Heritage Global Inc.

Previous wording

The following discussion and analysis should be read in conjunction with the information contained in the unaudited condensed consolidated interim financial statements of Heritage Global Inc. (together with its consolidated subsidiaries, “we”, “us”, “our” or the “Company”) and the related notes thereto for the three and nine month periods ended September 30, 2025 and 2024, appearing elsewhere herein, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on March 13, 2025 (the “Form 10-K”).

Current wording

The following discussion and analysis should be read in conjunction with the information contained in the unaudited condensed consolidated interim financial statements of Heritage Global Inc., a Florda Corporation ("HG") together with its consolidated subsidiaries, “we”, “us”, “our” or the “Company”, and the related notes thereto for the three month periods ended March 31, 2026 and 2025, appearing elsewhere herein, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on March 12, 2026 (the “Form 10-K”).

Previous wording

Our corporate headquarters are located at 12625 High Bluff Drive, Suite 305, San Diego, CA 92130. Our telephone number is (858) 847-0659 and our corporate website iswww.hginc.com. Information contained on our website is not incorporated by reference into this Form 10-Q.

Current wording

Our corporate headquarters are located at 6130 Nancy Ridge Drive, San Diego, CA 92121. Our telephone number is (858) 847-0659 and our corporate website iswww.hginc.com. Information contained on our website is not incorporated by reference into this Form 10-Q.

Previous wording

Pursuant to the terms of existing credit agreements, our largest borrower was required to collect on underlying charged off and nonperforming consumer loan portfolios and remit a required minimum monthly payment to us. However, this borrower became unable to make the required minimum monthly payments and therefore is in default. While in default, this borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios but must remit all such net collections to us and senior lenders. These remittances of net collections have not met the amount of the required minimum monthly payments since June of 2024. We determined that (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows. We do not expect to realize any return with respect to these loans in 2025, and whether we will realize any return with respect to these loans is uncertain. As we continue to work closely with the borrower and its senior lenders in an effort to mitigate the default in an efficient and effective manner, the impacted loans have been placed in nonaccrual status beginning in June 2024. In addition, there was a balance of $1.5 million from our share of other loans within affiliated Joint Ventures that are impacted by the default with our largest borrower and have been placed in nonaccrual status as of June 2024. Our share of payments received from this borrower, including interest, will be applied against the outstanding loan balance. As of September 30, 2025, the amortized cost basis of loans in nonaccrual status was $22.3 million, of which $4.8 million is recorded within notes receivable and $17.5 million is recorded within equity method investments. As of December 31, 2024, the amortized cost basis of loans in nonaccrual status was $23.5 million, of which $5.3 million is recorded within notes receivable and $18.2 million is recorded within equity method investments.

Current wording

Pursuant to the terms of existing credit agreements, our largest borrower was required to collect on underlying charged off and nonperforming consumer loan portfolios and remit a required minimum monthly payment to us. However, this borrower became unable to make the required minimum monthly payments and therefore is in default. While in default, this borrower continues to collect on the underlying charged off and nonperforming consumer loan portfolios but must remit all such net collections to us and senior lenders. These remittances of net collections have not met the amount of the required minimum monthly payments since June of 2024. We determined that (1) it is not probable that the projected cash flows expected from the borrower’s collection efforts on the underlying charged off or nonperforming receivable portfolio will be sufficient to satisfy all of the outstanding principal balance and contractual interest payments, and (2) it is not probable that the borrower will be able to meet the minimum required principal and interest payments through other operational cash flows. We do not expect to realize any return with respect to these loans in 2025, and whether we will realize any return with respect to these loans is uncertain. As we continue to work closely with the borrower and its senior lenders in an effort to mitigate the default in an efficient and effective manner, the impacted loans have been placed in nonaccrual status beginning in June 2024. In addition, there was a balance of $1.5 million from our share of other loans within affiliated Joint Ventures that are impacted by the default with our largest borrower and have been placed in nonaccrual status as of June 2024. Our share of payments received from this borrower, including interest, will be applied against the outstanding loan balance. As of March 31, 2026, the amortized cost basis of loans in nonaccrual status was $23.7 million, of which $4.8 million is recorded within notes receivable and $18.9 million is recorded within equity method investments.

