Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 01, 2019 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | HGBL | |
Entity Registrant Name | Heritage Global Inc. | |
Entity Central Index Key | 0000849145 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Interactive Data Current | Yes | |
Document Transition Report | false | |
Title of 12(b) Security | Common stock, $0.01 par value | |
Entity Incorporation, State or Country Code | FL | |
Document Quarterly Report | true | |
Entity Common Stock, Shares Outstanding | 29,253,278 | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity File Number | 0-17973 | |
Entity Tax Identification Number | 59-2291344 | |
Entity Address, Address Line One | 12625 High Bluff Drive | |
Entity Address, Address Line Two | Suite 305 | |
Entity Address, City or Town | San Diego | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92130 | |
City Area Code | 858 | |
Local Phone Number | 847-0656 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 3,901 | $ 4,268 |
Accounts receivable | 1,722 | 400 |
Inventory – equipment | 230 | 2,405 |
Other current assets | 1,463 | 607 |
Total current assets | 7,316 | 7,680 |
Property and equipment, net | 196 | 175 |
Equity method investments | 4,338 | 2,767 |
Right-of-use assets | 865 | |
Identifiable intangible assets, net | 3,451 | 3,627 |
Goodwill | 6,158 | 6,158 |
Other assets | 224 | 224 |
Total assets | 22,548 | 20,631 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 9,273 | 8,101 |
Current portion of debt | 432 | 1,178 |
Current portion of lease liabilities | 477 | |
Other current liabilities | 79 | 892 |
Total current liabilities | 10,261 | 10,171 |
Non-current portion of debt | 138 | 438 |
Non-current portion of lease liabilities | 433 | |
Other non-current liabilities | 1,838 | |
Deferred tax liabilities | 584 | 584 |
Total liabilities | 11,416 | 13,031 |
Stockholders’ equity: | ||
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 569 Class N shares at September 30, 2019 and December 31, 2018 | 6 | 6 |
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 29,253,278 shares at September 30, 2019 and December 31, 2018 | 293 | 293 |
Additional paid-in capital | 284,961 | 284,751 |
Accumulated deficit | (274,051) | (277,373) |
Accumulated other comprehensive loss | (77) | (77) |
Total stockholders’ equity | 11,132 | 7,600 |
Total liabilities and stockholders’ equity | $ 22,548 | $ 20,631 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement Of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 10 | $ 10 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 569 | 569 |
Preferred stock, shares outstanding | 569 | 569 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common Stock, Shares, Issued | 29,253,278 | 29,253,278 |
Common stock, shares outstanding | 29,253,278 | 29,253,278 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues: | ||||
Total revenues | $ 6,622 | $ 5,128 | $ 20,597 | $ 17,758 |
Operating costs and expenses: | ||||
Selling, general and administrative | 3,928 | 3,734 | 11,551 | 11,315 |
Depreciation and amortization | 74 | 79 | 226 | 239 |
Total operating costs and expenses | 5,363 | 4,712 | 18,378 | 14,307 |
Earnings of equity method investments | 8 | 1,277 | 0 | |
Operating income | 1,267 | 416 | 3,496 | 3,451 |
Fair value adjustment of contingent consideration | 0 | 157 | ||
Interest and other expense, net | (12) | (47) | (57) | (201) |
Income before income tax expense | 1,255 | 369 | 3,439 | 3,407 |
Income tax expense | 39 | 117 | 64 | |
Net income | $ 1,216 | $ 369 | $ 3,322 | $ 3,343 |
Weighted average common shares outstanding – basic | 28,653,278 | 28,653,278 | 28,653,278 | 28,557,517 |
Weighted average common shares outstanding – diluted | 29,352,812 | 28,823,918 | 28,911,488 | 28,902,499 |
Net income per share – basic | $ 0.04 | $ 0.01 | $ 0.12 | $ 0.12 |
Net income per share – diluted | $ 0.04 | $ 0.01 | $ 0.11 | $ 0.12 |
Comprehensive income: | ||||
Net income | $ 1,216 | $ 369 | $ 3,322 | $ 3,343 |
Other comprehensive income: | ||||
Foreign currency translation adjustment | (6) | (2) | ||
Comprehensive income | 1,216 | 363 | 3,322 | 3,341 |
Services Revenue [Member] | ||||
Revenues: | ||||
Total revenues | 5,207 | 4,897 | 14,950 | 16,407 |
Operating costs and expenses: | ||||
Cost of services revenue and assets sales | 435 | 710 | 2,649 | 2,001 |
Asset Sales [Member] | ||||
Revenues: | ||||
Total revenues | 1,415 | 231 | 5,647 | 1,351 |
Operating costs and expenses: | ||||
Cost of services revenue and assets sales | $ 926 | $ 189 | $ 3,952 | $ 752 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Accumulated Other Comprehensive Loss [Member] |
Beginning Balance at Dec. 31, 2017 | $ 3,488 | $ 6 | $ 285 | $ 284,396 | $ (281,124) | $ (75) |
Balance (in shares) at Dec. 31, 2017 | 569 | 28,480,148 | ||||
Stock-based compensation expense | 61 | 61 | ||||
Net income | 1,289 | 1,289 | ||||
Ending Balance at Mar. 31, 2018 | 4,838 | $ 6 | $ 285 | 284,457 | (279,835) | (75) |
Balance (in shares) at Mar. 31, 2018 | 569 | 28,480,148 | ||||
Beginning Balance at Dec. 31, 2017 | 3,488 | $ 6 | $ 285 | 284,396 | (281,124) | (75) |
Balance (in shares) at Dec. 31, 2017 | 569 | 28,480,148 | ||||
Net income | 3,343 | |||||
Foreign currency translation adjustment | (2) | |||||
Ending Balance at Sep. 30, 2018 | 7,122 | $ 6 | $ 293 | 284,681 | (277,781) | (77) |
Balance (in shares) at Sep. 30, 2018 | 569 | 29,253,278 | ||||
Beginning Balance at Mar. 31, 2018 | 4,838 | $ 6 | $ 285 | 284,457 | (279,835) | (75) |
Balance (in shares) at Mar. 31, 2018 | 569 | 28,480,148 | ||||
Stock-based compensation expense | 85 | 85 | ||||
Issuance of restricted common stock | $ 6 | (6) | ||||
Issuance of restricted common stock, shares | 600,000 | |||||
Issuance of common stock from exercise of stock options | 74 | $ 2 | 72 | |||
Issuance of common stock from exercise of stock options, shares | 173,130 | |||||
Net income | 1,685 | 1,685 | ||||
Foreign currency translation adjustment | 4 | 4 | ||||
Ending Balance at Jun. 30, 2018 | 6,686 | $ 6 | $ 293 | 284,608 | (278,150) | (71) |
Balance (in shares) at Jun. 30, 2018 | 569 | 29,253,278 | ||||
Stock-based compensation expense | 73 | 73 | ||||
Net income | 369 | 369 | ||||
Foreign currency translation adjustment | (6) | (6) | ||||
Ending Balance at Sep. 30, 2018 | 7,122 | $ 6 | $ 293 | 284,681 | (277,781) | (77) |
Balance (in shares) at Sep. 30, 2018 | 569 | 29,253,278 | ||||
Beginning Balance at Dec. 31, 2018 | 7,600 | $ 6 | $ 293 | 284,751 | (277,373) | (77) |
Balance (in shares) at Dec. 31, 2018 | 569 | 29,253,278 | ||||
Stock-based compensation expense | 71 | 71 | ||||
Net income | 612 | 612 | ||||
Ending Balance at Mar. 31, 2019 | 8,283 | $ 6 | $ 293 | 284,822 | (276,761) | (77) |
Balance (in shares) at Mar. 31, 2019 | 569 | 29,253,278 | ||||
Beginning Balance at Dec. 31, 2018 | 7,600 | $ 6 | $ 293 | 284,751 | (277,373) | (77) |
Balance (in shares) at Dec. 31, 2018 | 569 | 29,253,278 | ||||
Net income | 3,322 | |||||
Ending Balance at Sep. 30, 2019 | 11,132 | $ 6 | $ 293 | 284,961 | (274,051) | (77) |
Balance (in shares) at Sep. 30, 2019 | 569 | 29,253,278 | ||||
Beginning Balance at Mar. 31, 2019 | 8,283 | $ 6 | $ 293 | 284,822 | (276,761) | (77) |
Balance (in shares) at Mar. 31, 2019 | 569 | 29,253,278 | ||||
Stock-based compensation expense | 76 | 76 | ||||
Net income | 1,494 | 1,494 | ||||
Ending Balance at Jun. 30, 2019 | 9,853 | $ 6 | $ 293 | 284,898 | (275,267) | (77) |
Balance (in shares) at Jun. 30, 2019 | 569 | 29,253,278 | ||||
Stock-based compensation expense | 63 | 63 | ||||
Net income | 1,216 | 1,216 | ||||
Ending Balance at Sep. 30, 2019 | $ 11,132 | $ 6 | $ 293 | $ 284,961 | $ (274,051) | $ (77) |
Balance (in shares) at Sep. 30, 2019 | 569 | 29,253,278 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows provided by operating activities: | ||
