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Acquisition of National Loan Exchange, Inc. | 12 Months Ended
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Dec. 31, 2014
Acquisition of National Loan Exchange, Inc. [Text Block] | Note 3 – Acquisition of National Loan Exchange, Inc. On June 2, 2014, and effective May 31, 2014, the Company acquired all of the issued and outstanding capital stock in National Loan Exchange, Inc. (“NLEX”), a broker of charged-off receivables in the United States and Canada. NLEX operates as a wholly owned division of the Company. The acquisition of NLEX is consistent with HGI’s strategy to expand the services provided by its asset liquidation business. In connection with the acquisition, HGI entered into employment agreements with the previous owner and employees of NLEX. The consideration for the acquisition consisted of $2,000 cash and an earnout provision (“contingent consideration”). Under the terms of the NLEX purchase agreement, the Company will pay, to the former owner of NLEX, 50% of gross revenues of NLEX and its affiliates, minus 50% of certain expenses, for each of the four years following the closing. The payments are due on or about July 30 of each year, beginning in 2015. The contingent consideration is capped at an aggregate of $5,000, and at December 31, 2014, subject to the application of a 9% discount rate, is estimated to have a present value of $4,198. Key assumptions in determining this present value include projected earnings to the end of 2013 and a weighted average cost of capital of 31.6%. At December 31, 2014, the Company has estimated that the current portion of the contingent consideration is $803, and that the non-current portion is $3,395. During the period June 1, 2014 through December 31, 2014, the Company recognized a total of $210 of interest expense which represents the accretion of the present value discount during the period. The following table summarizes the consideration paid for NLEX and the amounts of the assets acquired and liabilities assumed, with the excess purchase price recognized as goodwill.
Consideration |  |  |
Cash paid on closing | $ | 2,000 |
Contingent consideration |  | 3,989 |
Total purchase price | $ | 5,989 |
Acquisition related costs (included in selling, general, and administrative expenses in HGI’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2014) | $ | 198 |
Recognized amounts of identifiable assets acquired and liabilities assumed |  |  |
Cash | $ | 639 |
Other current assets |  | 17 |
Fixed assets |  | 14 |
Identifiable intangible assets |  | 3,390 |
Accounts payable and accrued liabilities |  | (656) |
Deferred tax liability |  | (960) |
Total identifiable net assets assumed |  | 2,444 |
Goodwill |  | 3,545 |
| $ | 5,989 |
The intangible assets and goodwill are discussed in more detail in Note 6. The goodwill of $3,545 arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and NLEX. None of the goodwill recognized is expected to be deductible for income tax purposes. The amounts of NLEX revenue and earnings for the period June 1, 2014 through December 31, 2014, included in HGI’s condensed consolidated statement of operations for the year ended December 31, 2014, are shown below. Also shown are HGI’s consolidated revenue and net loss as if the acquisition of NLEX had occurred on January 1, 2014 and January 1, 2013.
|  |  |  |  | Net |
|  | Revenue |  |  | income |
|  |  |  |  | (loss) |
NLEX revenue and net income included through December 31, 2014 | $ | 2,076 |  | $ | 526 |
Supplemental pro-forma consolidated revenue and net loss (unaudited): January 1, 2014 – December 31, 2014 |  | $15,609 |  |  | $(26,506 | )
Supplemental pro-forma consolidated revenue and net loss (unaudited): January 1, 2013 – December 31, 2013 |  | $13,889 |  |  | $(4,864 | )

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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