Previous wording

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

Current wording

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

Previous wording

Differentiated business model. We believe we have diversified business lines serving the financial and industrial asset liquidation market. We have multiple revenue streams including our brokerage, principal based auction services, refurbishment and resale, advisory services and secured lending services. Further, our business is event-driven and we have repeat, forward-flow contracts in place with industry leading customers. We expect to drive growth in our revenue streams by taking different roles, and using partners as needed.

Current wording

Differentiated business model. We believe we have diversified business lines serving the financial and industrial asset liquidation market. We have multiple revenue streams including our consumer and commercial loan brokerages, principal based auction services, refurbishment and resale, advisory services and secured lending services. Further, our business is event-driven and we have repeat, forward-flow contracts in place with industry leading customers. We expect to drive growth in our revenue streams by taking different roles, and using partners as needed.

Previous wording

Compelling macro growth drivers. Historically, recessions drive an increased supply of surplus assets and an increased demand for liquidation services, which we believe we are well-positioned to provide. Further, consumer lending and resulting charge-offs, specifically via credit cards, are expected to continue their upward trend to meet, and possibly exceed, pre-pandemic levels, which we believe will drive an increased supply of charged off and non-performing assets. Additionally, we believe an active market for mergers and acquisitions in manufacturing industries drives demand for industrial asset liquidations and our services. The market in which we operate is highly fragmented, presenting a continued opportunity for the Company to increase market share and drive consolidation.

Current wording

Compelling macro growth drivers. Historically, recessions drive an increased supply of surplus assets and an increased demand for liquidation services, which we believe we are well-positioned to provide. Further, consumer revolving credit has increased above pre‑pandemic levels, and credit card delinquencies and charge-offs have risen to at or above pre‑pandemic benchmarks. While recent data indicate these metrics have begun to stabilize and, in some measures moderate, we believe credit card charge-offs and nonperforming receivables are likely to remain elevated. Under adverse macroeconomic conditions, delinquencies and charge-off rates could increase further, potentially expanding the supply of charged-off and nonperforming portfolios available for sale. Additionally, we believe an active market for mergers and acquisitions in manufacturing industries drives demand for industrial asset liquidations and our services. The market in which we operate is highly fragmented, presenting a continued opportunity for the Company to increase market share and drive consolidation.

Previous wording

Strong management team. We have built an experienced executive-level management team with deep domain expertise. Our President and Chief Executive Officer, Ross Dove, is a third-generation auctioneer and a pioneering innovator in applying technology to the asset liquidation industry. Mr. Dove began his career in the auction business over forty years ago, beginning with a small family-owned auction house and helping to expand it into a global firm, DoveBid, which was sold to a third party in 2008. In addition, our senior management team has deep domain expertise in both industrial asset and financial asset transactions. On September 17, 2020, we entered into an Employment Agreement with Kirk Dove, the former President and Chief Operating Officer of the Company. Upon his resignation, Kirk Dove continued his employment with us in an advisory capacity, and is expected to do so until December 31, 2027. Also, during 2020, Nick Dove was appointed as President, Industrial Assets Division, and David Ludwig was appointed as President, Financial Assets Division. Nick Dove previously served as Executive Vice President of Sales of Heritage Global Partners since August 2017. David Ludwig previously served as President of NLEX, a wholly owned subsidiary of the Company, and has served in such capacity since the Company acquired NLEX in 2014.

