Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2024 | May 01, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2024 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | HGBL | |
Security Exchange Name | NASDAQ | |
Entity Registrant Name | HERITAGE GLOBAL INC. | |
Entity Central Index Key | 0000849145 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Interactive Data Current | Yes | |
Document Transition Report | false | |
Title of 12(b) Security | Common stock, $0.01 par value | |
Entity Incorporation, State or Country Code | FL | |
Document Quarterly Report | true | |
Entity Common Stock, Shares Outstanding | 37,341,185 | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Securities Act File Number | 001-39471 | |
Entity Tax Identification Number | 59-2291344 | |
Entity Address, Address Line One | 12625 High Bluff Drive | |
Entity Address, Address Line Two | Suite 305 | |
Entity Address, City or Town | San Diego | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92130 | |
City Area Code | 858 | |
Local Phone Number | 847-0659 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Current assets: | ||
Cash and cash equivalents | $ 15,577 | $ 12,279 |
Accounts receivable (net of allowance for credit losses of $126 in 2024 and $132 in 2023) | 1,558 | 1,910 |
Current portion of notes receivable (net of allowance for credit losses of $643 in 2024 and $650 in 2023) | 6,514 | 6,581 |
Inventory – equipment | 4,735 | 5,074 |
Other current assets | 490 | 448 |
Total current assets | 28,874 | 26,292 |
Non-current portion of notes receivable, net | 10,698 | 10,890 |
Equity method investments | 20,271 | 21,361 |
Right-of-use assets | 2,377 | 2,539 |
Property and equipment, net | 1,684 | 1,705 |
Intangible assets, net | 3,655 | 3,753 |
Goodwill | 7,446 | 7,446 |
Deferred tax assets | 8,637 | 9,115 |
Other assets | 64 | 67 |
Total assets | 83,706 | 83,168 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 4,564 | 7,237 |
Payables to sellers | 6,816 | 4,975 |
Current portion of third party debt | 1,765 | 1,733 |
Current portion of lease liabilities | 779 | 789 |
Total current liabilities | 13,924 | 14,734 |
Non-current portion of third party debt | 5,040 | 5,495 |
Non-current portion of lease liabilities | 1,710 | 1,859 |
Total liabilities | 20,674 | 22,088 |
Stockholders’ equity: | ||
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 563 of Series N as of March 31, 2024 and December 31, 2023; with liquidation preference over common stockholders equivalent to $1,000 per share | 6 | 6 |
Common stock, $0.01 par value, authorized 300,000,000 shares; issued 37,336,392 and 37,157,616 shares as of March 31, 2024 and December 31, 2023, respectively; and outstanding 36,940,217 and 36,761,441 shares as of March 31, 2024 and December 31, 2023, respectively | 373 | 372 |
Additional paid-in capital | 294,674 | 294,522 |
Accumulated deficit | (231,227) | (233,026) |
Treasury stock at cost, 396,175 shares as of March 31, 2024 and December 31, 2023 | (794) | (794) |
Total stockholders’ equity | 63,032 | 61,080 |
Total liabilities and stockholders’ equity | $ 83,706 | $ 83,168 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 126 | $ 132 |
Notes receivable, net of allowance for credit losses | $ 643 | $ 650 |
Preferred stock, par value (in dollars per share) | $ 10 | $ 10 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 563 | 563 |
Preferred stock, shares outstanding | 563 | 563 |
Preferred Stock, Liquidation Preference Per Share | $ 1,000 | $ 1,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common Stock, shares issued | 37,336,392 | 37,157,616 |
Common stock, shares outstanding | 36,940,217 | 36,761,441 |
Treasury Stock, Common, Shares | 396,175 | 396,175 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Revenues: | ||
Total revenues | $ 12,161 | $ 16,612 |
Operating costs and expenses: | ||
Selling, general and administrative | 6,358 | 6,300 |
Depreciation and amortization | 141 | 120 |
Total operating costs and expenses | 10,390 | 13,095 |
Earnings of equity method investments | 787 | 377 |
Operating income | 2,558 | 3,894 |
Interest expense, net | (92) | (68) |
Income before income tax expense | 2,466 | 3,826 |
Income tax expense | 667 | 997 |
Net income | $ 1,799 | $ 2,829 |
Weighted average common shares outstanding – basic | 36,592,801 | 36,005,150 |
Weighted average common shares outstanding – diluted | 37,367,268 | 37,334,459 |
Net income per share – basic | $ 0.05 | $ 0.08 |
Net income per share – diluted | $ 0.05 | $ 0.08 |
Services Revenue [Member] | ||
Revenues: | ||
Total revenues | $ 8,983 | $ 10,245 |
Operating costs and expenses: | ||
Cost of services revenue and assets sales | 1,480 | 2,340 |
Asset Sales [Member] | ||
Revenues: | ||
Total revenues | 3,178 | 6,367 |
Operating costs and expenses: | ||
Cost of services revenue and assets sales | $ 2,411 | $ 4,335 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Treasury Stock, Common [Member] |
Beginning Balance at Dec. 31, 2022 | $ 48,299 | $ 6 | $ 369 | $ 293,589 | $ (245,270) | $ (395) |
Cumulative change in accounting principle (Note 2) | (231) | (231) | ||||
Begining Balance (in shares) at Dec. 31, 2022 | 565 | 36,932,177 | 243,468 | |||
Balance as of January 1, 2023 (as adjusted for change in accounting principle) | 48,068 | $ 6 | $ 369 | 293,589 | (245,501) | $ (395) |
Balance as of January 1, 2023 (as adjusted for change in accounting principle), shares | 565 | 36,932,177 | 243,468 | |||
Issuance of common stock from stock option awards | 5 | 5 | ||||
Issuance of common stock from stock options awards, shares | 31,191 | |||||
Issuance of restricted common stock | 152 | $ 2 | 150 | |||
Restricted stock units issued, shares | 134,592 | |||||
Stock-based compensation expense | 179 | 179 | ||||
Net Income (Loss) | 2,829 | 2,829 | ||||
Ending Balance at Mar. 31, 2023 | 51,233 | $ 6 | $ 371 | 293,923 | (242,672) | $ (395) |
Ending Balance (in shares) at Mar. 31, 2023 | 565 | 37,097,960 | 243,468 | |||
Beginning Balance at Dec. 31, 2023 | $ 61,080 | $ 6 | $ 372 | 294,522 | (233,026) | $ (794) |
Begining Balance (in shares) at Dec. 31, 2023 | 563 | 37,157,616 | 396,175 | |||
Issuance of common stock from stock options awards, shares | 3,750 | 1,200 | ||||
Issuance of restricted common stock | $ (75) | $ 1 | (76) | |||
Restricted stock units issued, shares | 177,576 | |||||
Stock-based compensation expense | 228 | 228 | ||||
Net Income (Loss) | 1,799 | 1,799 | ||||
Ending Balance at Mar. 31, 2024 | $ 63,032 | $ 6 | $ 373 | $ 294,674 | $ (231,227) | $ (794) |
Ending Balance (in shares) at Mar. 31, 2024 | 563 | 37,336,392 | 396,175 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash flows provided by operating activities: | ||
Net income | $ 1,799 | $ 2,829 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of deferred issuance costs and fees | 3 | 34 |
Earnings of equity method investments | (787) | (377) |
Noncash credit loss expense | (2) | 102 |
Noncash lease expense | 162 | 159 |
Depreciation and amortization | 141 | 120 |
Deferred taxes | 478 | 816 |
Stock-based compensation expense | 228 | 179 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 347 | (322) |
Inventory – equipment | 339 | 1,127 |
Other current assets | (39) | (26) |
Accounts payable and accrued liabilities | (2,674) | (687) |
Payables to sellers | 1,841 | 5,145 |
Lease liabilities | (160) | (154) |
Net cash provided by operating activities | 1,676 | 8,945 |
Cash flows from investing activities: | ||
Investment in notes receivable | (2,256) | (13,221) |
Payments received on notes receivable | 2,520 | 1,071 |
Cash received on transfer of notes receivable to partners | 0 | 4,613 |
Investment in equity method investments | (193) | (512) |
Return of investment in equity method investments | 1,283 | 975 |
Cash distributions from equity method investments | 787 | 377 |
Purchase of property and equipment | (22) | (89) |
Net cash provided by (used in) investing activities | 2,119 | (6,786) |
Cash flows from financing activities: | ||
Proceeds from debt payable to third parties | 0 | 3,400 |
Repayment of debt payable to third parties | (422) | (2,403) |
Proceeds from issuance of common stock from stock option awards | 0 | 5 |
Payments of tax withholdings related to issuance of restricted common stock and stock option awards | (75) | (95) |
Net cash (used in) provided by financing activities | (497) | 907 |
Net increase in cash and cash equivalents | 3,298 | 3,066 |
Cash and cash equivalents as of beginning of period | 12,279 | 12,667 |
Cash and cash equivalents as of end of period | 15,577 | 15,733 |
Supplemental cash flow information: | ||
Cash paid for taxes | (1) | 0 |
Cash paid for interest | $ 92 | $ 49 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ 1,799 | $ 2,829 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Note 1 –Basis of Presentation These unaudited condensed consolidated interim financial statements include the accounts of Heritage Global Inc. ("HG") together with its subsidiaries, including Heritage Global Partners, Inc. (“HGP”), National Loan Exchange Inc. (“NLEX”), Heritage Global LLC (“HG LLC”), Heritage Global Capital LLC (“HGC”), and Heritage ALT LLC (“ALT”). These entities, collectively, are referred to as "the Company,” "us" “we” or “our” in these consolidated financial statements. These consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and include the assets, liabilities, revenues, and expenses of all subsidiaries over which HG exercises control. All significant intercompany accounts and transactions have been eliminated upon consolidation. The Company began its operations in 2009 with the establishment of HG LLC. The business was subsequently expanded by the acquisitions of HGP, NLEX, and ALT in 2012, 2014, and 2021 respectively, and the creation of HGC in 2019. As a result, HG is positioned to provide an array of value-added capital and financial asset solutions: auction and appraisal services, traditional asset disposition sales, and specialty financing solutions. The Company’s reportable segments consist of Auction and Liquidation, through HGP, Refurbishment & Resale, through ALT, Brokerage, through NLEX and Specialty Lending, through HGC. The Company prepared the unaudited condensed consolidated interim financial statements included herein pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In the opinion of management, these condensed financial statements reflect all adjustments that are necessary to present fairly the results for the interim periods included herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are appropriate. