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., a Florida Corporation ("HG") (together with its consolidated subsidiaries, “we”, “us”, “our” or the “Company”) and the related notes thereto for the three and six month periods ended June 30, 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”).

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 Florida Corporation ("HG") (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, 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

As discussed further under Note 3 - Business Combinations, effective January 1, 2026 (the “Acquisition Date”) and pursuant to an Asset Purchase Agreement dated January 9, 2026, Heritage DebtX LLC (“DebtX”), a wholly owned subsidiary of HG, completed the acquisition of substantially all of the assets of The Debt Exchange, Inc., a provider of loan sale advisory services for commercial and consumer debt. The acquisition enhances the Company’s capabilities in financial advisory services and expands its customer relationships within the banking and financial services sector. Following the acquisition, the financial results of DebtX have been included in the Company's consolidated financial statements since the Acquisition Date and have been reported as the Commercial Loans segment within the Company's Financial Assets Division.

Current wording

As discussed further under Note 3 – Business Combinations, effective January 1, 2026 (the “DebtX Acquisition Date”) and pursuant to an Asset Purchase Agreement dated January 9, 2026, Heritage DebtX LLC (“DebtX”), a wholly owned subsidiary of HG, completed the acquisition of substantially all of the assets of The Debt Exchange, Inc., a provider of loan sale advisory services for commercial and consumer debt. The acquisition enhances the Company’s capabilities in financial advisory services and expands its customer relationships within the banking and financial services sector. Following the acquisition, the financial results of DebtX have been included in the Company's consolidated financial statements since the DebtX Acquisition Date and have been reported as the Commercial Loans segment within the Company's Financial Assets Division.

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 beginning in June 2024 and therefore is in default. Our share of payments received from the nonaccrual loans, including interest, will be applied against the outstanding loan balance. As of June 30, 2026, the amortized cost basis of loans in nonaccrual status was $4.6 million and is recorded within notes receivable. As of June 30, 2026, the Company's notes receivable balance of nonaccrual loans net of the $3.5 million allowance for credit losses, was $1.1 million

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 beginning in June 2024 and therefore is in default. Our share of payments received from the nonaccrual loans, including interest, will be applied against the outstanding loan balance. As of September 30, 2026 the amortized cost basis of loans in nonaccrual status was $7.5 million and is recorded within notes receivable. As of September 30, 2026, the Company's notes receivable balance of nonaccrual loans net of the $3.8 million allowance for credit losses, was $3.7 million.

Previous wording

Based upon the continuation of difficulties with the Company’s largest borrower, including a further decline in the second quarter of 2026, on July 30, 2026, the Board authorized a strategic plan to wind down the Company’s Specialty Lending segment beginning in the third quarter of 2026. Refer to Note 16 - Subsequent Events, and the Company’s Current Report on Form 8-K, filed with the SEC on July 31, 2026, for additional information.

Current wording

Based upon the continuation of difficulties with the Company’s largest borrower, including a further decline in the second quarter of 2026, on July 30, 2026, the Board authorized a strategic plan to wind down the Company’s Specialty Lending segment beginning in the third quarter of 2026. Refer to Note 1 – Basis of Presentation for additional information.

Previous wording

Based upon the continuation of difficulties with the Company’s largest borrower, including a further decline in the second quarter of 2026, on July 30, 2026, the Board authorized a strategic plan to wind down the Company’s Specialty Lending segment beginning in the third quarter of 2026. Refer to Note 16 - Subsequent Events, and the Company’s Current Report on Form 8-K, filed with the SEC on July 31, 2026, for additional information.

Current wording

Based upon the continuation of difficulties with the Company’s largest borrower, including a further decline in the second quarter of 2026, on July 30, 2026, the Board authorized a strategic plan to wind down the Company’s Specialty Lending segment beginning in the third quarter of 2026. Refer to Note 1 – Basis of Presentation for additional information.

Previous wording

Given the senior lender's priority position in cash flows generated from the underlying loan portfolios with the Company’s largest borrower (including the impacted loans that were placed in nonaccrual status in June 2024) and the change in collection strategy as well as the senior lender's sole and exclusive authority over defaulted loans, we believe we will not recover the carrying amount of our equity method investments in a liquidation event and we have determined that the loss in investment value is other than temporary. As a result, the Company concluded the asset was impaired and recorded a non-cash impairment charge of $18.2 million during the three months ended June 30, 2026.