Current wording

Strong management team. We have built an experienced executive-level management team with deep domain expertise. Our President and Chief Executive Officer, Ross Dove, is a third-generation auctioneer and a pioneering innovator in applying technology to the asset liquidation industry. Mr. Dove began his career in the auction business over forty years ago, beginning with a small family-owned auction house and helping to expand it into a global firm, DoveBid, which was sold to a third party in 2008. In addition, our senior management team has deep domain expertise in both industrial asset and financial asset transactions. On September 17, 2020, we entered into an Employment Agreement with Kirk Dove, the former President and Chief Operating Officer of the Company. Upon his resignation, Kirk Dove continued his employment with us in an advisory capacity. Also, during 2020, Nick Dove was appointed as President, Industrial Assets Division, and David Ludwig was appointed as President, Financial Assets Division. Nick Dove previously served as Executive Vice President of Sales of Heritage Global Partners since August 2017. David Ludwig previously served as President of NLEX, a wholly owned subsidiary of the Company, and has served in such capacity since the Company acquired NLEX in 2014.

Previous wording

Through NLEX, we act as an advisor for sales of charged-off and nonperforming asset portfolios via an electronic auction exchange platform for banks and other debt holders throughout the United States and Canada. Since the 1980s, NLEX has sold over $200 billion face value of performing, nonperforming and charged-off assets. NLEX sales range from credit card, secured and unsecured consumer and business loans, and automobile defaults to real estate nonperforming loans. The typical credit we broker sells at a discount to face value, and we typically receive a commission for these services from both buyers and sellers. We have existing relationships with high quality, top-tier and mid-tier debt buyers. In addition to its creditor relationships, NLEX has continued to be opportunistic as new lending facilities, such as FinTech, peer-to-peer and more recently Buy Now Pay Later lenders have expanded the availability of consumer credit. Because of growing volume in this industry, and due to continued elevated delinquency and charge-off rates, we anticipate growth opportunities in our brokerage segment as these sectors evolve. Given many of our clients' limited resources in this space, we have also implemented post-sale support, further entrenching NLEX with our dedicated clients as well as differentiating us from competitors.

Current wording

Through NLEX, we act as an advisor for sales of charged-off and nonperforming asset portfolios via an electronic auction exchange platform for banks and other debt holders throughout the United States and Canada. Since the 1980s, NLEX has sold over $250 billion face value of performing, nonperforming and charged-off assets. NLEX sales range from credit card, secured and unsecured consumer and business loans, and automobile defaults to real estate nonperforming loans. The typical credit we broker sells at a discount to face value, and we typically receive a commission for these services from both buyers and sellers. We have existing relationships with high quality, top-tier and mid-tier debt buyers. In addition to its creditor relationships, NLEX has continued to be opportunistic as new lending facilities, such as FinTech, peer-to-peer and more recently Buy Now Pay Later lenders have expanded the availability of consumer credit. Because of growing volume in this industry, and due to continued elevated delinquency and charge-off rates, we anticipate growth opportunities in our brokerage segment as these sectors evolve. Given many of our clients' limited resources in this space, we have also implemented post-sale support, further entrenching NLEX with our dedicated clients as well as differentiating us from competitors.

Previous wording

Through HGC, we provide specialty financing solutions to investors in charged-off and nonperforming asset portfolios. Since the inception of HGC in 2019, we have issued $158.5 million in total loans to investors by both self- funded loans and in partnership with senior lenders. Our portion of the total loans funded since inception is $72.1 million. Our income from secured lending consists of upfront fees, interest income, monthly monitoring fees and backend profit share. As of September 30, 2025, our net balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $27.3 million, of which $8.9 million is classified as notes receivable and $18.4 million is classified as equity method investments.

Current wording

Through HGC, we provide specialty financing solutions to investors in charged-off and nonperforming asset portfolios. Since the inception of HGC in 2019, we have issued $160.7 million in total loans to investors by both self- funded loans and in partnership with senior lenders. Our portion of the total loans funded since inception is $74.3 million. Our income from secured lending consists of upfront fees, interest income, monthly monitoring fees and backend profit share. As of March 31, 2026, our net balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $26.3 million, of which $8.1 million is classified as notes receivable and $18.2 million is classified as equity method investments.