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 14, 2024 (the “Form 10-K”). The results of operations for the three-month period ended March 31, 2024 are not necessarily indicative of those operating results to be expected for any subsequent interim period or for the entire year ending December 31, 2024. The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated balance sheet as of December 31, 2023, contained in the Company’s Form 10-K. Repurchase Program The Company’s Board of Directors authorized a share repurchase program on May 5, 2022 (“2022 Repurchase Program”), which permits the Company to purchase up to an aggregate of $ 4.0 million in common shares over a three year period ending in June of 2025. As of March 31, 2024, the Company had approximately $ 3.2 million in remaining aggregate dollar value of shares that may be purchased under the program. There were no shares repurchased in the open market for the three months ended March 31, 2024. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Use of estimates The preparation of the Company’s unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable and notes receivable, inventory, investments, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities, including projecting future years’ taxable income, and stock-based compensation. These estimates have the potential to significantly impact our condensed consolidated interim financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature. Reven ue recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and ASC Topic 310, Receivables (“ASC 310”). Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions, and secured lending. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. With the exception of revenue generated within our Specialty Lending segment, revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities. All services and asset sales revenue from contracts with customers consists of three reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage. Generally, revenue is recognized at the point in time in which the performance obligation has been satisfied and full consideration is received. The exception to recognition at a point in time occurs when certain contracts provide for advance payments recognized over a period of time. Services revenue recognized over a period of time is not material in comparison to total revenues (less than 1% of total revenues for the three months ended March 31, 2024 and 2023), and therefore not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability”. The deferred revenue balance was approximately $ 0.3 million as of March 31, 2024 and $ 0.5 million as of December 31, 2023 and is reflected in accounts payable and accrued liabilities on the condensed consolidated balance sheets. The deferred revenue balance is primarily related to customer deposits on asset sales within the Refurbishment & Resale segment. The Company records receivables in certain situations based on timing of payments for Auction and Liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations. For auction services and brokerage sale transactions, funds are typically collected from buyers and are held by the Company on the seller's behalf. The funds are included in cash and cash equivalents in the condensed consolidated balance sheets. The Company releases the funds to the seller, less the Company's commission and other fees due, after the buyer has accepted the goods. The amount of cash held on behalf of the sellers is recorded as payables to sellers in the accompanying condensed consolidated balance sheets. The Company evaluates revenue from Auction and Liquidation and Brokerage segment transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. The Company has determined that it acts as an agent for its fee based transactions and therefore reports the revenue from transactions in which the Company acts as an agent on a net basis. The Company also earns income through transactions that involve the Company acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, in which the Company’s ownership share meets the criteria for the equity method investments under ASC Topic 323, Equity Method and Joint Ventures , the Company does not record revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company. Through our Specialty Lending segment, the Company provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. The Company recognizes revenue generated by lending activity in accordance with ASC 310. Fees collected in relation to the issuance of loans include loan origination fees, interest income, portfolio monitoring fees, and a backend profit share percentage related to the underlying asset portfolio. The loan origination fees are offset with any direct origination costs and are deferred upon issuance of the loan and amortized over the lives of the related loans, as an adjustment to interest income. The interest method is used to arrive at a periodic interest cost (including amortization) that will represent a level effective rate on the sum of the face amount of the debt and (plus or minus) the unamortized premium or discount and expense at the beginning of each period. The monitoring fees and the backend profit share are considered a separate earnings process as compared to the origination fees and interest income. Monitoring fees are recorded at the agreed upon rate, and at the moment in which payments are made by the borrower. The backend profit share is recognized in accordance with the agreed upon rate at the time in which the amount is realizable and earned. The recognition policy was established due to the uncertainty of timing of the amount of backend profit share which will be realized. Specialty Lending - Concentration and credit risk As of March 31, 2024, the Company held a gross balance of investments in notes receivable of $ 37.3 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $ 23.4 million, or 63 % as of March 31, 2024, as compared to 62 % as of December 31, 2023. The Company does not intend to hold highly concentrated balances due from one borrower as part of its long-term strategy but may, in the short term, have concentration risk on its path to an established and diversified portfolio. The Company does not evaluate concentration risk solely based on balance due from specific borrowers, but also considers the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $ 23.4 million, there are 11 distinct loan agreements. The underlying portfolio of accounts are diversified throughout FinTech loans, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios. The Company mitigates this concentration risk by requiring, and monitoring, security from each borrower consisting of their charged off and nonperforming receivable portfolios. The Company engages in a due diligence process that leverages its valuation expertise and knowledge in the underlying nonperforming receivable portfolios marketplace. In the event of default, the Company is entitled to call the unpaid interest and principal balances and receive all net collections directly. The Company may also recover its investment by engaging a third party to collect on the underlying charged off or nonperforming receivable portfolio or the underlying portfolio can be sold through the Company's Brokerage segment. In certain cases, the Company’s recovery options may be subject to concurrence of the originator or other prior holder of the assets. From inception of the specialty lending program through March 31, 2024, the Company has incurred no actual credit losses. Accounts receivable The Company carries accounts receivable at the face amounts less an allowance for estimated credit losses. The Company estimates its reserve for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company only extends credit to entities and institutions of significance, such as well-known academic and financial institutions and U.S. government agencies. Consequently, historical accounts receivable credit losses are nearly zero, which provides the starting point for management’s assessment of the reserve for credit losses for its accounts receivable. The Company estimates its expected credit losses for accounts receivable based on historical credit loss experience, its assessment of current conditions, and other relevant available information from internal and external sources on a quarterly basis. As of March 31, 2024 and December 31, 2023, the reserve for credit losses related to accounts receivable was approximately $ 0.1 million. Notes receivable Under ASC 326, the Company evaluates notes receivable as a single pool, for individual notes receivable and borrowers with similar risk characteristics. Notes receivable and borrowers that do not share risk characteristics are evaluated on an individual basis. Management estimates the reserve balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience typically provides the basis for an estimation of expected credit losses; however, the Company lacks sufficient data upon which to base a historical estimation. Additionally, since the Company began recording notes receivable on the condensed consolidated balance sheets, the Company has recorded no actual credit losses to notes receivable. Lacking historical internal data upon which to base a reserve for credit losses to notes receivable, the Company, under ASC 326, estimates its reserve using external credit loss experience data. Management observes that the Company's notes receivable are similar in character to transactions undertaken by smaller banking institutions. The Company estimates its expected credit losses based on the Scaled Current Expected Credit Loss (CECL) Allowance Loss Estimator ("SCALE rate") available from the Federal Reserve. The SCALE rate methodology is endorsed by the FASB and the Conference of State Bank Supervisors. Management determined under ASC 326 that the SCALE rate, a generally applicable rate, may be appropriately adjusted by its assessment of observable facts and relevant circumstances indicating that the factors analyzed in the determination of the SCALE rate may not conform to the Company's operations and borrower assessments. As of March 31, 2024, the SCALE rate was 1.3861 % and the Company's credit loss allowance rate specific to notes receivable was 3.6 %. The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. As of March 31, 2024 and December 31, 2023, the Company's allowance for credit losses related to notes receivable outstanding was $ 0.6 million and $ 0.7 million, respectively. In order to evaluate the need for an adjustment to the receivable balance related to credit losses, or impairment, the Company performs a review of all outstanding loan receivables on a quarterly basis to determine if any indicators exist that suggest the loan will not be fully recoverable and assess the credit quality of the loan receivables. This review includes monthly and cumulative key performance indicators for each loan and borrower, as well as evaluation of borrower's financial condition. Equity method investments Similar to notes receivable, the loans held by the joint ventures are evaluated on a quarterly basis to determine if an adjustment to the allowance for credit losses is needed. As of March 31, 2024, the SCALE rate was 1.3861 % and the credit loss allowance rate specific to equity method investments was 4.4 %. The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. As of March 31, 2024 and December 31, 2023, the Company's allowance for credit losses related to its equity method investments was $ 0.9 million. Future accounting pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which, among other updates, requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and the related disclosures. In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and the related disclosures. |