Current wording

Given the senior lender's priority position in cash flows generated from the underlying loan portfolios with the Company’s largest borrower (including the impacted loans that were placed in nonaccrual status in June 2024) and the change in collection strategy as well as the senior lender's sole and exclusive authority over defaulted loans, we believe we will not recover the carrying amount of our equity method investments in a liquidation event and we have determined that the loss in investment value is other than temporary. As a result, the Company concluded the asset was impaired and recorded a noncash impairment charge of $18.2 million during the three months ended June 30, 2026. As of September 30, 2026, the Company had no equity method investment balance related to its Specialty Lending segment.

Previous wording

High return on invested capital. We believe we have an opportunity to drive improved auction economics by serving more frequently in the role of principal rather than the lower margin role of broker.

Current wording

High return on invested capital. We believe we have an opportunity to drive improved auction economics by serving more frequently in the role of principal rather than the role of broker.

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. 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. Effective August 1, 2026, David Ludwig transitioned to the role of Senior Advisor to the Company, and Tom Ludwig was appointed President of NLEX, effective January 1, 2026. Tom, who continues to serve as General Counsel, has been with NLEX for 19 years and has previously held roles as Chief Compliance Officer and Senior Vice President of Operations, overseeing multiple facets of the consumer loans business.

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 $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.

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. While lower flow volumes have pressured current fee revenue, we continue to see longer-term growth opportunities 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 DebtX, we provide end-to-end sale and valuation services for performing and non-performing commercial & industrial, commercial real estate, multifamily, and residential real estate loan portfolios. We facilitate the entire loan sale process from portfolio analysis and pricing, deal preparation, deal marketing, trade execution, and closing. We structure each loan sale to achieve optimal results for our clients, which typically includes a combination of highest price, certainty of execution, efficient timing, and data security and privacy.

Current wording

Through DebtX, we provide end-to-end sale and valuation services for performing and non-performing commercial & industrial, commercial real estate, multifamily, and residential real estate loan portfolios. We facilitate the entire loan sale process from portfolio analysis and pricing, deal preparation, deal marketing, trade execution, and closing. We structure each loan sale to achieve optimal results for our clients, which typically includes a combination of highest price, certainty of execution, efficient timing, and data security and privacy. Through Boston Note, we broker the sale and purchase of privately held loans, notes, and mortgages, commonly known as seller notes or carry-back notes.

Previous wording

Acquisitions are accounted for under ASC Topic 805, Business Combinations (“ASC 805”), which requires that assets acquired and liabilities assumed that are deemed to be a business are recorded based on their respective acquisition date fair values. ASC 805 further requires that separately identifiable intangible assets be recorded at their acquisition date fair values and that the excess of consideration paid over the fair value of assets acquired and liabilities assumed (including identifiable intangible assets) should be recorded as goodwill. Effective January 1, 2026 we acquired substantially all of the assets of The Debt Exchange Inc. for approximately $8.5 million. The purchase price allocation was based on an evaluation of the appropriate fair values and represents management's best estimate. See Note 3 to our condensed consolidated financial statements for further detail.

Current wording

Acquisitions are accounted for under ASC Topic 805, Business Combinations (“ASC 805”), which requires that assets acquired and liabilities assumed that are deemed to be a business are recorded based on their respective acquisition date fair values. ASC 805 further requires that separately identifiable intangible assets be recorded at their acquisition date fair values and that the excess of consideration paid over the fair value of assets acquired and liabilities assumed (including identifiable intangible assets) should be recorded as goodwill. Effective January 1, 2026 we acquired substantially all of the assets of The Debt Exchange, Inc. for approximately $8.5 million. The purchase price allocation was based on an evaluation of the appropriate fair values and represents management's best estimate. On July 31, 2026, we acquired substantially all of the assets of Boston Note & Mortgage III, LLC (the “Seller”), a nationwide broker and buyer of privately held loans, notes, and mortgages, commonly known as seller notes or carry-back notes. Following the transaction, Boston Note does business as Boston Note, a Heritage Global company, within our Commercial Loans segment. The total purchase consideration expected to be paid to the Seller is approximately $1.7 million, including $0.7 million of cash paid at closing and $1.0 million of estimated contingent consideration. See Note 3 to our condensed consolidated financial statements for further detail.