Previous wording

As of September 30, 2025, we held a gross balance of investments in notes receivable of $28.4 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $21.7 million, representing 76% of our total gross notes receivable balance as of September 30, 2025, as compared to 74% as of December 31, 2024. As discussed further above, our largest borrower is in default. As a result, the balance of the loans outstanding with our largest borrower were in nonaccrual status as of September 30, 2025. Whether we will realize any return with respect to the impacted loans is uncertain. We do not intend to hold highly concentrated balances due from one borrower as part of its long-term strategy but will in the short term have concentration risk on our path to an established and diversified portfolio.

Current wording

As of March 31, 2026, we held a gross balance of investments in notes receivable of $27.3 million, recorded in both notes receivable and equity method investments, and consisting of one borrower’s note balance of approximately $21.4 million, representing 78% of our total gross notes receivable balance as of March 31, 2026, as compared to 76% as of December 31, 2025. As discussed further above, our largest borrower is in default. As a result, the balance of the loans outstanding with our largest borrower were in nonaccrual status as of March 31, 2026. Whether we will realize any return with respect to the impacted loans is uncertain.

Previous wording

We do not evaluate concentration risk solely based on balance due from specific borrowers, but also consider the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $21.7 million, there are 11 distinct loan agreements, the underlying portfolio of accounts are diversified throughout FinTech, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios.

Current wording

We do not evaluate concentration risk solely based on balance due from specific borrowers, but also consider the number of portfolio purchases, type of charged off accounts within the portfolio, and the seller of the portfolio when determining the overall risk. Of the balance due from one borrower of $21.4 million, there are 11 distinct loan agreements, the underlying portfolio of accounts are diversified throughout FinTech, installment loans and credit card accounts, and further diversified amongst six separate sellers of these charged off portfolios.

Previous wording

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

Current wording

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

Previous wording

The current domestic and international political environment have contributed to uncertainty surrounding the future state of the global economy. While it is difficult to predict the ultimate effect of tariffs, trade disputes, and related matters on our business, to the extent that imported goods are subject to tariffs that reduce their availability and increase their price, demand may increase for the used industrial assets sold at our auctions, which could benefit our business. With respect to our Financial Assets Division, an economic downturn could increase the amount of distressed debt, which would tend to increase opportunities for our brokerage and specialty lending businesses, but could also reduce the collectability of the charged off receivables purchased by our debt buyers, which would negatively affect our specialty lending business.

Current wording

The current domestic and international political environment have contributed to uncertainty surrounding the future state of the global economy. While it is difficult to predict the ultimate effect of tariffs, trade disputes, and related matters on our business, to the extent that imported goods are subject to tariffs that reduce their availability and increase their price, demand may increase for the used industrial assets sold at our auctions, which could benefit our business. With respect to our Financial Assets Division, an economic downturn could increase the amount of distressed debt, which would tend to increase opportunities for our consumer loans, commercial loans and specialty lending businesses, but could also reduce the collectability of the charged off receivables purchased by our debt buyers, which would negatively affect our specialty lending business.

Previous wording

The critical accounting policies used in the preparation of our audited consolidated financial statements are discussed in our Form 10-K. There were no material changes to these policies during the nine months ended September 30, 2025.

Current wording

The critical accounting policies used in the preparation of our audited consolidated financial statements are discussed in our Form 10-K. Other than stated above, there were no material changes to these policies during the three months ended March 31, 2026.

Previous wording

We had working capital of $17.9 million and $18.5 million as of September 30, 2025 and December 31, 2024, respectively.

Current wording

We had working capital of $11.6 million and $18.1 million as of March 31, 2026 and December 31, 2025, respectively.

Previous wording

Our current assets as of September 30, 2025 decreased to $31.8 million compared to $33.1 million as of December 31, 2024. This change was primarily due to a decrease in cash of $2.3 million and a decrease in other current assets of $0.3 million, partially offset by an increase in inventory of $0.3 million, an increase in the current portion of notes receivable of $0.8 million, and an increase in accounts receivable of $0.2 million. Our current liabilities as of September 30, 2025 decreased to $13.9 million compared to $14.6 million as of December 31, 2024. The most significant changes were a decrease of $0.6 million in payables to sellers due to the timing of certain asset liquidation settlements and a decrease of $0.4 million in the current portion of third party debt, partially offset by an increase of $0.2 million in accounts payable and accrued liabilities.