Accounts Receivable, net
Accounts Receivable, net | 3 Months Ended |
Mar. 31, 2024 | |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |
Accounts Receivable, net | Note 3 – Accounts Receivable, net The Company’s accounts receivable, net consists of accounts receivables recorded in the ordinary course of business associated with the recognition of revenue from contracts with customers. In accordance with ASC 326, the Company performs a review of accounts receivables on a quarterly basis. During the three months ended March 31, 2024, the Company recorded no material adjustments for credit losses in selling, general and administrative expense on the consolidated statement of income related to accounts receivable. As of March 31, 2024 and December 31, 2023, the reserve for credit losses was approximately $ 0.1 million. |
Notes Receivable, Net
Notes Receivable, Net | 3 Months Ended |
Mar. 31, 2024 | |
Receivables [Abstract] | |
Notes Receivable, net | Note 4 – Notes Receivable, net The Company’s notes receivable, net consists of investments in loans to buyers of charged-off and nonperforming receivable portfolios. As of March 31, 2024 and December 31, 2023, the Company’s outstanding notes receivables, net of unamortized deferred fees and costs on originated loans, and adjusted for the reserve for credit losses was $ 17.2 million and $ 17.5 million, respectively. The activity during the three months ended March 31, 2024 includes the additional investment in notes receivable of approximately $ 2.3 million, which was offset by principal payments made by borrowers of approximately $ 2.5 million. The table below shows the Company’s lending activity as of March 31, 2024 (in thousands): March 31, 2024 Notes receivable as of December 31, 2023 $ 18,262 Investment in notes receivable 2,256 Transfer of notes — Principal repayments ( 2,520 ) Notes receivable, as of March 31, 2024 17,998 Deferred financing fees and costs, net ( 143 ) Allowance for credit loss ( 643 ) Notes receivable, net, March 31, 2024 $ 17,212 In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis. During the three months ended March 31, 2024, the Company recorded no material adjustments to the provision for credit losses in selling, general and administrative expense on the consolidated statement of income. As of March 31, 2024 and December 31, 2023, the allowance for credit losses was approximately $ 0.6 million and $ 0.7 million, respectively. |
Stock-based Compensation
Stock-based Compensation | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-based Compensation | Note 5 – Stock-based Compensation As of March 31, 2024, the Company had four stock-based compensation plans, which are described more fully in Note 16 – Stockholders' Equity - Stock-Based Compensation Plans of the Company's audited consolidated financial statements for the year ended December 31, 2023 contained in the Company’s Form 10-K. At the Company's 2022 Annual Meeting of Shareholders, the Company's shareholders approved the 2022 Heritage Global Inc. Equity Incentive Plan, which replaced 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. Stock Options During the three months ended March 31, 2024, the Company issued options to purch ase 20,000 shares of com mon stock to certain of the Company’s employees. During the same period, the Company canceled 12,750 options to purchase common stock as a result of employee resignations. The following summarizes the changes in common stock options for the three months ended March 31, 2024: Options Weighted Weighted Aggregate Intrinsic Value (In thousands) Outstanding as of December 31, 2023 2,265,350 $ 1.71 6.8 $ 3,059 Granted 20,000 $ 2.93 Exercised ( 3,750 ) $ 1.87 Forfeited ( 12,750 ) $ 1.87 Outstanding as of March 31, 2024 2,268,850 $ 1.72 6.5 $ 2,322 Options exercisable as of March 31, 2024 1,363,975 $ 1.25 5.4 $ 1,936 The Company recognized stock-based compensation expense related to common stock optio ns of $ 0.1 million for both the three months ended March 31, 2024 and 2023. As of March 31, 2024, there was appr oximately $ 1.3 million o f unrecognized stock-based compensation expense related to unvested common stock options outstanding, which is expected to be recognized over a weighted average period of 2.3 years. Restricted Stock Restricted stock awards represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of restricted stock awards or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Compensation cost for these awards is based on the fair value of the shares of common stock on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period. On June 1, 2018, the Company granted 600,000 shares of Company restricted common stock in connection with the Addendum to the Employment Agreements of David Ludwig and Tom Ludwig. The shares were subject to certain restrictions on transfer and a right of repurchase over five years . The shares vested in full on May 31, 2023. On August 3, 2022, the Company granted 115,000 shares of Company restricted common stock to non-executive directors under the 2022 Heritage Global Inc. Equity Incentive Plan. Of these restricted stock shares granted during 2022, 40,000 shares were granted with a vesting term that was completed prior to the grant date due to a delay in the Company’s ability to grant such shares, and the remaining 75,000 shares vested in full on March 31, 2023. On March 1, 2023, the Company granted 97,290 shares of Company restricted common stock to employees under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vested in full on March 1, 2024. On March 31, 2023, the Company granted 75,000 shares of Company restricted common stock to non-executive directors under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vested in full on March 31, 2024. During the quarter ended March 31, 2024, the Company canceled 15,000 restricted stock awards in connection with the resignation of a member of the Company's Board of Directors. On April 1, 2023, the Company granted 15,000 shares of Company restricted common stock to one non-executive director under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vested in full on April 1, 2024. On March 7, 2024, the Company granted 128,044 shares of Company restricted common stock to employees under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vest on March 7, 2025. On March 7, 2024, the Company granted 75,000 shares of Company restricted common stock to non-executive directors under the 2022 Heritage Global Inc. Equity Incentive Plan. The restricted stock shares vest on March 7, 2025. The Company determined the fair value of the shares awarded by using the closing price of our common stock as of the grant date. Stock-based compensation expense related to the restricted stock awards was approximately $ 0.1 million for both the three months ended March 31, 2024 and 2023. The unrecognized stock-based compensation expense as of March 31, 2024 was approximately $ 0.5 million. |
Equity Method Investments
Equity Method Investments | 3 Months Ended |
Mar. 31, 2024 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investments | Note 6 – Equity Method Investments In November 2018, CPFH LLC, of which the Company holds a 25 % share, was formed to purchase certain real estate assets among partners in a joint venture. In March 2020, HGC Origination I LLC and HGC Funding I LLC were formed as joint ventures with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In April 2022, KNFH LLC, of which the Company holds a 25 % share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. In December 2022, DHC8 LLC, of which the Company holds a 13.33 % share was formed to provide funding and receive principal and interest payments as a result of the initial investment. In May 2023, HGC MPG Funding LLC, of which the Company holds a 25 % share, was formed as a joint venture with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In December 2023, KNFH II LLC, of which the Company holds a 25 % share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. CPFH LLC, KNFH LLC, DHC8 LLC and KNFH II LLC are joint ventures formed in connection with the Company’s Industrial Assets division, whereas HGC Origination I LLC, HGC Funding I LLC, and HGC MPG Funding LLC were formed in connection with the Financial Assets division. The Company has significant influence over the operations and financial policies of each of its equity method investments. In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis for each of its specialty lending investments. During the three months ended March 31, 2024, the Company recorded no material adjustments for its share of the joint venture’s reduction to the provision for credit losses. As of March 31, 2024, the Company's share of the allowance for credit losses was approximately $ 0.9 million, which was primarily related to HGC Origination I LLC and HGC MPG Funding LLC. As of March 31, 2024, the Company has incurred no actual credit losses through its equity method investments. 