Net income | $ 3,322 | $ 3,343 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Fair value adjustment of contingent consideration | 0 | (157) |
Stock-based compensation expense | 210 | 219 |
Noncash lease expense | 356 | 0 |
Depreciation and amortization | 226 | 239 |
Earnings of equity method investments | (1,277) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,322) | (336) |
Inventory | 2,175 | 56 |
Other assets | (856) | (337) |
Lease liabilities | (374) | 0 |
Accounts payable and accrued liabilities | (1,413) | 1,345 |
Net cash provided by operating activities | 1,047 | 4,372 |
Cash flows used in investing activities: | ||
Purchase of property and equipment | (73) | (85) |
Investment in equity method investments | (566) | 0 |
Cash distributions from equity method investments | 271 | 0 |
Net cash used in investing activities | (368) | (85) |
Cash flows used in financing activities: | ||
Proceeds from debt payable to third party | 500 | 0 |
Repayment of debt payable to third party | (1,546) | (235) |
Payment of contingent consideration | 0 | (2,617) |
Repayment of debt payable to related party | 0 | (390) |
Proceeds from exercise of options to purchase common shares | 0 | 74 |
Net cash used in financing activities | (1,046) | (3,168) |
Net (decrease) increase in cash and cash equivalents | (367) | 1,119 |
Cash and cash equivalents at beginning of period | 4,268 | 2,109 |
Cash and cash equivalents at end of period | 3,901 | 3,228 |
Supplemental cash flow information: | ||
Cash paid for taxes | 248 | 86 |
Cash paid for interest | 47 | 92 |
Noncash change in right-of-use assets | 1,220 | 0 |
Noncash change in deferred rent | (64) | 0 |
Noncash change in lease liabilities | $ 1,284 | $ 0 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation | Note 1 –Basis of Presentation These unaudited condensed consolidated interim financial statements include the accounts of Heritage Global Inc. (“HGI”) together with its subsidiaries, including Heritage Global Partners, Inc. (“HGP”), Heritage Global LLC (“HG LLC”), Equity Partners HG LLC (“Equity Partners”) and National Loan Exchange, Inc. (“NLEX”). These entities, collectively, are referred to as the “Company” in these financial statements. The Company’s unaudited condensed consolidated interim financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), as outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), and include the assets, liabilities, revenues, and expenses of all subsidiaries over which HGI exercises control. All significant intercompany accounts and transactions have been eliminated upon consolidation. The Company’s sole operating segment is its asset liquidation business. The Company provides an array of value-added capital and financial asset solutions: auction and appraisal services, traditional asset disposition sales, and financial solutions for businesses and properties in transition. The Company has prepared the condensed consolidated interim financial statements included herein pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In the opinion of management, these financial statements reflect all adjustments that are necessary to present fairly the results for the interim periods included herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are appropriate. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 11, 2019 (the “Form 10-K”). The results of operations for the nine month period ended September 30, 2019 are not necessarily indicative of those operating results to be expected for any subsequent interim period or for the entire year ending December 31, 2019. The accompanying condensed consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated balance sheet at December 31, 2018, contained in the Company’s Form 10-K. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates include the assessment of collectability of revenue recognized, and the valuation of accounts receivable, inventory, other assets, right-of-use assets, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities, and stock-based compensation. These estimates have the potential to significantly impact the Company’s consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature. Foreign Currency The functional currency of foreign operations is deemed to be the local country’s currency. Assets and liabilities of operations outside of the United States are generally translated into U.S. dollars, and the effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income. Reclassifications Certain prior year balances within the condensed consolidated financial statements have been reclassified to conform to the current year presentation. Revenue Recognition Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions and providing merger and acquisition advisory services. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. Revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities. All services and asset sales revenue from contracts with customers is considered to be one reporting segment – the asset liquidation business. Although the Company provides various services within the asset liquidation business, it does not disaggregate revenue streams further than that in its statement of income, services revenue and asset sales. Generally, revenue is recognized in the asset liquidation business at the point in time in which the performance obligation has been satisfied and full consideration is received. The exception to recognition at a point in time occurs when certain contracts provide for advance payments recognized over a period of time. Services revenue recognized over a period of time is not material in comparison to total revenues (1% of total revenues for the nine month period ended September 30, 2019) and, therefore, not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability.” As of September 30, 2019, the deferred revenue balance was approximately $79,000. The Company records receivables in certain situations based on timing of payments for asset liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations. To the extent the transaction price includes variable consideration subsequent to the Company satisfying its performance obligations and beyond the Company’s control, such as contingent obligations between the buyer and seller of auctioned assets, we apply judgment in determining the amount of revenue to record based on the contingent nature of the transaction and the probability of possible outcomes. We evaluate the effect of circumstances of each transaction based on our historical and projected experience with similar customer contracts. We evaluate revenue from asset liquidation transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. We have determined that we act as an agent for our fee based asset liquidation transactions, and, therefore, we report the revenue from transactions in which we act as an agent on a net basis. The Company also earns asset liquidation income through asset liquidation transactions that involve the Company acting jointly with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, the Company does not record asset liquidation revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company. Leases The Company is obligated to make future payments under existing lease agreements which (1) specifically identify the asset, and (2) convey the right to control the use of the identified asset in exchange for consideration for a period of time. The Company determines whether a contract is a lease at the inception of the arrangement. We evaluate leasing arrangements in accordance with the accounting guidance to determine whether the contract is operating or financing in nature. Leases with an initial term of 12 months or less, or under predefined thresholds, are not recorded on the condensed consolidated balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term. The critical accounting policies used in the preparation of the Company’s audited consolidated financial statements are discussed in the Form 10-K. There have been no changes to these policies in the nine months ended September 30, 2019, except for the changes to lease accounting standards noted below. Recent Accounting Pronouncements In 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases In 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation In 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock-based Compensation | Note 3 – Stock-based Compensation Options At September 30, 2019 the Company had four stock-based compensation plans, which are described more fully in Note 15 to the audited consolidated financial statements for the year ended December 31, 2018, contained in the Company’s Form 10-K. During the nine months ended September 30, 2019, the Company issued options to purchase 345,350 shares of common stock to the Company’s employees and options to purchase 60,000 shares of common stock to the Company’s non-employee directors as part of their annual compensation. During the same period, the Company cancelled options to purchase 1,233,900 shares of common stock as a result of employee resignations and natural expiration. The following summarizes the changes in common stock options for the nine months ended September 30, 2019: Options Weighted Average Exercise Price Outstanding at December 31, 2018 4,303,900 $ 0.75 Granted 405,350 $ 0.67 Expired (765,000 ) $ 2.00 Forfeited (468,900 ) $ 0.63 Outstanding at September 30, 2019 3,475,350 $ 0.49 Options exercisable at September 30, 2019 1,983,375 $ 0.49 The Company recognized stock-based compensation expense related to stock options of $0.2 million for the nine months ended September 30, 2019. As of September 30, 2019, there is approximately $0.5 million of unrecognized stock-based compensation expense related to unvested option awards outstanding, which is expected to be recognized over a weighted average period of 2.2 years. Restricted Stock Restricted stock awards represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of restricted stock awards or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Compensation cost for these awards is based on the fair value on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period. On June 1, 2018, the Company granted 600,000 shares of Company restricted common stock in connection with the Addendum to the Employment Agreements of David Ludwig and Tom Ludwig. The shares are subject to certain restrictions on transfer and a right of repurchase over five years, ending May 31, 2023, and require a continued term of service to the Company. Stock-based compensation expense related to the restricted stock awards, calculated by using the grant date fair value of $0.43 per share, was $12,900 for the nine months ended September 30, 2019. The unrecognized stock-based compensation expense as of September 30, 2019 was approximately $0.2 million. Warrants On March 19, 2019, the Company entered into a Warrant Agreement (the “Warrant Agreement”) with Napier Park Industrial Asset Acquisition LP, a Delaware limited partnership (“Napier Park”). Pursuant to the Warrant Agreement, Napier Park is entitled to receive warrants to acquire shares of Company common stock with a fair market value of $71,368 for each $500,000 increment in excess of $2.5 million of Cumulative Gross Profit (as defined in the Warrant Agreement) to which the Company may become entitled in connection with its equity joint venture with Napier Park, achieved prior to December 19, 2022. During the nine months ended September 30, 2019, Napier Park did not receive any warrants. |
Lessor Arrangement
Lessor Arrangement | 9 Months Ended |
Sep. 30, 2019 | |
Lessor Disclosure [Abstract] | |
Lessor Arrangement | Note 4 – Lessor Arrangement On June 27, 2019, the Company, with certain partners, entered into agreements to lease, with a purchase option, a fully functional manufacturing building, including all machinery and equipment held within. The assets under lease relate to the Company’s purchase, with certain partners, of a pharmaceutical campus in Huntsville, Alabama, which was finalized in the fourth quarter of 2018, as disclosed in the Company’s Form 10-K. The lessee is obligated to make monthly lease payments over a ten year period, totaling approximately $13.2 million for the real estate portion, and monthly lease payments over a six year period totaling approximately $9.7 million for the machinery and equipment. The purchase option for both the real estate and machinery and equipment can be exercised at any time on or after December 1, 2019 and before May 31, 2021 for a total purchase price of $20.0 million; of which $12.0 million and $8.0 million are allocated to the real estate and machinery and equipment, respectively. The lessor arrangement is classified as a sales-type lease, and, therefore, the present value of future lease payments has been recognized as revenue and a lease receivable as of the effective date. The real estate portion of the arrangement is held by CPFH LLC, the joint venture, and is accounted for under the equity method where the Company’s share in earnings from equity method investments is shown in one line item on the income statement. Refer to Note 5 for further information. The machinery and equipment portion of the arrangement is jointly owned by all the partners of CPFH LLC, apart from the joint venture entity. Therefore, the Company has derecognized the leased asset of approximately $0.9 million and recognized as revenue approximately $1.2 million, which represents the present value of future lease payments and a lease receivable included in the accounts receivable line item on the balance sheet, consistent and reflective of its business model for asset sales. The Company expects to recognize approximately $0.5 million in interest income prior to the exercise of the purchase option, which is the difference between the present value (at a 5.50% discount rate) and the undiscounted lease payments. |
Equity Method Investments
Equity Method Investments | 9 Months Ended |
Sep. 30, 2019 | |
Equity Method Investments And Joint Ventures [Abstract] | |
Equity Method Investments | Note 5 – Equity Method Investments On November 14, 2018, CPFH LLC was formed to purchase certain real estate assets among partners in a Joint Venture. The Company’s share of the Joint Venture is 25%. The table below details CPFH LLC’s revenues and net income during the nine months ended September 30, 2019 and 2018 (in thousands): 2019 2018 Revenues $ 11,106 $ — Net income $ 5,068 $ — The table below details the summarized components of assets and liabilities of CPFH LLC as of September 30, 2019 and December 31, 2018 (in thousands): 2019 2018 Assets $ 18,824 $ 11,180 Liabilities $ 671 $ 168 |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 6 – Earnings Per Share The Company is required in periods in which it has net income to calculate basic earnings per share (“basic EPS”) using the two-class method. The two-class method is required because the Company’s Class N preferred shares, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares. In periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method is not used in periods in which the Company has a net loss because the preferred stock does not participate in losses. Stock options and other potential common shares are included in the calculation of diluted earnings per share (“diluted EPS”), since they are assumed to be exercised or converted, except when their effect would be anti-dilutive. The table below shows the calculation of the shares used in computing diluted EPS. Three Months Ended September 30, Nine Months Ended September 30, Weighted Average Shares Calculation: 2019 2018 2019 2018 Basic weighted average shares outstanding 28,653,278 28,653,278 28,653,278 28,557,517 Treasury stock effect of common stock options and restricted stock awards 699,534 170,640 258,210 344,982 Diluted weighted average common shares outstanding 29,352,812 28,823,918 28,911,488 28,902,499 For the nine months ended September 30, 2019 and 2018 there were potential common shares totaling approximately 0.4 million and 1.0 million, respectively, that were excluded from the computation of diluted EPS as the inclusion of such shares would have been anti-dilutive. For the three months ended September 30, 2019 and 2018 there were potential common shares totaling approximately 20,000 and 1.0 million, respectively, that were excluded. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leases | Note 7 – Leases The Company leases office and warehouse space primarily in three locations: Del Mar, CA; Burlingame, CA; and Edwardsville, IL. As each contract does not meet any of the four criteria of ASC 842 for financing lease classification, the Company has determined that each lease arrangement should be classified as an operating lease. The right-of-use assets and lease liabilities for each location are as follows (in thousands): September 30, Right-of-use assets: 2019 Del Mar, CA $ 34 Burlingame, CA 464 Edwardsville, IL 367 $ 865 September 30, Lease liabilities: 2019 Del Mar, CA $ 38 Burlingame, CA 504 Edwardsville, IL 368 $ 910 The Company’s leases generally do not provide an implicit rate, and, therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used its incremental borrowing rate as of January 1, 2019 for operating leases that commenced prior to that date. As of January 1, 2019, the Company’s incremental borrowing rate was 5.25%. Lease expense for these leases is recognized on a straight-line basis over the lease term. For the nine month periods ended September 30, 2019 and 2018, lease expense was approximately $0.4 million and $0.2 million, respectively. Undiscounted future minimum lease commitments as of September 30, 2019 that have initial or remaining lease terms in excess of one year are as follows (in thousands): 2019 $ 141 2020 449 2021 223 2022 110 2023 46 Total undiscounted future minimum lease payments 969 Less imputed interest 59 Present value of lease liabilities $ 910 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Note 8 – Intangible Assets and Goodwill Identifiable intangible assets The Company’s identifiable intangible assets are associated with its acquisitions of HGP in 2012 and NLEX in 2014, as shown in the table below (in thousands), and are amortized using the straight-line method over their remaining estimated useful lives of three to seven years. The Company’s tradename acquired as part of the acquisition of NLEX in 2014 has an indefinite life and therefore is not amortized. Carrying Value Carrying Value December 31, September 30, Amortized Intangible Assets 2018 Amortization 2019 Customer Network (HGP) $ 114 $ (17 ) $ 97 Trade Name (HGP) 746 (77 ) 669 Customer Relationships (NLEX) 330 (82 ) 248 Total 1,190 (176 ) 1,014 Unamortized Intangible Assets Trade Name (NLEX) 2,437 — 2,437 Total $ 3,627 $ (176 ) $ 3,451 Amortization expense during each of the nine months ended September 30, 2019 and 2018 was $0.2 million. The estimated amortization expense as of September 30, 2019 during the next five fiscal years and thereafter is shown below (in thousands): Year Amount 2019 (remainder of year from October 1, 2019 to December 31, 2019) $ 59 2020 236 2021 236 2022 128 2023 126 Thereafter 229 Total $ 1,014 Goodwill Acquisition September 30, 2019 December 31, 2018 Equity Partners $ 573 $ 573 HGP 2,040 2,040 NLEX 3,545 3,545 Total goodwill $ 6,158 $ 6,158 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt | Note 9 – Debt Outstanding debt at September 30, 2019 and December 31, 2018 is summarized as follows (in thousands): September 30, 2019 December 31, 2018 Current: Third party debt $ 432 $ 1,178 Non-current: Third party debt 138 438 Total debt $ 570 $ 1,616 In 2016, the Company entered into a related party secured promissory note with an entity owned by certain executive officers of the Company (the “Entity”) for a revolving line of credit (the “Line of Credit”). Under the terms of the Line of Credit, the Company received a revolving line of credit with an aggregate borrowing capacity of $1.5 million. Interest under the Line of Credit was charged at a variable rate, and the Entity was eligible to participate in the net profits and net losses of certain industrial auction principal and guarantee transactions entered into by the Company on or after January 1, 2017, and consummated on or prior to the maturity date. In connection with the Company entering into a new credit facility with a third party bank o n September 27, 2018, the Company terminated the related party secured promissory note with the Entity. On September 27, 2018, Heritage Global Inc. entered into a secured promissory note and business loan agreement (the “Credit Facility”) with First Choice Bank, for a $1.5 million revolving line of credit. The Credit Facility had an initial maturity date of October 5, 2019 and replaced the Line of Credit. The Company is permitted to use the proceeds of the loan solely for its business operations. The Credit Facility accrues at a variable interest rate, which is equal to the rate of interest last quoted by The Wall Street Journal as the “prime rate,” not to be less than 5.25% per annum, with a minimum interest charge of $100.00 per month. The Company began paying interest on the Credit Facility in regular monthly payments on November 5, 2018. The Company may prepay the Credit Facility without penalty, subject to the minimum monthly interest charge. The Company is the borrower, with certain of the subsidiaries of the Company as guarantors under the Credit Facility. The Credit Facility is secured by a first priority security interest in all of the Company’s and its certain subsidiaries’ current and future tangible and intangible assets, inventory, chattel paper, accounts, equipment and general intangibles. The availability of draws under the Credit Facility is conditioned, among other things, on the compliance with certain customary representations and warranties, including the preparation of timely financial statements, payment of taxes and disclosure of all material legal or administrative proceedings. The agreement governing the Credit Facility also contains customary affirmative covenants regarding, among other things, the maintenance of records, compliance with governmental requirements, timely submission of all filings with the Securities and Exchange Commission and payment of taxes. The Credit Facility contains certain customary financial covenants and negative covenants that, among other things, include restrictions on the Company’s ability to create, incur or assume indebtedness for borrowed money, including capital leases or to sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of the Company’s assets. On March 29, 2019, Heritage Global Inc. entered into the Change in Terms Agreement and the First Amendment to Business Loan Agreement (collectively, the “Amendments”), which amended the Company’s Credit Facility. The Amendments, among other things, (i) increased the principal amount of the revolving line of credit to $3.0 million, (ii) extended the maturity date of the Credit Facility to April 5, 2020, and (iii) raised the floor interest rate under the Credit Facility from 5.25% to 5.50%. During the nine months ended September 30, 2019, the Company drew on the line of credit for a total of $0.5 million and made repayments of principal totaling $1.3 million resulting in a zero balance as of September 30, 2019. On