Note 3 – Business Combinations

The Company has determined the following transactions to be business combinations in accordance with ASC 805 Business Combinations. Accordingly, the assets acquired and liabilities assumed in the transactions were recorded at their estimated acquisition fair values, while transaction costs associated with the acquisitions were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805. The Company’s purchase price allocations were based on an evaluation of the appropriate fair values and represent 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”).

DebtX

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 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 $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 noncompete 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 DebtX Acquisition Date and have been reported as the Commercial Loans segment within the Company's Financial Assets Division. For the nine months ended September 30, 2026, DebtX contributed revenue of $3.3 million and net loss of $1.0 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 nine months ended September 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.

Boston Note

Effective July 31, 2026 (the “Boston Note Acquisition Date”) HG Boston Note LLC (“Boston Note”), a wholly owned subsidiary of Heritage Global, Inc., completed the acquisition of 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. The acquisition allows the Company's Financial Assets Division to enter additional financial asset classes and distribution channels. 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.

The purchase agreement provides for additional cash payments of up to $1.3 million in aggregate if Boston Note achieves specified net operating income milestones over the three years following the acquisition. The purchase agreement also provides for additional payments equal to 15% of Boston Note’s net operating income in excess of $0.5 million for each milestone period. The contingent consideration is not contingent on the continued employment of the sellers. The undiscounted amount the Company could be required to pay ranges from zero to $1.3 million, plus additional amounts under the excess net operating income provision, which is not subject to a maximum. The Company recognized the acquisition-date fair value of the contingent consideration of $0.6 million and $0.4 million within other current liabilities and other non-current liabilities, respectively.

The liability is remeasured to fair value at each reporting date, and changes are recognized in interest and other (expense) income, net. As of September 30, 2026, the fair value of the contingent consideration was $0.6 million and $0.4 million recorded within other current liabilities and other non-current liabilities, respectively. The Company recognized an increase in the fair value of less than $0.1 million during the three months ended September 30, 2026 since the Boston Note Acquisition Date which solely reflects the passage of time.

The fair value of the contingent consideration liability was estimated using a combination of Monte Carlo simulation and probability-weighted expected payment models. The resulting payments are discounted to present value using a risk-adjusted discount rate. Significant unobservable inputs include projected net operating income, net operating income volatility of 30% to 38%, and a risk-adjusted discount rate of 12%. Because these inputs are not observable in the market, the liability is classified within Level 3 of the fair value hierarchy. An increase in projected net operating income or volatility would generally increase the fair value of the liability, while an increase in the discount rate would decrease it.

The identifiable intangible asset acquired consists of the Boston Note trade name, which the Company expects to continue using following the acquisition. The Company determined that the trade name has an indefinite useful life, as there are no legal, regulatory, contractual, competitive, economic or other factors expected to limit the period over which it will contribute to the Company’s cash flows. Accordingly, the trade name is not amortized and will be tested for impairment annually, or more frequently if events or changes in circumstances indicate that it may be impaired.

The excess of the consideration transferred over the fair values of assets acquired 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 purchase price allocation is preliminary and subject to change during the measurement period, primarily for the valuation of the trade name and contingent consideration.

The financial results of Boston Note have been included in the Company's consolidated financial statements since the Boston Note Acquisition Date and have been reported within the Commercial Loans segment within the Company's Financial Assets Division. For the two months ended September 30, 2026, Boston Note contributed revenue of $0.4 million and net income of $0.3 million to the Company's consolidated results.

Pro forma results of operations have not been presented because the historical results of operations of the acquired business were not material to the Company’s consolidated results of operations.

The Company incurred acquisition-related costs of $0.1 million that consisted primarily of legal and advisory services. These costs are included in selling, general and administrative expenses during the three months ended September 30, 2026.