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 and earnings during the three months ended March 31, 2024 and 2023 (in thousands): March 31, 2024 2023 Revenues and gross profit: KNFH LLC $ — $ 440 DHC8 LLC 321 445 KNFH II LLC — — HGC Origination I LLC and HGC Funding I LLC 1,140 1,297 HGC MPG Funding LLC 1,241 — Total revenues and gross profit $ 2,702 $ 2,182 Operating income (loss) and net income (loss): KNFH LLC — ( 10 ) DHC8 LLC 268 378 KNFH II LLC ( 44 ) — HGC Origination I LLC and HGC Funding I LLC 1,134 1,304 HGC MPG Funding LLC 1,241 — Total operating income and net income $ 2,599 $ 1,672 The table below details the summarized components of assets and liabilities of the Company’s joint ventures, as of March 31, 2024 and December 31, 2023 (in thousands): March 31, December 31, 2024 2023 Assets: KNFH LLC $ — $ 292 DHC8 LLC 4,700 7,061 KNFH II LLC 8,306 8,150 HGC Origination I LLC and HGC Funding I LLC 27,174 28,389 HGC MPG Funding LLC 36,413 38,081 Total assets $ 76,593 $ 81,973 Liabilities: KNFH LLC $ — $ 289 DHC8 LLC 1,080 1,102 KNFH II LLC 4,000 4,000 HGC Origination I LLC and HGC Funding I LLC 1,244 10 HGC MPG Funding LLC — — Total liabilities $ 6,324 $ 5,401 |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2024 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 7 – Earnings Per Share The Company is required, in periods in which it has net income, to calculate basic earnings per share (“basic EPS”) using the two-class method. The two-class method is required because the Company’s shares of Series N preferred stock, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares. For the three months ended March 31, 2024 and 2023, the earnings allocated to the outstanding preferred shares were not material. In periods in which the Company records a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. As the preferred stock does not participate in losses, the two-class method is not used in periods in which the Company records a net loss. Stock options and other potential common shares are included in the calculation of diluted earnings per share (“diluted EPS”). In calculating diluted EPS, such shares are assumed to be exercised or converted, except when their effect would be anti-dilutive. The table below shows the calculation of the number of shares used in computing diluted EPS: Three Months Ended March 31, 2024 2023 Basic weighted average shares outstanding 36,592,801 36,005,150 Treasury stock effect of common stock options and restricted stock awards 774,467 1,329,309 Diluted weighted average common shares outstanding 37,367,268 37,334,459 For the three months ended March 31, 2024 and 2023, there were potential common share s of 0.2 million and 0 .3 million, respectively, that were excluded from the computation of diluted EPS, as the inclusion of such common shares would have been anti-dilutive. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2024 | |
Leases [Abstract] | |
Leases | Note 8 – Leases The Company leases office and warehouse space in four locations: Del Mar, California, Hayward, California, San Diego, California and Edwardsville, Illinois. The Company determined that all of its lease arrangements are classified as operating leases. On August 12, 2022, the Company entered into an agreement with Liberty Industrial Park, LLC pursuant to which the Company leases 6,627 square feet of industrial space in San Diego, California. The commencement date of the lease was September 1, 2022. It provides for an initial monthly base rent of $ 11,266 , which increases on an annual basis to $ 13,180 per month in the final year. In addition, the Company is obligated to pay its share of maintenance costs of common areas. On June 1, 2023, the Company amended its Edwardsville office building lease with David Ludwig, extending the term of the agreement to May 31, 2027 and setting rent amounts for the new term. It provides for an initial monthly base rent of $ 9,412 , which increases on an annual basis to $ 9,914 per month in the final year. The right-of-use assets and lease liabilities for each lease location are as follows (in thousands): March 31, December 31, 2024 2023 Right-of-use assets: Del Mar, CA $ 147 $ 186 Hayward, CA 1,455 1,525 San Diego, CA 447 477 Edwardsville, IL 328 351 Total right-of-use assets $ 2,377 $ 2,539 Lease liabilities Del Mar, CA $ 161 $ 203 Hayward, CA 1,527 1,594 San Diego, CA 470 498 Edwardsville, IL 331 353 Total lease liabilities $ 2,489 $ 2,648 The Company’s leases generally do not provide an implicit rate, and, therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within 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 and June 1, 2023, the Company’s incremental borrowing rate was 5.50 % and 7.25 %, respectively. The weighted average remaining lease term for operating leases is 3.9 years and the weighted average discount rate is 5.35 % as of March 31, 2024. Lease expense is recognized on a straight-line basis over the lease term. For the three months ended March 31, 2024 and March 31, 2023, lease expense was approximately $ 0.2 million. As of March 31, 2024, undiscounted future minimum lease payments related to leases that have initial or remaining lease terms in excess of one year are as follows (in thousands): 2024 (remainder of year from April 1, 2024 to December 31, 2024) $ 594 2025 661 2026 649 2027 543 2028 299 Total undiscounted future minimum lease payments 2,746 Less: imputed interest ( 257 ) Present value of lease liabilities $ 2,489 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 3 Months Ended |
Mar. 31, 2024 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Note 9 – Intangible Assets and Goodwill Intangible assets The Company’s identifiable intangible assets are associated with its acquisitions of HGP in 2012, NLEX in 2014 and ALT in 2021, as shown in the table below (in thousands except for lives), and are amortized using the straight-line method over their remaining estimated useful lives. The Company’s tradename that was acquired as part of the acquisition of NLEX in 2014 has an indefinite life and therefore is not amortized. Remaining Carrying Value Carrying Value Life December 31, March 31, (years) 2023 Amortization 2024 Amortizable intangible assets: Trade Name (HGP) 0.8 $ 128 $ ( 32 ) $ 96 Trade Name (ALT) 17.4 575 ( 8 ) 567 Vendor Relationship (ALT) 2.4 613 ( 58 ) 556 Total amortizable intangible assets 1,316 ( 98 ) 1,218 Indefinite-lived intangible assets: Trade Name (NLEX) N/A 2,437 — 2,437 Total intangible assets $ 3,753 $ ( 98 ) $ 3,655 Amortization expense during the three months ended March 31, 2024 and 2023 was $ 0.1 million. T he Company estimates that the residual value for intangible assets is no t significant. As of March 31, 2024, the estimated amortization expense for the remainder of the current fiscal year and the next five fiscal years and thereafter is shown below (in thousands): Year Amount 2024 (remainder of year from April 1, 2024 to December 31, 2024) $ 293 2025 263 2026 186 2027 32 2028 32 Thereafter 412 Total estimated amortization expense $ 1,218 Goodwill The Company’s goodwill relates to its acquisition of various entities. Goodwill consists of the following at March 31, 2024 and December 31, 2023 (in thousands): March 31, 2024 December 31, 2023 ALT $ 1,861 $ 1,861 HGP 2,041 2,041 NLEX 3,544 3,544 Total goodwill $ 7,446 $ 7,446 There were no additions to goodwill and no impairments recorded to the carrying value of goodwill during the three months ended March 31, 2024. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Debt | Note 10 – Debt Outstanding debt as of March 31, 2024 and December 31, 2023 is summarized as follows (in thousands): March 31, 2024 December 31, 2023 Current: ALT Note $ 515 $ 511 2021 Credit Facility - - 2023 Credit Facility 1,250 1,222 Total third party debt, current 1,765 1,733 Non-current: ALT Note 265 395 2023 Credit Facility 4,775 5,100 Total third party debt, non-current 5,040 5,495 Total third party debt $ 6,805 $ 7,228 2021 Credit Facility On May 5, 2021, the Company entered into a promissory note, business loan agreement, commercial security agreement and pledge agreement (the “2021 Credit Facility”) with C3bank, National Association ("Lender") for a $ 10.0 million revolving line of credit. The Company is permitted to use the proceeds of the loan solely for its business operations. The Company is the borrower under the 2021 Credit Facility. The 2021 Credit Facility is secured by a security interest in certain of the Company’s subsidiaries’ current and future tangible and intangible assets, inventory, chattel paper, accounts, equipment and general intangibles, and a pledge of the equity of the direct and indirect subsidiaries of the Company. On August 23, 2022, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “2022 Modification Agreement”), effective as of April 1, 2022, by and between the Company and Lender. The 2022 Modification Agreement modified and reaffirmed the 2021 Credit Facility to provide for, among other things, the arrangement of financial covenants, which remained unchanged, into two categories: (i) financial covenants used to resize the maximum principal amount available to the Company as of the date of determination (as determined by Lender in its sole discretion), and (ii) financial covenants to be maintained by the Company. On May 26, 2023, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Modification Agreement”), effective as of May 26, 2023, by and between the Company and Lender. The Modification Agreement modifies and reaffirms the 2021 Credit Facility to, among other things, extend the maturity date, modify the applicable interest rate, and further modify the loan covenants. The maturity date was modified to October 27, 2024 . The applicable interest rate spread and floor was modified to be the Wall Street Journal Prime rate plus 1.00 % (such rate not to be less than 6.75 % per annum). Additionally, the Modification Agreement modifies the loan covenants to provide that the Company shall pay the Lender an annual unused line fee, payable on the earlier of (a) bi-annually every six (6) months in arrears, within ten (10) days thereof, commencing on October 27, 2023, or (b) the payment in full of the 2021 Credit Facility, but only if the average balance of the 2021 Credit Facility for the respective six months is below $ 5.0 million. The availability of additional draws under the 2021 Credit Facility is conditioned, among other things, on the compliance with certain customary representations and warranties, including default, insolvency or bankruptcy, material adverse change in financial condition and any guarantor’s attempt to revise its guarantee. The agreement governing the 2021 Credit Facility also contains customary affirmative covenants regarding, among other things, the maintenance of records, maintenance of certain insurance coverage, compliance with governmental requirements and maintenance of several financial covenants. The 2021 Credit Facility contains certain customary financial covenants and negative covenants that, among other things, include restrictions on the Company’s ability to create, incur or assume indebtedness for borrowed money, including capital leases or to sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of the Company’s assets. As of March 31, 2024, the Company was in compliance with all financial and negative covenants. As of March 31, 2024, there was no outstanding balance on the 2021 Credit Facility. The Company's weighted average interest rate on short-term borrowings as of March 31, 2024 and December 31, 2023 was 8.75 % and 9.51 %, respectively. ALT Note On August 23, 2021, the Company entered into a $ 2.0 million subordinated promissory note with an interest rate of 3 % per annum and a maturity date of August 23, 2025 (the “ALT Note”) as part of the aggregate purchase price paid to acquire certain assets and liabilities of American Laboratory Trading. The ALT Note requires 48 equal installments of approximately $ 44,000 on the first day of each month beginning September 23, 2021 with the final payment due on August 23, 2025. The outstanding balance of the ALT Note as of March 31, 2024 was $ 0.8 million. 