January 30, 2018, HG LLC, a wholly-owned subsidiary of HGI, settled a long-standing litigation matter that was commenced against the predecessor in interest of HG LLC. The settlement, which also involved several other co-defendant parties, included a complete release of HG LLC’s predecessor in interest and its successors and affiliates by the plaintiffs from all claims arising from or relating to the facts and circumstances underlying the litigation. The portion of the settlement attributable to HG LLC’s predecessor in interest was paid on behalf of HG LLC by 54 Finance, LLC (“54 Finance”) (an affiliate of a co-defendant in the litigation) in consideration of a Promissory Note dated January 30, 2018 (the “Note”) from HG LLC in the amount of $1,260,000. Pursuant to a Guaranty dated January 30, 2018, HGI has guaranteed the obligations of HG LLC under the Note, which are required to be paid in 36 equal installments of $35,000, with any remaining outstanding balance due and payable in full on January 30, 2021. As of December 31, 2017, the Company accrued the present value of the Note based on the payment terms noted above and at an interest rate of 6.5%. Upon the occurrence of any Event of Default, in the sole discretion of 54 Finance, the outstanding principal balance of the Note will bear interest at a rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 12%. An “Event of Default” means: (a) any failure of HG LLC to pay when due any amount thereunder, when and as due, (b) any failure on the part of HG LLC to pay upon 54 Finance’s demand any fees, costs, expenses or other charges hereunder or otherwise due to HG LLC under the Note or the Guaranty, (c) any breach, failure or default under the Guaranty, (d) HG LLC or the Company repudiates or revokes, or purports to repudiate or revoke, any obligation under the Note or the Guaranty, or the obligation of the Company under the Guaranty is limited or terminated by operation of law or by the Company, or (e) HG LLC or the Company shall be or become insolvent, however defined, or admit in writing its inability to pay debts as they mature, or make a general assignment for the benefit of its creditors, or shall institute any bankruptcy, insolvency or similar proceeding under the laws of any jurisdiction, or shall take any action to authorize such proceeding. D uring the nine months ended September 30, 2019, the Company made the scheduled payments on the Note totaling $280,000. The outstanding balance on the Note as of September 30, 2019 was $570,000. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10 – Income Taxes At September 30, 2019 the Company has aggregate tax net operating loss carry forwards of approximately $71.8 million ($56.6 million of unrestricted net operating tax losses and approximately $15.2 million of restricted net operating tax losses) and unused minimum tax credit carry forwards of $0.1 million. Substantially all of the net operating loss carry forwards and unused minimum tax credit carry forwards expire between 2024 and 2037. The Company’s utilization of restricted net operating tax loss carry forwards against future income for tax purposes is restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. The reported tax expense varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to the income from operations before taxes primarily as a result of the change in the deferred tax asset valuation allowance. The Company records net deferred tax assets to the extent that it believes such assets will more likely than not be realized. As a result of cumulative losses and uncertainty with respect to future taxable income, the Company has provided a full valuation allowance against its net deferred tax assets as of September 30, 2019 and December 31, 2018. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11 – Related Party Transactions As part of the operations of NLEX, the Company leases office space in Edwardsville, IL that is owned by the President of NLEX, David Ludwig. The total amount paid to the related party was approximately $82,000 and $78,000 for the nine months ended September 30, 2019 and 2018, respectively, and is included in selling, general and administrative expenses in the condensed consolidated financial statements. All of the payments in both 2019 and 2018 were made to David Ludwig. On June 1, 2018, the Company amended its lease agreement with David Ludwig, whereby the term of the agreement extends to May 31, 2023 and the rent amounts were agreed upon for the new term. On September 13, 2019, the Company entered into an Amendment (the “Mann Amendment”) to the Employment Agreement (the “Mann Employment Agreement”) for Kenneth Mann, a named executive officer of the Company and the Senior Managing Director of Equity Partners. Pursuant to the terms of the Mann Amendment, Mr. Mann will continue his current employment with Equity Partners until December 31, 2019, after which time the Mann Employment Agreement and Mann Amendment will terminate and Mr. Mann’s employment with Equity Partners will cease (the “Resignation Time”). Equity Partners has agreed to provide Mr. Mann with his current annual salary of $375,000, potential bonus in an amount equal to $50,000 paid in regular payroll, and continued benefits. In addition, Equity Partners has agreed to pay to the personnel of Equity Partners (including Mr. Mann) an aggregate bonus equal to the sum of 50% of Equity Partners’ 2019 net operating income (if any), plus $25,000. Mr. Mann has agreed to surrender, and to cause an entity controlled by him to surrender, at the Resignation Time certain options to purchase Company common stock possessed by either Mr. Mann or the entity controlled by Mr. Mann. Subject to certain conditions and to the delivery of a mutual release as provided in the Amendment, the Mann Amendment provides that on January 1, 2020 Equity Partners will transfer to Mr. Mann certain assets of Equity Partners (the “Transferred Assets”), free and clear of all liens. The Mann Amendment further provides that Mr. Mann may choose, in his sole discretion, to accept assignment from Equity Partners of any of the liabilities and obligations of Equity Partners listed in the Mann Amendment by providing written notice to Equity Partners by November 29, 2019. Other than the Transferred Assets, Equity Partners will retain all of the assets and rights held by Equity Partners. Following September 13, 2019, Mr. Mann has agreed to pay, or to cause a buyer to pay, to Equity Partners a percentage of all revenue received with respect to each engagement for which the Company has been engaged or retained as of December 31, 2019 but that is closed or completed following December 31, 2019, subject to certain exclusions. The percentage to be paid is determined by multiplying the revenue by the percentage of the engagement completed prior to December 31, 2019, as determined in good faith by Mr. Mann and a representative of Equity Partners on or before December 31, 2019. Equity Partners maintains a right to audit Mr. Mann’s and a buyer’s records for up to one year following the final payment for all such engagements. The Company expects the separation to result in a non-cash goodwill impairment charge on December 31, 2019 of approximately $573,000. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 12 – Subsequent Events The Company has evaluated events subsequent to September 30, 2019 for potential recognition or disclosure in its condensed consolidated financial statements. There have been no material subsequent events requiring recognition or disclosure in this Quarterly Report on Form 10-Q. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates include the assessment of collectability of revenue recognized, and the valuation of accounts receivable, inventory, other assets, right-of-use assets, goodwill and intangible assets, liabilities, deferred income tax assets and liabilities, and stock-based compensation. These estimates have the potential to significantly impact the Company’s consolidated financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events that are continuous in nature. |