Previous 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 six months ended June 30, 2026.

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 nine months ended September 30, 2026.

Previous wording

We had working capital of $9.4 million and $18.1 million as of June 30, 2026 and December 31, 2025, respectively.

Current wording

We had working capital of $8.0 million and $18.1 million as of September 30, 2026 and December 31, 2025, respectively.

Previous wording

Our current assets as of June 30, 2026 decreased to $23.0 million compared to $33.6 million as of December 31, 2025. This change was primarily due to a decrease in cash of $7.3 million, as further discussed below, a decrease in the current portion of notes receivable of $3.7 million primarily due to an increased allowance for credit losses, and a decrease in inventory of $0.4 million, partially offset by an increase in accounts receivable of $0.6 million.

Current wording

Our current assets as of September 30, 2026 decreased to $26.9 million compared to $33.6 million as of December 31, 2025. This change was primarily due to a decrease in cash of $4.9 million, as further discussed below, a decrease in the current portion of notes receivable of $3.5 million primarily due to an increased allowance for credit losses, partially offset by an increase in accounts receivable of $0.9 million, and an increase in inventory of $0.7 million.

Previous wording

Our current liabilities as of June 30, 2026 decreased to $13.6 million compared to $15.5 million as of December 31, 2025. 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 $1.0 million in accounts payable and accrued liabilities.

Current wording

Our current liabilities as of September 30, 2026 increased to $18.9 million compared to $15.5 million as of December 31, 2025. The most significant changes were an increase of $2.0 million in our borrowings under the line of credit and an increase of $1.9 million in payables to sellers due to the timing of certain asset liquidation settlements, partially offset by a decrease of $1.0 million in accounts payable and accrued liabilities.

Previous wording

During the six months ended June 30, 2026, our primary source of cash was cash on hand and principal repayments on outstanding loans. Cash disbursements during the six months ended June 30, 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.

Current wording

During the nine months ended September 30, 2026, our primary sources of cash were cash on hand, cash provided by our operating activities and principal repayments on our outstanding loans. Cash disbursements during the nine months ended September 30, 2026 consisted primarily of approximately $8.5 million cash paid for the acquisition of substantially all of the assets of The Debt Exchange, Inc., cash paid for the acquisition of substantially all of the assets of Boston Note & Mortgage III, LLC, investments in notes receivable, equity method investments, and capital expenditures related to improvements to our new building.

Previous wording

We believe we can fund our operations and our debt service obligations for 12 months from the date of filing this quarterly report and beyond through a combination of working capital, cash flows from our on-going operations and accessing financing from a future credit facility, currently being negotiated with C3bank and expected to be executed in the third quarter of 2026.

Current wording

We believe we can fund our operations and our debt service obligations for 12 months from the date of filing this quarterly report and beyond through a combination of working capital, cash flows from our ongoing operations and availability under the Company's 2026 Credit Facility with C3bank.

Previous wording

As of June 30, 2026 and December 31, 2025, we had stockholders’ equity of $51.9 million and $67.0 million, respectively.

Current wording

As of September 30, 2026 and December 31, 2025, we had stockholders’ equity of $53.1 million and $67.0 million, respectively.

Previous wording

The decrease in stockholders' equity of $15.1 million is mainly due to noncash charges recognized in the second quarter of 2026, in connection with the implementation of the Exit Plan. The noncash charges did not result in any cash expenditures and did not affect the Company’s cash balances or liquidity as of June 30, 2026. Accordingly, the charge is not expected to affect the Company’s ability to fund its ongoing business activities or future operations.

Current wording

The decrease in stockholders' equity of $13.9 million is mainly due to noncash charges recognized in the second quarter of 2026, in connection with the implementation of the Exit Plan. The noncash charges did not result in any cash expenditures and did not affect our cash balances or liquidity as of September 30, 2026. Accordingly, the charges are not expected to affect our ability to fund its ongoing business activities or future operations.