2023 Credit Facility On May 26, 2023, the Company entered into a promissory note, a business loan agreement and commercial security agreement (collectively, the “2023 Credit Facility”) with C3 Bank. The 2023 Credit Facility provides for a new $ 7.0 million term loan (the "Term Loan") which is repayable in monthly installments of principal and interest until the maturity date of April 27, 2028. The Company determines the current portion of the Term Loan to be the amount of principal owed in the next 12 months. The Term Loan sets the interest rate spread and interest rate floor to accrue at a variable interest rate, which is based on the rate of interest last quoted by The Wall Street Journal as the “prime rate,” plus a margin of 0.250 %. Additionally, the Term Loan provides that in the event of prepayment the Company shall pay the Lender a prepayment fee during the first year equal to twelve months of interest (less interest actually paid). The Company is the borrower under the Term Loan and is permitted to use the proceeds of the Term Loan solely for its business operations. The Term Loan is secured by a security interest in certain of the Company’s and its certain subsidiaries’ current and future tangible and intangible assets, inventory, chattel paper, accounts, equipment and general intangibles and a pledge of the equity of the direct and indirect subsidiaries of the Company. Specifically, the Term Loan is secured by the building currently used by ALT in East Lyme, CT. As of March 31, 2024, the Company was in compliance with all financial and negative covenants. The outstanding balance of the Term Loan as of March 31, 2024 was $ 6.0 million, of which $ 1.2 million was classified as "current" and $ 4.8 million was classified as "non-current." |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 11 – Income Taxes At March 31, 2024, the Company has aggregate federal net operating loss carry forwards of $ 50.0 million. These net operating loss carry forwards begin to expire in 2024 . The Company’s utilization of restricted net operating tax loss carry forwards against future income for tax purposes is restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5 % direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years. The reported tax expense varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to the income from operations before taxes primarily as a result of the impact of state income taxes. The Company records net deferred tax assets to the extent that it believes such assets will more likely than not be realized. As a result of cumulative losses and uncertainty with respect to future taxable income, the Company has provided a partial valuation allowance against its net deferred tax assets. As of both March 31, 2024 and December 31, 2023, the Company's valuation allowance against its deferred tax assets was approximately $ 2.2 million. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 12 – Related Party Transactions As part of the operations of NLEX, the Company leases office space in Edwardsville, IL that is owned by the President of NLEX and a member of the board of directors of the Company, David Ludwig. The total amount paid to the related party for both three-month periods ended March 31, 2024 and 2023 was approximately $ 28,000 , and is included in selling, general and administrative expenses in the unaudited condensed consolidated statements of income. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2024 | |
Segment Reporting Information, Additional Information [Abstract] | |
Segment Information | Note 13 – Segment Information The following table sets forth certain financial information for the Company's reportable segments (in thousands): Three Months Ended March 31, 2024 2023 Industrial Assets Division: Auction and Liquidation $ 796 $ 1,468 Refurbishment & Resale 16 1,101 Total divisional operating income 812 2,569 Financial Assets Division: Brokerage 2,067 2,045 Specialty Lending 865 477 Total divisional operating income 2,932 2,522 Corporate operating expense & other income ( 1,186 ) ( 1,197 ) Consolidated operating income $ 2,558 $ 3,894 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of estimates The preparation of the Company’s unaudited condensed consolidated interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates include the assessment of collectability of revenue recognized and the valuation of accounts receivable and notes receivable, inventory, investments, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities, including projecting future years’ taxable income, and stock-based compensation. These estimates have the potential to significantly impact our condensed consolidated interim financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature. |
Revenue Recognition | Reven ue recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and ASC Topic 310, Receivables (“ASC 310”). Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions, and secured lending. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. With the exception of revenue generated within our Specialty Lending segment, revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities. All services and asset sales revenue from contracts with customers consists of three reportable segments: Auction and Liquidation, Refurbishment & Resale, and Brokerage. Generally, revenue is recognized at the point in time in which the performance obligation has been satisfied and full consideration is received. The exception to recognition at a point in time occurs when certain contracts provide for advance payments recognized over a period of time. Services revenue recognized over a period of time is not material in comparison to total revenues (less than 1% of total revenues for the three months ended March 31, 2024 and 2023), and therefore not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability”. The deferred revenue balance was approximately $ 0.3 million as of March 31, 2024 and $ 0.5 million as of December 31, 2023 and is reflected in accounts payable and accrued liabilities on the condensed consolidated balance sheets. The deferred revenue balance is primarily related to customer deposits on asset sales within the Refurbishment & Resale segment. The Company records receivables in certain situations based on timing of payments for Auction and Liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations. For auction services and brokerage sale transactions, funds are typically collected from buyers and are held by the Company on the seller's behalf. The funds are included in cash and cash equivalents in the condensed consolidated balance sheets. The Company releases the funds to the seller, less the Company's commission and other fees due, after the buyer has accepted the goods. The amount of cash held on behalf of the sellers is recorded as payables to sellers in the accompanying condensed consolidated balance sheets. The Company evaluates revenue from Auction and Liquidation and Brokerage segment transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. The Company has determined that it acts as an agent for its fee based transactions and therefore reports the revenue from transactions in which the Company acts as an agent on a net basis. The Company also earns income through transactions that involve the Company acting jointly with one or more additional purchasers or lenders, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, in which the Company’s ownership share meets the criteria for the equity method investments under ASC Topic 323, Equity Method and Joint Ventures , the Company does not record revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company. Through our Specialty Lending segment, the Company provides specialty financing solutions to investors in charged-off and nonperforming asset portfolios. The Company recognizes revenue generated by lending activity in accordance with ASC 310. Fees collected in relation to the issuance of loans include loan origination fees, interest income, portfolio monitoring fees, and a backend profit share percentage related to the underlying asset portfolio. The loan origination fees are offset with any direct origination costs and are deferred upon issuance of the loan and amortized over the lives of the related loans, as an adjustment to interest income. The interest method is used to arrive at a periodic interest cost (including amortization) that will represent a level effective rate on the sum of the face amount of the debt and (plus or minus) the unamortized premium or discount and expense at the beginning of each period. The monitoring fees and the backend profit share are considered a separate earnings process as compared to the origination fees and interest income. Monitoring fees are recorded at the agreed upon rate, and at the moment in which payments are made by the borrower. The backend profit share is recognized in accordance with the agreed upon rate at the time in which the amount is realizable and earned. The recognition policy was established due to the uncertainty of timing of the amount of backend profit share which will be realized. |