Foreign Currency | Foreign Currency The functional currency of foreign operations is deemed to be the local country’s currency. Assets and liabilities of operations outside of the United States are generally translated into U.S. dollars, and the effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income. |
Reclassifications | Reclassifications Certain prior year balances within the condensed consolidated financial statements have been reclassified to conform to the current year presentation. |
Revenue Recognition | Revenue Recognition Services revenue generally consists of commissions and fees from providing auction services, appraisals, brokering of sales transactions and providing merger and acquisition advisory services. Asset sales revenue generally consists of proceeds obtained through sales of purchased assets. Revenue is recognized for both services revenue and asset sales revenue based on the ASC 606 standard recognition model, which consists of the following: (1) an agreement exists between two or more parties that creates enforceable rights and obligations, (2) the performance obligations are clearly identified, (3) the transaction price has been determined, (4) the transaction price has been properly allocated to each performance obligation, and (5) the entity satisfies a performance obligation by transferring a promised good or service to a customer for each of the entities. All services and asset sales revenue from contracts with customers is considered to be one reporting segment – the asset liquidation business. Although the Company provides various services within the asset liquidation business, it does not disaggregate revenue streams further than that in its statement of income, services revenue and asset sales. Generally, revenue is recognized in the asset liquidation business at the point in time in which the performance obligation has been satisfied and full consideration is received. The exception to recognition at a point in time occurs when certain contracts provide for advance payments recognized over a period of time. Services revenue recognized over a period of time is not material in comparison to total revenues (1% of total revenues for the nine month period ended September 30, 2019) and, therefore, not reported on a disaggregated basis. Further, as certain contracts stipulate that the customer make advance payments, amounts not recognized within the reporting period are considered deferred revenue and the Company’s “contract liability.” As of September 30, 2019, the deferred revenue balance was approximately $79,000. The Company records receivables in certain situations based on timing of payments for asset liquidation transactions held at the end of the reporting period; however, revenue is generally recognized in the period that the Company satisfies the performance obligation and cash is collected. The Company does not record a “contract asset” for partially satisfied performance obligations. To the extent the transaction price includes variable consideration subsequent to the Company satisfying its performance obligations and beyond the Company’s control, such as contingent obligations between the buyer and seller of auctioned assets, we apply judgment in determining the amount of revenue to record based on the contingent nature of the transaction and the probability of possible outcomes. We evaluate the effect of circumstances of each transaction based on our historical and projected experience with similar customer contracts. We evaluate revenue from asset liquidation transactions in accordance with the accounting guidance to determine whether to report such revenue on a gross or net basis. We have determined that we act as an agent for our fee based asset liquidation transactions, and, therefore, we report the revenue from transactions in which we act as an agent on a net basis. The Company also earns asset liquidation income through asset liquidation transactions that involve the Company acting jointly with one or more additional purchasers, pursuant to a partnership, joint venture or limited liability company (“LLC”) agreement (collectively, “Joint Ventures”). For these transactions, the Company does not record asset liquidation revenue or expense. Instead, the Company’s proportionate share of the net income (loss) is reported as earnings of equity method investments. In general, the Joint Ventures apply the same revenue recognition and other accounting policies as the Company. |
Leases | Leases The Company is obligated to make future payments under existing lease agreements which (1) specifically identify the asset, and (2) convey the right to control the use of the identified asset in exchange for consideration for a period of time. The Company determines whether a contract is a lease at the inception of the arrangement. We evaluate leasing arrangements in accordance with the accounting guidance to determine whether the contract is operating or financing in nature. Leases with an initial term of 12 months or less, or under predefined thresholds, are not recorded on the condensed consolidated balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term. The critical accounting policies used in the preparation of the Company’s audited consolidated financial statements are discussed in the Form 10-K. There have been no changes to these policies in the nine months ended September 30, 2019, except for the changes to lease accounting standards noted below. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases In 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation In 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Schedule of Changes in Common Stock Options | The following summarizes the changes in common stock options for the nine months ended September 30, 2019: Options Weighted Average Exercise Price Outstanding at December 31, 2018 4,303,900 $ 0.75 Granted 405,350 $ 0.67 Expired (765,000 ) $ 2.00 Forfeited (468,900 ) $ 0.63 Outstanding at September 30, 2019 3,475,350 $ 0.49 Options exercisable at September 30, 2019 1,983,375 $ 0.49 |
Equity Method Investments (Tabl
Equity Method Investments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity Method Investments And Joint Ventures [Abstract] | |
Schedule of Revenues and Net Income | The table below details CPFH LLC’s revenues and net income during the nine months ended September 30, 2019 and 2018 (in thousands): 2019 2018 Revenues $ 11,106 $ — Net income $ 5,068 $ — |
Schedule of the Components of Assets and Liabilities | The table below details the summarized components of assets and liabilities of CPFH LLC as of September 30, 2019 and December 31, 2018 (in thousands): 2019 2018 Assets $ 18,824 $ 11,180 Liabilities $ 671 $ 168 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Calculation of the Shares Used in Computing Diluted EPS | The table below shows the calculation of the shares used in computing diluted EPS. Three Months Ended September 30, Nine Months Ended September 30, Weighted Average Shares Calculation: 2019 2018 2019 2018 Basic weighted average shares outstanding 28,653,278 28,653,278 28,653,278 28,557,517 Treasury stock effect of common stock options and restricted stock awards 699,534 170,640 258,210 344,982 Diluted weighted average common shares outstanding 29,352,812 28,823,918 28,911,488 28,902,499 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Schedule of Right-of-Use Assets and Lease Liabilities | The right-of-use assets and lease liabilities for each location are as follows (in thousands): September 30, Right-of-use assets: 2019 Del Mar, CA $ 34 Burlingame, CA 464 Edwardsville, IL 367 $ 865 September 30, Lease liabilities: 2019 Del Mar, CA $ 38 Burlingame, CA 504 Edwardsville, IL 368 $ 910 |