Previous wording

We determine our future capital and operating requirements based upon our current and projected operating performance and contractual commitments. We expect to be able to finance our future operations through a combination of working capital, future net cash flows from operating activities and a new credit facility with C3bank, which we expect to be in place prior to the end of the third quarter of 2026. Our contractual requirements are limited to the outstanding debt and lease commitments with related and unrelated parties. Capital requirements are generally limited to our purchases of surplus and distressed assets and our investment activity under our Specialty Lending segment. We believe that our current capital resources are sufficient for these requirements. In the event additional capital is needed, we believe we can obtain additional debt financing through capital partners.

Current wording

We determine our future capital and operating requirements based upon our current and projected operating performance and contractual commitments. We expect to be able to finance our future operations through a combination of working capital and the 2026 Credit Facility. Our contractual requirements are limited to the outstanding debt and lease commitments with related and unrelated parties. Capital requirements are generally limited to our purchases of surplus and distressed assets. We believe that our current capital resources are sufficient for these requirements. In the event additional capital is needed, we believe we can obtain additional debt financing through capital partners.

Previous wording

Cash and cash equivalents as of June 30, 2026 were $13.2 million as compared to $20.5 million as of December 31, 2025, a decrease of approximately $7.3 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 June 30, 2026 payables to sellers was $6.7 million, resulting in a net cash available balance of $6.5 million compared to available cash of $13.2 million as of December 31, 2025.

Current wording

Cash and cash equivalents as of September 30, 2026 were $15.6 million as compared to $20.5 million as of December 31, 2025, a decrease of approximately $4.9 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 September 30, 2026 payables to sellers was $9.2 million, resulting in a net cash available balance of $6.4 million compared to available cash of $13.2 million as of December 31, 2025.

Previous wording

Cash used in operations was $1.1 million during the six months ended June 30, 2026 as compared to cash provided by operations of $4.5 million during the same period in 2025. The approximate $5.6 million change was attributable to a decrease of $1.9 million in net income adjusted for noncash items and a decrease in operating assets and liabilities of $3.6 million during the six months ended June 30, 2026 as compared to the same period in 2025.

Current wording

Cash provided by operations was $2.3 million during the nine months ended September 30, 2026 as compared to cash provided by operations of $4.6 million during the same period in 2025. The approximate $2.2 million change was primarily attributable to a decrease of $2.1 million in net income adjusted for noncash items and a decrease in operating assets and liabilities of $0.1 million during the nine months ended September 30, 2026 as compared to the same period in 2025.

Previous wording

The changes in operating assets and liabilities during the six months ended June 30, 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.

Current wording

The changes in operating assets and liabilities during the nine months ended September 30, 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 used in investing activities during the six months ended June 30, 2026 was $5.2 million compared to cash used in investing activities of $8.6 million during the same period in 2025.

Current wording

Cash used in investing activities during the nine months ended September 30, 2026 was $8.2 million compared to cash used in investing activities of $8.9 million during the same period in 2025.

Previous wording

Cash used in investing activities during the six months ended June 30, 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 $0.8 million, and investments in notes receivable of $2.0 million. Cash used in investing activities during the six months ended June 30, 2026 was offset by payments received on notes receivable of $3.1 million, return of investment and cash distributions received from equity method investments of $2.2 million, and return of participating interest of $0.7 million.

Current wording

Cash used in investing activities during the nine months ended September 30, 2026 consisted primarily of the purchase price paid for the acquisitions of substantially all of the assets of The Debt Exchange, Inc. and Boston Note & Mortgage III, LLC for a total of $9.2 million, the purchase of property and equipment of $1.5 million, investments in notes receivable of $2.0 million, and investments in equity method investments of $2.0 million. Cash used in investing activities during the nine months ended September 30, 2026 was offset by payments received on notes receivable of $3.6 million, return of investment and cash distributions received from equity method investments of $2.2 million, and return of participating interest of $0.7 million.