Specialty Lending - Concentration and Credit risk | Specialty Lending - Concentration and credit risk As of March 31, 2024, the Company held a gross balance of investments in notes receivable of $ 37.3 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $ 23.4 million, or 63 % as of March 31, 2024, as compared to 62 % as of December 31, 2023. The Company does not intend to hold highly concentrated balances due from one borrower as part of its long-term strategy but may, in the short term, have concentration risk on its path to an established and diversified portfolio. The Company does not evaluate concentration risk solely based on balance due from specific borrowers, but also considers the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $ 23.4 million, there are 11 distinct loan agreements. The underlying portfolio of accounts are diversified throughout FinTech loans, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios. The Company mitigates this concentration risk by requiring, and monitoring, security from each borrower consisting of their charged off and nonperforming receivable portfolios. The Company engages in a due diligence process that leverages its valuation expertise and knowledge in the underlying nonperforming receivable portfolios marketplace. In the event of default, the Company is entitled to call the unpaid interest and principal balances and receive all net collections directly. The Company may also recover its investment by engaging a third party to collect on the underlying charged off or nonperforming receivable portfolio or the underlying portfolio can be sold through the Company's Brokerage segment. In certain cases, the Company’s recovery options may be subject to concurrence of the originator or other prior holder of the assets. From inception of the specialty lending program through March 31, 2024, the Company has incurred no actual credit losses. |
Accounts Receivable | Accounts receivable The Company carries accounts receivable at the face amounts less an allowance for estimated credit losses. The Company estimates its reserve for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company only extends credit to entities and institutions of significance, such as well-known academic and financial institutions and U.S. government agencies. Consequently, historical accounts receivable credit losses are nearly zero, which provides the starting point for management’s assessment of the reserve for credit losses for its accounts receivable. The Company estimates its expected credit losses for accounts receivable based on historical credit loss experience, its assessment of current conditions, and other relevant available information from internal and external sources on a quarterly basis. As of March 31, 2024 and December 31, 2023, the reserve for credit losses related to accounts receivable was approximately $ 0.1 million. |
Notes Receivable | Notes receivable Under ASC 326, the Company evaluates notes receivable as a single pool, for individual notes receivable and borrowers with similar risk characteristics. Notes receivable and borrowers that do not share risk characteristics are evaluated on an individual basis. Management estimates the reserve balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience typically provides the basis for an estimation of expected credit losses; however, the Company lacks sufficient data upon which to base a historical estimation. Additionally, since the Company began recording notes receivable on the condensed consolidated balance sheets, the Company has recorded no actual credit losses to notes receivable. Lacking historical internal data upon which to base a reserve for credit losses to notes receivable, the Company, under ASC 326, estimates its reserve using external credit loss experience data. Management observes that the Company's notes receivable are similar in character to transactions undertaken by smaller banking institutions. The Company estimates its expected credit losses based on the Scaled Current Expected Credit Loss (CECL) Allowance Loss Estimator ("SCALE rate") available from the Federal Reserve. The SCALE rate methodology is endorsed by the FASB and the Conference of State Bank Supervisors. Management determined under ASC 326 that the SCALE rate, a generally applicable rate, may be appropriately adjusted by its assessment of observable facts and relevant circumstances indicating that the factors analyzed in the determination of the SCALE rate may not conform to the Company's operations and borrower assessments. As of March 31, 2024, the SCALE rate was 1.3861 % and the Company's credit loss allowance rate specific to notes receivable was 3.6 %. The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. As of March 31, 2024 and December 31, 2023, the Company's allowance for credit losses related to notes receivable outstanding was $ 0.6 million and $ 0.7 million, respectively. In order to evaluate the need for an adjustment to the receivable balance related to credit losses, or impairment, the Company performs a review of all outstanding loan receivables on a quarterly basis to determine if any indicators exist that suggest the loan will not be fully recoverable and assess the credit quality of the loan receivables. This review includes monthly and cumulative key performance indicators for each loan and borrower, as well as evaluation of borrower's financial condition. |
Equity Method Investments | Equity method investments Similar to notes receivable, the loans held by the joint ventures are evaluated on a quarterly basis to determine if an adjustment to the allowance for credit losses is needed. As of March 31, 2024, the SCALE rate was 1.3861 % and the credit loss allowance rate specific to equity method investments was 4.4 %. The increase over the SCALE rate was due to both the above mentioned risks presented by a concentrated balance with a single borrower and declining collections industry-wide. As of March 31, 2024 and December 31, 2023, the Company's allowance for credit losses related to its equity method investments was $ 0.9 million. |
Future Accounting Pronouncements | Future accounting pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which, among other updates, requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and the related disclosures. In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires enhanced annual disclosures with respect to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and the related disclosures. |
Notes Receivable, net (Tables)
Notes Receivable, net (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Receivables [Abstract] | |
Schedule of Company's Lending Activity | The table below shows the Company’s lending activity as of March 31, 2024 (in thousands): March 31, 2024 Notes receivable as of December 31, 2023 $ 18,262 Investment in notes receivable 2,256 Transfer of notes — Principal repayments ( 2,520 ) Notes receivable, as of March 31, 2024 17,998 Deferred financing fees and costs, net ( 143 ) Allowance for credit loss ( 643 ) Notes receivable, net, March 31, 2024 $ 17,212 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Changes in Common Stock Options | The following summarizes the changes in common stock options for the three months ended March 31, 2024: Options Weighted Weighted Aggregate Intrinsic Value (In thousands) Outstanding as of December 31, 2023 2,265,350 $ 1.71 6.8 $ 3,059 Granted 20,000 $ 2.93 Exercised ( 3,750 ) $ 1.87 Forfeited ( 12,750 ) $ 1.87 Outstanding as of March 31, 2024 2,268,850 $ 1.72 6.5 $ 2,322 Options exercisable as of March 31, 2024 1,363,975 $ 1.25 5.4 $ 1,936 |
Equity Method Investments (Tabl
Equity Method Investments (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of Joint Venture Revenues and Net Income (Loss) | The table below details the Company’s joint venture revenues and earnings during the three months ended March 31, 2024 and 2023 (in thousands): March 31, 2024 2023 Revenues and gross profit: KNFH LLC $ — $ 440 DHC8 LLC 321 445 KNFH II LLC — — HGC Origination I LLC and HGC Funding I LLC 1,140 1,297 HGC MPG Funding LLC 1,241 — Total revenues and gross profit $ 2,702 $ 2,182 Operating income (loss) and net income (loss): KNFH LLC — ( 10 ) DHC8 LLC 268 378 KNFH II LLC ( 44 ) — HGC Origination I LLC and HGC Funding I LLC 1,134 1,304 HGC MPG Funding LLC 1,241 — Total operating income and net income $ 2,599 $ 1,672 |
Schedule of the Components of Assets and Liabilities | The table below details the summarized components of assets and liabilities of the Company’s joint ventures, as of March 31, 2024 and December 31, 2023 (in thousands): March 31, December 31, 2024 2023 Assets: KNFH LLC $ — $ 292 DHC8 LLC 4,700 7,061 KNFH II LLC 8,306 8,150 HGC Origination I LLC and HGC Funding I LLC 27,174 28,389 HGC MPG Funding LLC 36,413 38,081 Total assets $ 76,593 $ 81,973 Liabilities: KNFH LLC $ — $ 289 DHC8 LLC 1,080 1,102 KNFH II LLC 4,000 4,000 HGC Origination I LLC and HGC Funding I LLC 1,244 10 HGC MPG Funding LLC — — Total liabilities $ 6,324 $ 5,401 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Earnings Per Share [Abstract] | |
Schedule of Calculation of the Shares Used in Computing Diluted EPS | The table below shows the calculation of the number of shares used in computing diluted EPS: Three Months Ended March 31, 2024 2023 Basic weighted average shares outstanding 36,592,801 36,005,150 Treasury stock effect of common stock options and restricted stock awards 774,467 1,329,309 Diluted weighted average common shares outstanding 37,367,268 37,334,459 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Leases [Abstract] | |
Schedule of Right-of-Use Assets and Lease Liabilities | The right-of-use assets and lease liabilities for each lease location are as follows (in thousands): March 31, December 31, 2024 2023 Right-of-use assets: Del Mar, CA $ 147 $ 186 Hayward, CA 1,455 1,525 San Diego, CA 447 477 Edwardsville, IL 328 351 Total right-of-use assets $ 2,377 $ 2,539 Lease liabilities Del Mar, CA $ 161 $ 203 Hayward, CA 1,527 1,594 San Diego, CA 470 498 Edwardsville, IL 331 353 Total lease liabilities $ 2,489 $ 2,648 |
Schedule of Undiscounted Future Minimum Lease Commitments | As of March 31, 2024, undiscounted future minimum lease payments related to leases that have initial or remaining lease terms in excess of one year are as follows (in thousands): 2024 (remainder of year from April 1, 2024 to December 31, 2024) $ 594 2025 661 2026 649 2027 543 2028 299 Total undiscounted future minimum lease payments 2,746 Less: imputed interest ( 257 ) Present value of lease liabilities $ 2,489 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | The Company’s identifiable intangible assets are associated with its acquisitions of HGP in 2012, NLEX in 2014 and ALT in 2021, as shown in the table below (in thousands except for lives), and are amortized using the straight-line method over their remaining estimated useful lives. The Company’s tradename that was acquired as part of the acquisition of NLEX in 2014 has an indefinite life and therefore is not amortized. Remaining Carrying Value Carrying Value Life December 31, March 31, (years) 2023 Amortization 2024 Amortizable intangible assets: Trade Name (HGP) 0.8 $ 128 $ ( 32 ) $ 96 Trade Name (ALT) 17.4 575 ( 8 ) 567 Vendor Relationship (ALT) 2.4 613 ( 58 ) 556 Total amortizable intangible assets 1,316 ( 98 ) 1,218 Indefinite-lived intangible assets: Trade Name (NLEX) N/A 2,437 — 2,437 Total intangible assets $ 3,753 $ ( 98 ) $ 3,655 |
