v3.26.1
Business Combinations
 6 Months Ended
Jun. 30, 2026
Business Combination [Abstract]  
Business Combinations

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 Heritage Global, Inc., 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. The total purchase consideration paid to The Debt Exchange, Inc. was approximately $8.5 million, consisting of cash paid at closing and amounts placed into escrow.

The Company has determined the transaction to be a business combination in accordance with ASC 805 Business Combinations. Accordingly, the assets acquired and liabilities assumed in the transaction were recorded at their estimated acquisition fair values, while transaction costs associated with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805. The Company’s purchase price allocation was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. Fair values are determined based on the requirements of ASC Topic 820, Fair Value Measurement (“ASC 820”).

The following table summarizes the allocation of the purchase consideration to the estimated fair values of assets acquired and liabilities assumed as of the Acquisition Date (in thousands):

Other current assets

 

$

67

 

Property and equipment

 

 

38

 

Intangible assets

 

 

3,060

 

Goodwill

 

 

5,301

 

Other current liabilities

 

 

(6

)

Purchase price

 

$

8,460

 

The $3.1 million of intangible assets are attributable to $1.3 million of customer relationships which will be amortized over a useful life of 15 years, $1.8 million for the DebtX trade name which has an indefinite useful life, and approximately $26,000 of non-compete agreements which will be amortized over one year.

The excess of the consideration transferred over the fair values of assets acquired and liabilities assumed was recorded as goodwill, which was primarily attributed to increased synergies that are expected to be achieved from the acquisition. Goodwill is expected to be deductible for income tax purposes.

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. For the six months ended June 30, 2026, DebtX contributed revenue of $2.4 million and net loss of $0.5 million to the Company's consolidated results.

For the year ended December 31, 2025, The Debt Exchange, Inc. reported, on a standalone basis, revenues of approximately $6.6 million and operating income of approximately $0.8 million. As the acquisition was effective on January 1, 2026, these unaudited results were not included in the Company’s consolidated results of operations for the year ended December 31, 2025.

The Company incurred acquisition-related costs of $0.3 million that consisted primarily of legal and advisory services. These costs are included in selling, general and administrative expenses for the year ended December 31, 2025.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information presented in the table below (in thousands) is provided for illustrative purposes only and summarizes the combined results of operations of the Company and DebtX for the three and six months ended June 30, 2026 and 2025. For purposes of this pro forma presentation, the acquisition of substantially all of the assets of The Debt Exchange, Inc. is assumed to have occurred on January 1, 2025. The pro forma financial information for all periods presented also includes the estimated business combination accounting effects resulting from this acquisition, notably amortization expense from the acquired intangible assets and certain other integration related impacts.

This unaudited pro forma financial information should not be relied upon as being indicative of the historical results that would have been obtained if the acquisition had actually occurred on January 1, 2025, and are not intended to be a projection of future trends or results.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

 

 

 

 

(pro forma)

 

 

 

 

 

(pro forma)

 

Pro forma revenues

 

$

12,265

 

 

$

17,521

 

 

$

24,990

 

 

$

31,949

 

Pro forma operating (loss) income

 

$

(20,911

)

 

$

3,519

 

 

$

(19,903

)

 

$

4,426

 

Pro forma net (loss) income

 

$

(15,888

)

 

$

2,576

 

 

$

(15,171

)

 

$

3,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income per share - basic

 

$

(0.46

)

 

$

0.07

 

 

$

(0.44

)

 

$

0.09

 

Pro forma net income per share - diluted

 

$

(0.46

)

 

$

0.07

 

 

$

(0.44

)

 

$

0.09

 

The pro forma financial information for all periods presented also includes the estimated business combination accounting effects resulting from this acquisition, notably amortization expense from the acquired intangible assets and certain other integration related impacts.