hounsell facilitates between Heritage DebtX LLC and certain customers of MaisieDog, or, (ii) if such customer engagements remain with MaisieDog, then Heritage DebtX LLC and MaisieDog will enter into a revenue-share arrangement in connection with such customer engagements. In either case, the MaisieDog Arrangement will terminate once Mr. Hounsell receives commissions or MaisieDog retains revenue that, in the aggregate, equal $ 500,000 , net of certain expenses. • Eligibility to receive severance equal to the annual base salary upon termination by Heritage DebtX LLC without “cause” or by Mr. Hounsell for “good reason.” • Right to participate in other benefits and insurance plans available to HG executives in similarly-situated positions. • Customary confidentiality, non-solicitation and non-compete obligations upon Mr. Hounsell. The above summary of certain terms and conditions of the Hounsell Employment Agreement does not purport to be a complete discussion of that agreement or related documents and is qualified in its entirety by reference to the Hounsell Employment Agreement, which is filed as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on January 12, 2026. F- 34