Previous wording

Cash used in investing activities during the six months ended June 30, 2025 consisted primarily of purchase of property and equipment of $7.6 million, investments in notes receivable of $3.0 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 six months ended June 30, 2025 was offset by payments received on notes receivable of $3.9 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 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.

Previous wording

Cash used in financing activities was approximately $1.0 million during the six months ended June 30, 2026 compared to cash provided by financing activities of $2.2 million during the six months ended June 30, 2025. Financing activities during the six months ended June 30, 2026 consisted primarily of repayments of secured borrowing of $0.8 million and $0.3 million in repurchases of our common stock. Financing activities during the six months ended June 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.

Current wording

Cash provided by financing activities was approximately $0.9 million during the nine months ended September 30, 2026 compared to cash provided by financing activities of $2.0 million during the nine months ended September 30, 2025. Financing activities during the nine months ended September 30, 2026 consisted primarily of proceeds from debt payable to third parties of $3.0 million, offset by repayments of debt payable to third parties of $1.0 million, repayments of secured borrowing of $0.8 million and repurchases of our common stock of $0.3 million. 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.

Previous wording

The following table sets out the Company’s condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands).

Current wording

The following table sets out the Company’s condensed consolidated results of operations for the three and nine months ended September 30, 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 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.

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 our charged-off receivables and loan sale brokerage services, (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, 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.

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 and Boston Note, provides loan sale advisement and valuation services. The Specialty Lending segment, through HGC, has historically provided specialty financing solutions to investors in charged-off and nonperforming asset portfolios. On July 30, 2026, the Board authorized the Exit Plan to wind down the Company’s Specialty Lending segment. Refer to Note 1 – Basis of Presentation for additional information.

Previous wording

Notwithstanding the foregoing, the reported segment operating income for ALT and HGC represents incremental costs for managing these segments as part of their sister segments (HGP for ALT and NLEX for HGC). As such, the reported operating income for ALT and HGC does not represent their true standalone contribution, as we do not attempt to allocate existing fixed divisional overhead costs of the sister divisions to the newer segments. Similarly, corporate overhead cost is not allocated to the operating divisions for management reporting purposes. Further, we do not utilize segmented asset information to evaluate the performance of our reportable segments and do not include intercompany transfers between segments for management reporting purposes.

Current wording

Notwithstanding the foregoing, the reported segment operating income for ALT, BioSurplus and HGC represents incremental costs for managing these segments as part of their sister segments (HGP for ALT and BioSurplus, and NLEX for HGC). As such, the reported operating income for ALT and HGC does not represent their true standalone contribution, as we do not attempt to allocate existing fixed divisional overhead costs of the sister divisions to the newer segments. Similarly, corporate overhead cost is not allocated to the operating divisions for management reporting purposes. Further, we do not utilize segmented asset information to evaluate the performance of our reportable segments and do not include intercompany transfers between segments for management reporting purposes.

Previous wording

The following tables set forth certain financial information for the Company's reportable segments for the six month periods ended June 30, 2026 and 2025 (in thousands):

Current wording

The following tables set forth certain financial information for the Company's reportable segments for the nine month periods ended September 30, 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 June 30, 2026, the total amount of gross profit allocated to ALT from HGP was not material, as compared to the total amount of gross profit allocated to ALT during the same period of 2025 of approximately $0.4 million. During the six months ended June 30, 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 $0.6 million.

Current wording

[1] Within the Company’s Industrial Assets division, management allocates gross profit resulting from certain auctions from Auction 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, 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 $0.5 million. During the nine months ended September 30, 2026, the total amount of gross profit allocated to ALT from HGP was approximately $0.2 million, as compared to the total amount of gross profit allocated to ALT during the same period of 2025 of approximately $1.1 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. No interest expense has been allocated to operating segments during the three or six months ended June 30, 2026 and 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 or nine months ended September 30, 2026 and 2025.

Previous wording

Revenues and cost of revenues –Revenues were $12.3 million during the three months ended June 30, 2026 compared to $14.3 million during the same period in 2025. Costs of services revenue and asset sales were $3.9 million during the three months ended June 30, 2026 compared to $5.9 million during the three months ended June 30, 2025. The gross profit of these items was $8.3 million during the three months ended June 30, 2026 compared to $8.4 million during the same period in 2025, a decrease of approximately $0.1 million, or approximately 1%. The decrease in gross profit in the second quarter of 2026 compared to the second quarter of 2025 is primarily due to a decrease in gross profit generated by our consumer loans segment and normal changes in the timing and magnitude of transactions, offset by the inclusion of gross profit from DebtX beginning in the first quarter of 2026.