Schedule of Undiscounted Future Minimum Lease Commitments | Undiscounted future minimum lease commitments as of September 30, 2019 that have initial or remaining lease terms in excess of one year are as follows (in thousands): 2019 $ 141 2020 449 2021 223 2022 110 2023 46 Total undiscounted future minimum lease payments 969 Less imputed interest 59 Present value of lease liabilities $ 910 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | The Company’s identifiable intangible assets are associated with its acquisitions of HGP in 2012 and NLEX in 2014, as shown in the table below (in thousands), and are amortized using the straight-line method over their remaining estimated useful lives of three to seven years. The Company’s tradename acquired as part of the acquisition of NLEX in 2014 has an indefinite life and therefore is not amortized. Carrying Value Carrying Value December 31, September 30, Amortized Intangible Assets 2018 Amortization 2019 Customer Network (HGP) $ 114 $ (17 ) $ 97 Trade Name (HGP) 746 (77 ) 669 Customer Relationships (NLEX) 330 (82 ) 248 Total 1,190 (176 ) 1,014 Unamortized Intangible Assets Trade Name (NLEX) 2,437 — 2,437 Total $ 3,627 $ (176 ) $ 3,451 |
Schedule of Estimated Amortization Expense, Intangible Assets | The estimated amortization expense as of September 30, 2019 during the next five fiscal years and thereafter is shown below (in thousands): Year Amount 2019 (remainder of year from October 1, 2019 to December 31, 2019) $ 59 2020 236 2021 236 2022 128 2023 126 Thereafter 229 Total $ 1,014 |
Schedule of Goodwill | Acquisition September 30, 2019 December 31, 2018 Equity Partners $ 573 $ 573 HGP 2,040 2,040 NLEX 3,545 3,545 Total goodwill $ 6,158 $ 6,158 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Outstanding debt at September 30, 2019 and December 31, 2018 is summarized as follows (in thousands): September 30, 2019 December 31, 2018 Current: Third party debt $ 432 $ 1,178 Non-current: Third party debt 138 438 Total debt $ 570 $ 1,616 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Narrative) (Details) - ASC 606 [Member] | 9 Months Ended |
Sep. 30, 2019USD ($)Segment | |
Summary Of Significant Accounting Policies [Line Items] | |
Number of reporting segment | Segment | 1 |
Percentage of service revenue that is recognized over a period of time against total revenue | 1.00% |
Deferred revenue | $ | $ 79,000 |
Stock-based Compensation (Narra
Stock-based Compensation (Narrative) (Details) - USD ($) | Mar. 19, 2019 | Jun. 01, 2018 | Sep. 30, 2019 | Sep. 30, 2018 |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Options to purchase, Granted (in shares) | 405,350 | |||
Options cancelled to purchase common stock | 1,233,900 | |||
Stock-based compensation expense | $ 210,000 | $ 219,000 | ||
David Ludwig And Tom Ludwig [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Restricted common stock granted | 600,000 | |||
Napier Park [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Warrants received to acquire shares of common stock with fair market value | $ 71,368 | 0 | ||
Incremental amount in excess of cumulative gross profit | 500,000 | |||
Cumulative gross profit of warrants | $ 2,500,000 | |||
Options [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Stock-based compensation expense | 200,000 | |||
Unrecognized stock-based compensation | $ 500,000 | |||
Unrecognized stock-based compensation, Period for recognition | 2 years 2 months 12 days | |||
Restricted Stock [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 12,900 | |||
Weighted average grant date fair value | $ 0.43 | |||
Unrecognized stock-based compensation expense | $ 200,000 | |||
Restricted Stock [Member] | David Ludwig And Tom Ludwig [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Shares restriction term of service | 5 years | |||
Employees [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Options to purchase, Granted (in shares) | 345,350 | |||
Non-Employee Directors [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Options to purchase, Granted (in shares) | 60,000 |
Schedule of Changes in Common S
Schedule of Changes in Common Stock Options (Details) | 9 Months Ended |
Sep. 30, 2019$ / sharesshares | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Options, Outstanding at the beginning of the period | shares | 4,303,900 |
Options, Granted | shares | 405,350 |
Options, Expired | shares | (765,000) |
Options, Forfeited | shares | (468,900) |
Options, Outstanding at the end of the period | shares | 3,475,350 |
Options, Exercisable at the end of the period | shares | 1,983,375 |
Weighted Average Exercise Price, Outstanding at the beginning of the period | $ / shares | $ 0.75 |
Weighted Average Exercise Price, Granted | $ / shares | 0.67 |
Weighted Average Exercise Price, Expired | $ / shares | 2 |
Weighted Average Exercise Price, Forfeited | $ / shares | 0.63 |
Weighted Average Exercise Price, Outstanding at the end of the period | $ / shares | 0.49 |
Weighted Average Exercise Price, Exercisable at the end of the period | $ / shares | $ 0.49 |
Lessor Arrangement (Narrative)
Lessor Arrangement (Narrative) (Details) $ in Millions | Jun. 27, 2019USD ($) |
Lessor Lease Description [Line Items] | |
Sale leaseback transaction, date | The purchase option for both the real estate and machinery and equipment can be exercised at any time on or after December 1, 2019 and before May 31, 2021. |
Total purchase price | $ 20 |
Real Estate [Member] | |
Lessor Lease Description [Line Items] | |
Lease payments term | 10 years |
Total monthly lease payments | $ 13.2 |
Total purchase price | $ 12 |
Machinery and Equipment [Member] | |
Lessor Lease Description [Line Items] | |
Lease payments term | 6 years |
Total monthly lease payments | $ 9.7 |
Total purchase price | 8 |
Derecognized lease asset | 0.9 |
Revenue from derecognized lease asset | 1.2 |
Interest income prior to exercise of purchase option | $ 0.5 |
Discount rate | 5.50% |
Equity Method Investments (Narr
Equity Method Investments (Narrative) (Details) | Nov. 14, 2018 |
CPFH LLC [Member] | |
Schedule Of Equity Method Investments [Line Items] | |
Equity method investment, ownership percentage | 25.00% |
Schedule of Revenues and Net In
Schedule of Revenues and Net Income (Details) - CPFH LLC [Member] $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Schedule Of Equity Method Investments [Line Items] | |
Revenues | $ 11,106 |
Net income | $ 5,068 |
Schedule of the Components of A
Schedule of the Components of Assets and Liabilities (Details) - CPFH LLC [Member] - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Schedule Of Equity Method Investments [Line Items] | ||
Assets | $ 18,824 | $ 11,180 |
Liabilities | $ 671 | $ 168 |
Earnings Per Share (Narrative)
Earnings Per Share (Narrative) (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
Convertible Preferred Stock, Shares Issuable upon Conversion | The Company's Class N preferred shares, each of which is convertible to 40 common shares, have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. | |||
Class N preferred shares, each convertible to common shares | 40 | 40 | ||
Anti-dilutive common shares | 20,000 | 1,000,000 | 400,000 | 1,000,000 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of Calculation of the Shares Used in Computing Diluted EPS (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
Basic weighted average shares outstanding | 28,653,278 | 28,653,278 | 28,653,278 | 28,557,517 |
Treasury stock effect of common stock options and restricted stock awards | 699,534 | 170,640 | 258,210 | 344,982 |