Current wording

Our current assets as of March 31, 2026 decreased to $23.8 million compared to $33.6 million as of December 31, 2025. This change was primarily due to a decrease in cash of $8.9 million, as further discussed below, and a decrease in inventory of $0.6 million.

Previous wording

During the nine months ended September 30, 2025, our primary source of cash was cash on hand, cash provided by operating activities, principal repayments on outstanding loans, and proceeds from a promissory note, a business loan agreement and commercial security agreement (collectively, the “Mortgage Loan Agreement”) with C3bank, National Association, that provides for a $4.1 million term loan (the “Mortgage”). Cash disbursements during the nine months ended September 30, 2025 consisted primarily of investments in notes receivable, investments in equity method investments including related participating interest, repurchases of our common stock, and the purchase of our new building for $7.4 million.

Current wording

During the three months ended March 31, 2026, our primary source of cash was cash on hand and principal repayments on outstanding loans. Cash disbursements during the three months ended March 31, 2026 consisted primarily of approximately $8.5 million cash paid for the acquisition of substantially all of the assets of The Debt Exchange, Inc., investments in notes receivable, repurchases of our common stock, and capital expenditures related to improvements to our new building.

Previous wording

On February 6, 2025 we entered into “the Mortgage Loan Agreement” with C3bank, National Association (the “Lender”). The Mortgage Loan Agreement provides for the Mortgage which we used to purchase real property and the building located at 6130 Nancy Ridge Drive in San Diego, California on February 11, 2025. This property will be used as the Company’s future corporate headquarters and as future warehouse and office space for the operations of Heritage Global Partners, Inc., our subsidiary that operates our Auction and Liquidation segment. As of September 30, 2025, we had an outstanding balance of $4.1 million on the Mortgage.

Current wording

On February 6, 2025 we entered into the Mortgage Loan Agreement with C3bank, National Association (the “Lender”). The Mortgage Loan Agreement provides for the Mortgage which we used to purchase real property and the building located at 6130 Nancy Ridge Drive in San Diego, California on February 11, 2025. This property is used as the Company’s corporate headquarters and as a warehouse and office space for the operations of Heritage Global Partners, Inc., our subsidiary that operates our Auction and Liquidation segment. As of March 31, 2026, we had an outstanding balance of $4.1 million on the Mortgage.

Previous wording

On December 27, 2024, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Fifth Modification Agreement”), by and between the Company and the Lender. The Fifth Modification Agreement modifies and reaffirms the 2021 Credit Facility to, among other things, extend the maturity date to June 27, 2026, modify the applicable interest rate, and further modify the loan covenants. We are permitted to use the proceeds of the loan solely for our business operations. As of September 30, 2025, we had no outstanding balance on the 2021 Credit Facility.

Current wording

On December 27, 2024, the Company entered into a Loan Modification Agreement and Reaffirmation of Loan (the “Sixth Modification Agreement”), by and between the Company and the Lender. The Sixth Modification Agreement modifies and reaffirms the 2021 Credit Facility to, among other things, extend the maturity date to June 27, 2026, modify the applicable interest rate, and further modify the loan covenants. We are permitted to use the proceeds of the loan solely for our business operations. As of March 31, 2026, we had no outstanding balance on the 2021 Credit Facility.

Previous wording

As of September 30, 2025 and December 31, 2024, we had stockholders’ equity of $66.5 million and $65.2 million, respectively.

Current wording

As of March 31, 2026 and December 31, 2025, we had stockholders’ equity of $67.8 million and $67.0 million, respectively.

