Company: HGBL
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0000950170-25-038691
Chunk: 131

Company: Heritage Global Inc.
Filing Date: 2025-03-13
Form: 10-K
Item: Item 1B
Chunk 131
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 and machinery and equipment among partners in a joint venture. In December 2022, DHC8 LLC, of which the Company holds a 13.33% share was formed to provide funding and receive principal and interest payments as a result of the initial investment. In May 2023, HGC MPG Funding LLC, of which the Company holds a 25% share, was formed as a joint venture with a partner for purposes of conducting business relating to the sourcing, origination and funding of loans to debt purchasing clients. In December 2023, KNFH II LLC, of which the Company holds a 25% share, was formed to purchase certain real estate assets and machinery and equipment among partners in a joint venture. CPFH LLC, KNFH LLC, DHC8 LLC and KNFH II LLC are joint ventures formed in connection with the Company’s Industrial Assets division, whereas HGC Origination I LLC, HGC Funding I LLC, and HGC MPG Funding LLC were formed in connection with the Financial Assets division. The Company has significant influence over the operations and financial policies of each of its equity method investments. In accordance with ASC 326, the Company performs a review of notes receivable on a quarterly basis for each of its specialty lending investments. For the year ended December 31, 2024, the Company’s share of the joint venture’s provision for credit losses was approximately $1.0 million, representing a credit loss rate of 4.5% specific to its equity method investments, which was primarily related to HGC Origination I LLC and HGC MPG Funding LLC. The provision for credit losses was primarily driven by increases in loan balances. As of December 31, 2023, the Company's share of the allowance for credit losses was approximately $0.9 million, representing a credit loss rate of 4.3% specific to its equity method investments. As of December 31, 2024, the Company has recorded no actual credit losses through its equity method investments. As of December 31, 2024, the amortized cost basis of the Company's share of loans in nonaccrual status recorded in equity method investments was $18.3 million.Based on the nature of our equity method investments, the joint venture entities' revenues and gross profit are not materially different and furthermore, operating income and net income have no material differences. The table below details the Company’s joint venture revenues, earnings, assets, and liabilities as of December 31, 2024 (in