Diluted weighted average common shares outstanding | 29,352,812 | 28,823,918 | 28,911,488 | 28,902,499 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) $ in Millions | 9 Months Ended | ||
Sep. 30, 2019USD ($)Location | Sep. 30, 2018USD ($) | Jan. 01, 2019 | |
Leases [Abstract] | |||
Number of locations | Location | 3 | ||
Lessee operating lease, incremental borrowing rate | 5.25% | ||
Lease expense | $ | $ 0.4 | $ 0.2 |
Leases - Schedule of Right-of-U
Leases - Schedule of Right-of-Use Assets and Lease Liabilities (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Lessee Lease Description [Line Items] | |
Right-of-use assets | $ 865 |
Lease liabilities | 910 |
Del Mar, CA [Member] | |
Lessee Lease Description [Line Items] | |
Right-of-use assets | 34 |
Lease liabilities | 38 |
Burlingame, CA [Member] | |
Lessee Lease Description [Line Items] | |
Right-of-use assets | 464 |
Lease liabilities | 504 |
Edwardsville, IL [Member] | |
Lessee Lease Description [Line Items] | |
Right-of-use assets | 367 |
Lease liabilities | $ 368 |
Leases - Schedule of Undiscount
Leases - Schedule of Undiscounted Future Minimum Lease Commitments (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Operating Lease Liabilities Payments Due [Abstract] | |
2019 | $ 141 |
2020 | 449 |
2021 | 223 |
2022 | 110 |
2023 | 46 |
Total undiscounted future minimum lease payments | 969 |
Less imputed interest | 59 |
Lease liabilities | $ 910 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill (Narrative) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Finite Lived Intangible Assets [Line Items] | ||
Amortization expense, intangible assets | $ 176,000 | $ 200,000 |
Goodwill, additions | 0 | 0 |
Goodwill, Impairment Loss | $ 0 | $ 0 |
Minimum [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Finite-Lived intangible asset, useful life | 3 years | |
Maximum [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Finite-Lived intangible asset, useful life | 7 years |
Schedule of Intangible Assets (
Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Total net amortized intangible assets | $ 1,190 | ||
Amortization | (176) | $ (200) | |
Total net amortized intangible assets | 1,014 | ||
Total net intangible assets | 3,627 | ||
Total net intangible assets | 3,451 | ||
NLEX [Member] | Trade Name [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Unamortized intangible assets | 2,437 | $ 2,437 | |
Customer Network [Member] | HGP [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Total net amortized intangible assets | 114 | ||
Amortization | (17) | ||
Total net amortized intangible assets | 97 | ||
HGP Trade Name [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Total net amortized intangible assets | 746 | ||
Amortization | (77) | ||
Total net amortized intangible assets | 669 | ||
Customer Relationships [Member] | NLEX [Member] | |||
Finite And Indefinite Lived Intangible Assets By Major Class [Line Items] | |||
Total net amortized intangible assets | 330 | ||
Amortization | (82) | ||
Total net amortized intangible assets | $ 248 |
Schedule of Estimated Amortizat
Schedule of Estimated Amortization Expense, Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
2019 (remainder of year from October 1, 2019 to December 31, 2019) | $ 59 | |
2020 | 236 | |
2021 | 236 | |
2022 | 128 | |
2023 | 126 | |
Thereafter | 229 | |
Total | $ 1,014 | $ 1,190 |
Schedule of Goodwill (Details)
Schedule of Goodwill (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | $ 6,158 | $ 6,158 |
Equity Partners [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | 573 | 573 |
HGP [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | 2,040 | 2,040 |
NLEX [Member] | ||
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | $ 3,545 | $ 3,545 |
Schedule of Debt (Details)
Schedule of Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Current: | ||
Third party debt | $ 432 | $ 1,178 |
Non-current: | ||
Third party debt | 138 | 438 |
Total debt | $ 570 | $ 1,616 |
Debt (Narrative) (Details)
Debt (Narrative) (Details) | Mar. 29, 2019USD ($) | Sep. 27, 2018USD ($) | Jan. 30, 2018USD ($)Installment | Sep. 30, 2019USD ($) | Dec. 31, 2017 | Dec. 31, 2016USD ($) |
Revolving Line of Credit [Member] | First Choice Bank [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit aggregate borrowing capacity | $ 3,000,000 | |||||
Line of credit | $ 1,500,000 | $ 0 | ||||
Debt instrument, Maturity date | Apr. 5, 2020 | Oct. 5, 2019 | ||||
Interest rate per annum | 5.50% | |||||
Frequency of payment | monthly payments | |||||
Line of credit, repayment | $ 1,300,000 | |||||
Line of credit, drawn amount | $ 500,000 | |||||
Revolving Line of Credit [Member] | First Choice Bank [Member] | Minimum [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Monthly interest payment | $ 100 | |||||
Revolving Line of Credit [Member] | First Choice Bank [Member] | Wall Street Journal prime rate [Member] | Minimum [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate per annum | 5.25% | |||||
Affiliated Entity [Member] | Revolving Line of Credit [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit aggregate borrowing capacity | $ 1,500,000 | |||||
Heritage Global LLC [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Litigation settlement, amount paid behalf of subsidiary | $ 1,260,000 | |||||
Number of installments | Installment | 36 | |||||
Litigation settlement installments amount due | $ 35,000 | |||||
Remaining outstanding debt balance payable date | Jan. 30, 2021 | |||||
Interest rate on promissory note | 6.50% | |||||
Percentage of default interest amount | 12.00% | |||||
Debt instrument, periodic payment | $ 280,000 | |||||
Outstanding note balance | $ 570,000 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Income Taxes [Line Items] | |
Operating loss carryforwards | $ 71.8 |
Tax Credit Carryforward, Amount | $ 0.1 |
Operating Loss Carryforwards, Expiration Date | Substantially all of the net operating loss carry forwards and unused minimum tax credit carry forwards expire between 2024 and 2037. |
Operating Loss Carryforwards, Limitations on Use | The Company’s utilization of restricted net operating tax loss carry forwards against future income for tax purposes is restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. |
Unrestricted [Member] | |
Income Taxes [Line Items] | |
Operating loss carryforwards | $ 56.6 |
Restricted [Member] | |
Income Taxes [Line Items] | |
Operating loss carryforwards | $ 15.2 |
Related Party Transactions (Nar
Related Party Transactions (Narrative) (Details) - USD ($) | Dec. 31, 2019 | Sep. 13, 2019 | Sep. 30, 2019 | Sep. 30, 2018 |
Related Party Transaction [Line Items] | ||||
Payment to related party | $ 0 | $ 390,000 | ||
Non Cash Impairment Charge To Goodwill | $ 0 | 0 | ||
Scenario Forecast [Member] | ||||
Related Party Transaction [Line Items] | ||||
Non Cash Impairment Charge To Goodwill | $ 573,000 | |||
Senior Officer of NLEX [Member] | Lease Amounts [Member] | Edwardsville, IL [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction agreement end date | May 31, 2023 | |||
Senior Officer of NLEX [Member] | Lease Amounts [Member] | Edwardsville, IL [Member] | Selling, General and Administrative Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Payment to related party | $ 82,000 | $ 78,000 | ||
Mr. Mann [Member] | ||||
Related Party Transaction [Line Items] | ||||
Current annual salary | $ 375,000 | |||
Potential bonus paid in regular payroll | $ 50,000 | |||
Additional benefits to the partners | Equity Partners has agreed to pay to the personnel of Equity Partners (including Mr. Mann) an aggregate bonus equal to the sum of 50% of Equity Partners’ 2019 net operating income (if any), plus $25,000. | |||
Percentage of aggregate bonus paid to partners | 50.00% | |||
Percentage of aggregate bonus paid to partners | $ 25,000,000 |