Previous wording

Cash and cash equivalents as of September 30, 2025 were $19.4 million as compared to $21.7 million as of December 31, 2024, a decrease of approximately $2.3 million. The total cash amount reflected on our balance sheet represents the total cash and cash equivalents held on account. Cash amounts owed to our clients are identified as payables to sellers within current liabilities. We view cash net of payables to sellers as available for operations or investment purposes. As of September 30, 2025 payables to sellers was $6.8 million, resulting in a net cash available balance of $12.6 million compared to available cash of $14.3 million as of December 31, 2024.

Current wording

Cash and cash equivalents as of March 31, 2026 were $11.6 million as compared to $20.5 million as of December 31, 2025, a decrease of approximately $8.9 million. The total cash amount reflected on our balance sheet represents the total cash and cash equivalents held on account. Cash amounts owed to our clients are identified as payables to sellers within current liabilities. We view cash net of payables to sellers as available for operations or investment purposes. As of March 31, 2026, payables to sellers was $5.3 million, resulting in a net cash available balance of $6.2 million compared to available cash of $13.2 million as of December 31, 2025.

Previous wording

Cash provided by operating activities was $4.6 million during the nine months ended September 30, 2025 as compared to $13.3 million during the same period in 2024. The approximate $8.7 million change was primarily attributable to a decrease in operating assets and liabilities of $8.9 million offset by an increase of $0.2 million in net income adjusted for noncash items during the nine months ended September 30, 2025 as compared to the same period in 2024.

Current wording

Cash used in operating activities was $2.7 million during the three months ended March 31, 2026 as compared to cash provided by operating activities of $2.6 million during the same period in 2025. The approximate $5.3 million change was primarily attributable to a decrease in operating assets and liabilities of $4.1 million and a decrease of $1.2 million in net income adjusted for noncash items during the three months ended March 31, 2026 as compared to the same period in 2025.

Previous wording

The changes in operating assets and liabilities during the nine months ended September 30, 2025 as compared to the same period in 2024 are primarily due to the nature of our operations. We earn revenue from discrete asset liquidation deals that vary considerably with respect to their magnitude and timing, and that can consist of fees, commissions, asset sale proceeds, or a combination thereof. The operating assets and liabilities associated with these deals are, therefore, subject to the same variability and can be quite different at the end of any given period.

Current wording

The changes in operating assets and liabilities during the three months ended March 31, 2026 as compared to the same period in 2025 are primarily due to the nature of our operations. We earn revenue from discrete asset liquidation deals that vary considerably with respect to their magnitude and timing, and that can consist of fees, commissions, asset sale proceeds, or a combination thereof. The operating assets and liabilities associated with these deals are, therefore, subject to the same variability and can be quite different at the end of any given period.

Previous wording

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

Current wording

Cash used in investing activities during the three months ended March 31, 2026 consisted primarily of the purchase price paid for the acquisition of substantially all of the assets of The Debt Exchange, Inc. of $8.5 million, the purchase of property and equipment of $0.6 million, and investments in notes receivable of $1.0 million. Cash used in investing activities during the three months ended March 31, 2026 was offset by payments received on notes receivable of $1.9 million, return of investment and cash distributions received from equity method investments of $2.1 million and return of investment in participating interest of $0.6 million.

Previous wording

Cash used in investing activities during the nine months ended September 30, 2025 consisted primarily of purchase of property and equipment of $7.9 million, investments in notes receivable of $4.4 million, investment in equity method investments of $1.6 million and an investment in a participating interest of $1.6 million. Cash used in investing activities during the nine months ended September 30, 2025 was offset by payments received on notes receivable of $5.1 million and return of investment and cash distributions received from equity method investments of $1.3 million.

Current wording

Cash used in investing activities during the three months ended March 31, 2025 consisted primarily of purchase of property and equipment of $7.4 million, investments in notes receivable of $1.3 million, investment in equity method investments of $1.6 million and an investment in a participating interest of $1.6 million. Cash used in investing activities during the three months ended March 31, 2025 was offset by payments received on notes receivable of $1.6 million and return of investment and cash distributions received from equity method investments of $0.8 million.