Schedule of Estimated Amortization Expense Intangible Assets | As of March 31, 2024, the estimated amortization expense for the remainder of the current fiscal year and the next five fiscal years and thereafter is shown below (in thousands): Year Amount 2024 (remainder of year from April 1, 2024 to December 31, 2024) $ 293 2025 263 2026 186 2027 32 2028 32 Thereafter 412 Total estimated amortization expense $ 1,218 |
Schedule of Goodwill | The Company’s goodwill relates to its acquisition of various entities. Goodwill consists of the following at March 31, 2024 and December 31, 2023 (in thousands): March 31, 2024 December 31, 2023 ALT $ 1,861 $ 1,861 HGP 2,041 2,041 NLEX 3,544 3,544 Total goodwill $ 7,446 $ 7,446 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Schedule Of Debt | Outstanding debt as of March 31, 2024 and December 31, 2023 is summarized as follows (in thousands): March 31, 2024 December 31, 2023 Current: ALT Note $ 515 $ 511 2021 Credit Facility - - 2023 Credit Facility 1,250 1,222 Total third party debt, current 1,765 1,733 Non-current: ALT Note 265 395 2023 Credit Facility 4,775 5,100 Total third party debt, non-current 5,040 5,495 Total third party debt $ 6,805 $ 7,228 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Segment Reporting Information, Additional Information [Abstract] | |
Schedule of Financial Information for the Company's Reportable Segments | The following table sets forth certain financial information for the Company's reportable segments (in thousands): Three Months Ended March 31, 2024 2023 Industrial Assets Division: Auction and Liquidation $ 796 $ 1,468 Refurbishment & Resale 16 1,101 Total divisional operating income 812 2,569 Financial Assets Division: Brokerage 2,067 2,045 Specialty Lending 865 477 Total divisional operating income 2,932 2,522 Corporate operating expense & other income ( 1,186 ) ( 1,197 ) Consolidated operating income $ 2,558 $ 3,894 |
Basis of Presentation (Addition
Basis of Presentation (Additional Information) (Details) - Common Stock [Member] $ in Millions | Mar. 31, 2024 USD ($) |
Common share purchased, amount | $ 4 |
Remained share purchase amount under the programme | $ 3.2 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2024 USD ($) Segment Portfolio | Dec. 31, 2023 USD ($) | |
Summary Of Significant Accounting Policies [Line Items] | ||
Allowance for doubtful accounts as of December 31, 2022 | $ 126 | $ 132 |
Accumulated deficit | (231,227) | (233,026) |
Reserve balance for credit loss | 100 | 100 |
Deferred revenue | 300 | $ 500 |
Notes receivable, principal amount | 37,300 | |
Borrower's note balance | $ 23,400 | |
Borrower's note balance, percentage | 63% | 62% |
Due from borrower | $ 23,400 | |
Number of distinct portfolio purchases and loan agreements | Portfolio | 11 | |
Beginning balance of reserve for credit losses as of January 1, 2023 | $ 100 | $ 100 |
Allowance for credit loss | $ (643) | |
Consolidated [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Number of reporting segment | Segment | 3 | |
Accounting Standards Update 2022-02 [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Percentage of service revenue that is recognized over a period of time against total revenue | 1.3861% | |
Note receivable outstanding | $ 600 | 700 |
Accounting Standards Update 2022-02 [Member] | Notes Receivable [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Percentage of service revenue that is recognized over a period of time against total revenue | 3.60% | |
Accounting Standards Update 2022-02 [Member] | Equity Method Investments [Member] | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Percentage of service revenue that is recognized over a period of time against total revenue | 1.3861% | |
Credit loss rate | 4.40% | |
Allowance for credit loss | $ 900 | $ 900 |
Accounts Receivable, net (Addit
Accounts Receivable, net (Additional Information) (Details) - USD ($) $ in Millions | Mar. 31, 2024 | Dec. 31, 2023 |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||
Accounts Receivable, after Allowance for Credit Loss, Noncurrent | $ 0.1 | $ 0.1 |
Notes Receivable, Net - (Additi
Notes Receivable, Net - (Additional Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | |
Receivables with Imputed Interest [Line Items] | ||
Notes receivables, net of unamortized | $ 17,200 | $ 17,500 |
Provision for credit losses | 0 | |
Notes issued | 2,300 | |
Principal payments received | 2,500 | |
Allowance for Credit Losses | $ 600 | $ 700 |
Notes Receivable, Net - Schedul
Notes Receivable, Net - Schedule of Company's Lending Activity (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Receivables [Abstract] | |
Notes receivable as of December 31, 2023 | $ 18,262 |
Investment in notes receivable | 2,256 |
Transfer of notes | 0 |
Principal repayments | (2,520) |
Notes receivable, as of March 31, 2024 | 17,998 |
Deferred financing fees and costs, net | (143) |
Allowance for credit loss | (643) |
Notes receivable, net, March 31, 2024 | $ 17,212 |
Stock-based Compensation (Narra
Stock-based Compensation (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||||
Mar. 07, 2024 | Apr. 02, 2023 | Mar. 31, 2023 | Aug. 03, 2022 | Jun. 01, 2018 | Mar. 31, 2024 | Mar. 31, 2023 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Options to purchase, Granted (in shares) | 20,000 | ||||||
Options cancelled to purchase common stock | 12,750 | ||||||
Stock-based compensation expense | $ 228 | $ 179 | |||||
David Ludwig And Tom Ludwig [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Restricted common stock granted | 600,000 | ||||||
Common Stock Options [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
issuance of shares | 3,500,000 | ||||||
Stock-based compensation expense | $ 100 | 100 | |||||
Unrecognized stock-based compensation | $ 1,300 | ||||||
Unrecognized stock-based compensation, Period for recognition | 2 years 3 months 18 days | ||||||
Restricted Stock [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Stock-based compensation expense | $ 100 | $ 100 | |||||
Unrecognized stock-based compensation | $ 500 | ||||||
Restricted Stock [Member] | David Ludwig And Tom Ludwig [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Shares restriction term of service | 5 years | ||||||
Employees [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Options to purchase, Granted (in shares) | 20,000 | ||||||
Employees [Member] | Equity Incentive Plan [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Restricted common stock granted | 128,044 | 97,290 | |||||
Non Executive Directors [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Restricted common stock granted | 75,000 | 115,000 | |||||
Non Executive Directors [Member] | Restricted Stock [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Options to purchase, Granted (in shares) | 40,000 | ||||||
Number of Shares vested in period | 75,000 | ||||||
Non Executive Directors [Member] | Equity Incentive Plan [Member] | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Restricted common stock granted | 15,000 | 75,000 | |||||
Canceled Restricted Stock | 15,000 |
Stock-based Compensation - Sche
Stock-based Compensation - Schedule of Changes in Common Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |||
Options, Outstanding at the beginning of the period | 2,265,350 | ||
Options, Granted | 20,000 | ||
Options, Exercised | (3,750) | ||
Forfeited | (12,750) | ||
Options, Outstanding at the end of the period | 2,268,850 | ||
Options, Exercisable at the end of the period | 1,363,975 | ||
Weighted Average Exercise Price, Outstanding at the beginning of the period | $ 1.71 | ||
Weighted Average Exercise Price, Granted | 2.93 | ||
Weighted Average Exercise Price, Exercised | 1.87 | ||
Share-Based Compensation Arrangements by Share-Based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price | 1.87 | ||
Weighted Average Exercise Price, Outstanding at the end of the period | 1.72 | ||
Weighted Average Exercise Price, Exercisable at the end of the period | $ 1.25 | ||
Options Outstanding Weighted Average Contractual Life (years) | 6 years 6 months | 6 years 9 months 18 days | |
Options Exercisable Weighted Average Contractual Life (years) | 5 years 4 months 24 days | ||
Aggregate Intrinsic Value, Outstanding | $ 2,322 | $ 3,059 | |
Aggregate Intrinsic Value, Exercisable | $ 1,936 |
Equity Method Investments - Sch
Equity Method Investments - Schedule of Joint Venture Revenues and Net Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Schedule Of Equity Method Investments [Line Items] | ||
Operating (loss) income | $ 2,558 | $ 3,894 |
Net income | 1,799 | 2,829 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Revenues | 2,702 | 2,182 |
Gross Profit, Total | 2,702 | 2,182 |
Operating (loss) income | 2,599 | 1,672 |
Net income | 2,599 | 1,672 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | KNFH LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Revenues | 0 | 440 |
Operating (loss) income | 0 | (10) |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | DHC8 LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Revenues | 321 | 445 |
Operating (loss) income | 268 | 378 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | KNFH II LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Revenues | 0 | 0 |
Operating (loss) income | (44) | 0 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | HGC Funding I LLC and Origination I LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Revenues | 1,140 | 1,297 |
Operating (loss) income | 1,134 | 1,304 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | HGC MPG Funding LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Revenues | 1,241 | 0 |
Operating (loss) income | $ 1,241 | $ 0 |
Equity Method Investments (Addi
Equity Method Investments (Additional Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | |||||
Mar. 31, 2024 | Dec. 31, 2023 | May 31, 2023 | Dec. 31, 2022 | Apr. 30, 2022 | Nov. 14, 2018 | |
Schedule of Equity Method Investments [Line Items] | ||||||
Provision for credit losses | $ 0 | |||||
HGC Funding I LLC and Origination I LLC [Member] | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Provision for credit losses | 0 | |||||
Reserve for credit losses | $ 900 | |||||
CPFH LLC [Member] | Other Investees Member | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Equity method investment, ownership percentage | 25% | |||||
