Company: HGBL
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0000950170-25-038691
Chunk: 46

Company: Heritage Global Inc.
Filing Date: 2025-03-13
Form: 10-K
Item: Item 15
Chunk 46
---
 during 2023

        (2,205
        )

        Balance as of December 31, 2023

        2,223

        Change during 2024

        1,290

        Balance as of December 31, 2024
         
        $
        3,513

      As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. At December 31, 2023, management reevaluated the Company's performance and forecast for the next five years and concluded that there is sufficient positive evidence to conclude that is it more likely than not that additional deferred tax assets of $2.2 million are realizable. At December 31, 2024 management reevaluated the Company's performance and forecast for the following five years and concluded that it is more likely than not that the Company will be able to use $24.3 million of the remaining $41.0 million federal NOL carryforwards. Based on management's new estimate, the Company believes it is appropriate to increase the valuation allowance to a total of $3.5 million, recognizing $1.3 million as a discrete expense (tax effected at 21%) at December 31, 2024. The change to the valuation allowance was primarily due to the application of our nonaccrual loan policy, which resulted in a decrease to our estimates related to the utilization of net operating loss carryforwards in 2025.At December 31, 2024, the Company has aggregate federal net operating loss carry forwards of $41.0 million. These net operating loss carry forwards begin to expire in 2025.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. These rules, in general, provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect stockholders of a loss corporation have, in aggregate, increased by more than 50 percentage points during the immediately preceding three years.

F-24

Restrictions in net operating loss carry forwards occurred in 2001 as a result of the acquisition of the Company by Street Capital. Pursuant to Section 382 of the Internal Revenue Code, the annual usage of the Company’s net operating loss carry forwards was limited to approximately $2.5 million per annum until 2008 and $1