Previous wording

Cash provided by financing activities was approximately $2.0 million during the nine months ended September 30, 2025 compared to cash used in financing activities of $7.8 million during the nine months ended September 30, 2024. Financing activities during the nine months ended September 30, 2025 consisted primarily of $4.1 million in proceeds from our Mortgage and $1.1 million of proceeds from secured borrowing, partially offset by $2.6 million in repurchases of our common stock and $0.4 million in repayments of third party debt. Cash used in financing activities during the nine months ended September 30, 2024 consisted primarily of $6.3 million in repayments of our Term Loan, $0.4 million in repayments to our ALT Note and $1.1 million in repurchases of our common stock.

Current wording

Cash used in financing activities was approximately $0.9 million during the three months ended March 31, 2026 compared to cash provided by financing activities of $3.9 million during the three months ended March 31, 2025. Financing activities during the three months ended March 31, 2026 consisted primarily of repayments of secured borrowing of $0.7 million and repurchases of our common stock of $0.1 million. Cash provided by financing activities during the three months ended March 31, 2025 consisted primarily of $4.1 million in proceeds from our Mortgage and $1.1 million of proceeds from secured borrowing, partially offset by $1.0 million in repurchases of our common stock.

Previous wording

The following table sets out the Company’s condensed consolidated results of operations for the nine months ended September 30, 2025 and 2024 (in thousands).

Current wording

The following table sets out the Company’s condensed consolidated results of operations for the three months ended March 31, 2026 and 2025 (in thousands).

Previous wording

Our revenue has several components: (1) traditional fee based asset disposition services, such as commissions from on-line and webcast auctions, liquidations and negotiated sales, and commissions from the NLEX charged-off receivables business, (2) the acquisition and subsequent disposition of distressed and surplus assets, including industrial machinery and equipment and real estate, and (3) fees and interest earned for appraisal, management advisory services and specialty lending services.

Current wording

Our revenue has several components: (1) traditional fee based asset disposition services, such as commissions from on-line and webcast auctions, liquidations and negotiated sales, and commissions from the NLEX charged-off receivables business and from the DebtX loan sale business, (2) the acquisition and subsequent disposition of distressed and surplus assets, including industrial machinery and equipment and real estate, and (3) fees and interest earned for appraisal, management advisory services and specialty lending services.

Previous wording

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

Current wording

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

Previous wording

The following table sets forth certain financial information for the Company's reportable segments for the three month periods ended September 30, 2025 and 2024 (in thousands):

Current wording

The following table sets forth certain financial information for the Company's reportable segments for the three months ended March 31, 2026 and 2025 (in thousands):

Previous wording

[1] Within the Company’s Industrial Asset division, management allocates gross profit resulting from certain auctions from Auctions and Liquidation (HGP) to Refurbishment & Resale (ALT). From time to time, ALT may source and refer an auction project to HGP or directly sell lab equipment inventory through the auction channel. In these instances, the profits relating to these transactions are allocated to ALT rather than accounted for under the segment profit or loss of HGP. During the three months ended September 30, 2025, the total amount of gross profit allocated to ALT from HGP was approximately $0.5 million, as compared to the total amount of gross profit allocated to ALT during the same period of 2024 of approximately $0.3 million. During the nine months ended September 30, 2025, the total amount of gross profit allocated to ALT from HGP was approximately $1.1 million, as compared to the total amount of gross profit allocated to ALT during the same period of 2024 of approximately $0.8 million.

Current wording

[1] Within the Company’s Industrial Asset division, management allocates gross profit resulting from certain auctions from Auctions and Liquidation (HGP) to Refurbishment & Resale (ALT). From time to time, ALT may source and refer an auction project to HGP or directly sell lab equipment inventory through the auction channel. In these instances, the profits relating to these transactions are allocated to ALT rather than accounted for under the segment profit or loss of HGP. During the three months ended March 31, 2026, the total amount of gross profit allocated to ALT from HGP was approximately $0.1 million, as compared to the total amount of gross profit allocated to ALT during the same period of 2025 of approximately $0.3 million.