KNFH LLC [Member] | Other Investees Member | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Equity method investment, ownership percentage | 25% | |||||
DHC8 LLC [Member] | Other Investees Member | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Equity method investment, ownership percentage | 13.33% | |||||
Hgc Mpg Funding Llc Member | Other Investees Member | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Equity method investment, ownership percentage | 25% | |||||
Knfh Ii Llc Member | Other Investees Member | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Equity method investment, ownership percentage | 25% |
Equity Method Investments- Sche
Equity Method Investments- Schedule of the Components of Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | $ 83,706 | $ 83,168 |
Total liabilities | 20,674 | 22,088 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | 76,593 | 81,973 |
Total liabilities | 6,324 | 5,401 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | KNFH LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | 0 | 292 |
Total liabilities | 0 | 289 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | DHC8 LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | 4,700 | 7,061 |
Total liabilities | 1,080 | 1,102 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | KNFH II LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | 8,306 | 8,150 |
Total liabilities | 4,000 | 4,000 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | HGC Funding I LLC and Origination I LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | 27,174 | 28,389 |
Total liabilities | 1,244 | 10 |
Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] | HGC MPG Funding LLC [Member] | ||
Schedule Of Equity Method Investments [Line Items] | ||
Total assets | 36,413 | 38,081 |
Total liabilities | $ 0 | $ 0 |
Earnings Per Share (Narrative)
Earnings Per Share (Narrative) (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Earnings Per Share [Abstract] | ||
Convertible Preferred Stock, Shares Issuable upon Conversion | the Company’s shares of Series N preferred stock, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. | |
Anti-dilutive common shares | 0.2 | 0.3 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of Calculation of the Shares Used in Computing Diluted EPS (Details) - shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Earnings Per Share [Abstract] | ||
Basic weighted average shares outstanding | 36,592,801 | 36,005,150 |
Treasury stock effect of common stock options and restricted stock awards | 774,467 | 1,329,309 |
Diluted weighted average common shares outstanding | 37,367,268 | 37,334,459 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) $ in Thousands | 3 Months Ended | |||||
Jun. 01, 2023 USD ($) | Aug. 12, 2022 USD ($) ft² | Mar. 31, 2024 USD ($) Location | Mar. 31, 2023 USD ($) | Sep. 01, 2022 | Jan. 01, 2019 | |
Lessee, Lease, Description [Line Items] | ||||||
Number of locations | Location | 4 | |||||
Lessee operating lease, incremental borrowing rate | 7.25% | 5.50% | 5.25% | |||
Lease expense | $ 200 | $ 200 | ||||
Weighted average remaining lease term | 3 years 10 months 24 days | |||||
Weighted average discount rate | 5.35% | |||||
Liberty Industrial Park Llc | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Area of lease | ft² | 6,627 | |||||
Initial monthly base rent | $ 11,266 | |||||
Liberty Industrial Park Llc | Maximum [Member] | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Initial monthly base rent | $ 13,180 | |||||
Edwardsville office [Member] | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Initial monthly base rent | $ 9,412 | |||||
Edwardsville office [Member] | Maximum [Member] | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Initial monthly base rent | $ 9,914 |
Leases - Schedule of Right-of-U
Leases - Schedule of Right-of-Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Lessee Lease Description [Line Items] | ||
Right-of-use assets | $ 2,377 | $ 2,539 |
Lease liabilities | 2,489 | 2,648 |
Del Mar, CA [Member] | ||
Lessee Lease Description [Line Items] | ||
Right-of-use assets | 161 | 203 |
Lease liabilities | 147 | 186 |
Hayward, CA [Member] | ||
Lessee Lease Description [Line Items] | ||
Right-of-use assets | 1,527 | 1,594 |
Lease liabilities | 1,455 | 1,525 |
San Diego, CA [Member] | ||
Lessee Lease Description [Line Items] | ||
Right-of-use assets | 470 | 498 |
Lease liabilities | 447 | 477 |
Edwardsville, IL [Member] | ||
Lessee Lease Description [Line Items] | ||
Right-of-use assets | 331 | 353 |
Lease liabilities | $ 328 | $ 351 |
Leases - Schedule of Undiscount
Leases - Schedule of Undiscounted Future Minimum Lease Commitments (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract] | ||
2024 (remainder of year from April 1, 2024 to December 31, 2024) | $ 594 | |
2025 | 661 | |
2026 | 649 | |
2027 | 543 | |
2028 | 299 | |
Total undiscounted future minimum lease payments | 2,746 | |
Less imputed interest | (257) | |
Present value of lease liabilities | $ 2,489 | $ 2,648 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill (Additional Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of Intangible Assets | $ 98 | $ 100 |
Acquired Finite-Lived Intangible Asset, Residual Value | 0 | |
Goodwill, Impairment Loss | 0 | |
Impairment charges | $ 0 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Amortization | $ (98) | $ (100) | |
Total estimated amortization expense | 1,218 | $ 1,316 | |
Intangible assets, net | 3,655 | 3,753 | |
NLEX [Member] | Trade Name [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Indefinite-lived intangible assets | 2,437 | 2,437 | |
ALT [Member] | Trade Name [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Amortization | (8) | ||
Total estimated amortization expense | 567 | $ 575 | |
Intangible Assets, Amortizable Period | 17 years 4 months 24 days | ||
HGP Trade Name [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Amortization | (32) | ||
Total estimated amortization expense | 96 | $ 128 | |
Intangible Assets, Amortizable Period | 9 months 18 days | ||
Vendor Relationships [Member] | ALT [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Amortization | (58) | ||
Total estimated amortization expense | $ 556 | $ 613 | |
Intangible Assets, Amortizable Period | 2 years 4 months 24 days |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill - Schedule of Estimated Amortization Expense Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2024 (remainder of year from April 1, 2024 to December 31, 2024) | $ 293 | |
2025 | 263 | |
2026 | 186 | |
2027 | 32 | |
2028 | 32 | |
Thereafter | 412 | |
Total estimated amortization expense | $ 1,218 | $ 1,316 |
Intangible Assets and Goodwil_5
Intangible Assets and Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | $ 7,446 | $ 7,446 |
ALT [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | 1,861 | 1,861 |
H G P | ||
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | 2,041 | 2,041 |
NLEX [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | $ 3,544 | $ 3,544 |
Schedule of Debt (Details)
Schedule of Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Current: | ||
Third party debt current | $ 1,765 | $ 1,733 |
Non-current: | ||
Third party debt | 5,040 | 5,495 |
Total third party debt | 6,805 | 7,228 |
2021 Credit Facility | ||
Current: | ||
Third party debt current | 0 | 0 |
2023 Credit Facility | ||
Current: | ||
Third party debt current | 1,250 | 1,222 |
Non-current: | ||
Third party debt | 4,775 | 5,100 |
ALT Note | ||
Current: | ||
Third party debt current | 515 | 511 |
Non-current: | ||
Third party debt | $ 265 | $ 395 |
Debt (Narrative) (Details)
Debt (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
May 26, 2023 | Aug. 23, 2021 | Mar. 31, 2024 | Dec. 31, 2023 | May 05, 2021 | |
Heritage Global LLC [Member] | |||||
Debt Instrument [Line Items] | |||||
Line of credit | $ 2,000 | ||||
Debt instrument, Maturity date | Aug. 23, 2025 | ||||
Interest rate per annum | 3% | ||||
Litigation settlement installments amount due | $ 44,000 | ||||
Debt outstanding amount | $ 800 | ||||
Wall Street Journal prime rate [Member] | |||||
Debt Instrument [Line Items] | |||||
Interest rate per annum | 1% | ||||
Wall Street Journal prime rate [Member] | Heritage Global LLC [Member] | |||||
Debt Instrument [Line Items] | |||||
Interest rate per annum | 0.25% | ||||
2021 Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Line of Credit Facility, Average Outstanding Amount | 5,000 | ||||
C3bank [Member] | |||||
Debt Instrument [Line Items] | |||||
Line of credit | $ 10,000 | ||||
Debt instrument, Maturity date | Oct. 27, 2024 | ||||
Debt outstanding amount | $ 0 | ||||
Short-Term Debt, Weighted Average Interest Rate, at Point in Time | 8.75% | 9.51% | |||
C3bank [Member] | Maximum [Member] | |||||
Debt Instrument [Line Items] | |||||
Interest rate per annum | 6.75% | ||||
C3bank [Member] | Wall Street Journal prime rate [Member] | |||||
Debt Instrument [Line Items] | |||||
Line of credit | $ 7,000 | ||||
Debt outstanding amount | $ 6,000 | ||||
Line of credit facility current portion | 1,200 | ||||
Line of credit facility non - current portion | $ 4,800 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | |
Income Taxes [Line Items] | ||
Operating loss carryforwards | $ 50 | |
Operating Loss CarryForwards Expiring Year | 2024 | |
Description of Income Tax Credit Carryforwords | These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years. | |
Valuation allowance | $ 2.2 | $ 2.2 |
Ownership Percentage [Member] | ||
Income Taxes [Line Items] | ||
Ownership Percentage | 5% |
Related Party Transactions (Nar
Related Party Transactions (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Senior Officer of NLEX [Member] | Lease Amounts [Member] | Edwardsville, IL [Member] | Selling, General and Administrative Expenses [Member] | ||
Related Party Transaction [Line Items] | ||
Payment to related party | $ 28,000 | $ 28,000 |
Segment Information - Schedule
Segment Information - Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Net operating income (loss) | $ 2,558 | $ 3,894 |
Industrial Assets Division [Member] | ||
Net operating income (loss) | 812 | 2,569 |
Financial Assets Division [Member] | ||
Net operating income (loss) | 2,932 | 2,522 |
Auction and Liquidation [Member] | ||
Net operating income (loss) | 796 | 1,468 |
Refurbishment & Resale [Member] | ||
Net operating income (loss) | 16 | 1,101 |
Brokerage [Member] | ||
Net operating income (loss) | 2,067 | 2,045 |
Specialty Lending [Member] | ||
Net operating income (loss) | 865 | 477 |
Corporate and Other [Member] | ||
Net operating income (loss) | (1,186) | (1,197) |
Consolidated [Member] | ||
Net operating income (loss) | $ 2,558 | $ 3,894 |