Current wording

Revenues and cost of revenues –Revenues were $14.6 million during the three months ended September 30, 2026 compared to $11.4 million during the same period in 2025. Costs of services revenue and asset sales were $5.4 million during the three months ended September 30, 2026 compared to $4.1 million during the three months ended September 30, 2025. The gross profit of these items was $9.2 million during the three months ended September 30, 2026 compared to $7.3 million during the same period in 2025, an increase of approximately $1.9 million, or approximately 26%. The increase in gross profit in the third quarter of 2026 compared to the third quarter of 2025 is primarily due to an increase in gross profit generated from DebtX and Boston Note beginning in January and August of 2026, respectively, as well as improved auction activity.

Previous wording

Selling, general and administrative expense –Selling, general and administrative expense was $10.8 million during the three months ended June 30, 2026 compared to $6.1 million during the same period in 2025.

Current wording

Selling, general and administrative expense –Selling, general and administrative expense was $8.0 million during the three months ended September 30, 2026 compared to $6.0 million during the same period in 2025.

Previous wording

Selling, general and administrative expense during the six months ended June 30, 2026 increased by approximately $5.8 million compared to the selling, general and administrative expense during same period of 2025. The increase in selling, general and administrative expense during the six months ended June 30, 2026 was primarily due to the increased allowance for credit losses on notes receivable and the acquisition of substantially all of the assets of The Debt Exchange, Inc.

Current wording

Selling, general and administrative expense during the three months ended September 30, 2026 increased by approximately $2.0 million compared to the selling, general and administrative expense during the same period of 2025. The increase in selling, general and administrative expense during the three months ended September 30, 2026 was primarily due to the inclusion of the operations of DebtX and Boston Note beginning in January and August of 2026, respectively, and an increase in commissions related to increased auction activity.

Previous wording

Revenues and cost of revenues –Revenues were $25.0 million during the six months ended June 30, 2026 compared to $27.8 million during the same period in 2025. Costs of services revenue and asset sales were $8.4 million during the six months ended June 30, 2026 compared to $11.3 million during the same period in 2025. The gross profit of these items was $16.6 million during the six months ended June 30, 2026 compared to $16.4 million during the same period in 2025, an increase of approximately $0.2 million, or approximately 1%. The increase in gross profit during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 is primarily due to the inclusion of gross profit from DebtX beginning in 2026, offset by to normal changes in the timing and magnitude of asset liquidation transactions and a decrease in gross profit generated by our consumer loans segment.

Current wording

Revenues and cost of revenues –Revenues were $39.6 million during the nine months ended September 30, 2026 compared to $39.1 million during the same period in 2025. Costs of services revenue and asset sales were $13.7 million during the nine months ended September 30, 2026 compared to $15.4 million during the same period in 2025. The gross profit of these items was $25.9 million during the nine months ended September 30, 2026 compared to $23.7 million during the same period in 2025, an increase of approximately $2.2 million, or approximately 9%. The increase in gross profit during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 is primarily due to the inclusion of gross profit generated from DebtX and Boston Note beginning in January and August of 2026, respectively, offset by normal changes in the timing and magnitude of asset liquidation transactions and a decrease in gross profit generated by our consumer loans segment.

Previous wording

Selling, general and administrative expense –Selling, general and administrative expense was $18.5 million during the six months ended June 30, 2026 compared to $12.7 million during the same period of 2025.

Current wording

Selling, general and administrative expense –Selling, general and administrative expense was $26.4 million during the nine months ended September 30, 2026 compared to $18.6 million during the same period of 2025.

Previous wording

Significant components of selling, general and administrative expense for the six months ended June 30, 2026 and 2025 are shown below (in thousands):

Current wording

Significant components of selling, general and administrative expense for the nine months ended September 30, 2026 and 2025 are shown below (in thousands):