Previous wording

[2] All financing arrangements are originated with Corporate and other. Management may determine from time to time that interest incurred from financing arrangements are directly attributable to a specific segment. As a result, interest incurred may be charged to the segment and included in that segment’s profit or loss as a charge to operating expense. During the three months ended September 30, 2024, no interest was allocated to Specialty Lending (HGC) from Corporate and other. During the nine months ended September 30, 2024, the total amount of interest allocated to Specialty Lending (HGC) from Corporate and other was approximately $0.3 million. No interest expense has been allocated to operating segments during the nine months ended September 30, 2025.

Current wording

[2] All financing arrangements are originated with Corporate and other. Management may determine from time to time that interest incurred from financing arrangements are directly attributable to a specific segment. As a result, interest incurred may be charged to the segment and included in that segment’s profit or loss as a charge to operating expense. No interest expense has been allocated to operating segments during the three months ended March 31, 2026 or March 31, 2025.

Previous wording

Revenues and cost of revenues –Revenues were $11.4 million during the three months ended September 30, 2025 compared to $10.4 million during the same period in 2024. Costs of services revenue and asset sales were $4.1 million during the three months ended September 30, 2025 compared to $3.2 million during the three months ended September 30, 2024. The gross profit of these items was $7.3 million during the three months ended September 30, 2025 compared to $7.2 million during the same period in 2024, an increase of approximately $0.1 million, or approximately 1%. The increase in gross profit in the third quarter of 2025 compared to the third quarter of 2024 is primarily due to normal changes in the timing and magnitude of transactions.

Current wording

Revenues and cost of revenues –Revenues were $12.7 million during the three months ended March 31, 2026 compared to $13.5 million during the same period in 2024. Costs of services revenue and asset sales were $4.4 million during the three months ended March 31, 2026 compared to $5.4 million during the three months ended March 31, 2025. The gross profit of these items was $8.3 million during the three months ended March 31, 2026 compared to $8.0 million during the same period in 2025, an increase of approximately $0.3 million, or approximately 4%. The increase in gross profit during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is primarily due to normal changes in the timing and magnitude of transactions, in addition to the inclusion of gross profit from DebtX beginning in the first quarter of 2026.

Previous wording

Selling, general and administrative expense –Selling, general and administrative expense was $6.0 million during the three months ended September 30, 2025 compared to $5.7 million during the same period in 2024.

Current wording

Selling, general and administrative expense –Selling, general and administrative expense was $7.6 million during the three months ended March 31, 2026 compared to $6.5 million during the same period in 2025.

Previous wording

Selling, general and administrative expense during the third quarter of 2025 increased by approximately $0.3 million compared to the selling, general and administrative expense during the third quarter of 2024. Selling, general and administrative expense through the three months ended September 30, 2025 were generally consistent with selling, general and administrative expense during the same period of 2024.

Current wording

Selling, general and administrative expense during the three months ended March 31, 2026 increased by approximately $1.1 million compared to the selling, general and administrative expense during same period of 2025. The increase in selling, general and administrative expense during the three months ended March 31, 2026 was primarily due to the acquisition of substantially all of the assets of The Debt Exchange, Inc.

Previous wording

Depreciation and amortization expense –Depreciation and amortization expense was $0.1 million during both the three month periods ended September 30, 2025 and 2024.

Current wording

Depreciation and amortization expense –Depreciation and amortization expense was approximately $0.2 million and $0.1 million during the three month periods ended March 31, 2026 and 2025, respectively.

Previous wording

Earnings in Equity Method Investments – Earnings in equity method investments were $0.1 million during both the three months ended September 30, 2025 and 2024.

Current wording

Earnings in Equity Method Investments – Earnings in equity method investments were approximately $0.5 million and $44,000 during both the three months ended March 31, 2026 and 2025. The increase in earnings in equity method investments during the three months ended March 31, 2026 was primarily due to the seller's exercise of the purchase option to repurchase the real estate assets in the DLZ Solutions joint venture, as discussed in Note 7 - Equity Method Investments.