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Stockholders' Equity
 12 Months Ended
Dec. 31, 2024
Equity [Abstract]  
Stockholders' Equity

Note 16 – Stockholders’ Equity

Capital Stock

The Company’s authorized capital stock consists of 300,000,000 common shares with a par value of $0.01 per share and 10,000,000 preferred shares with a par value of $10.00 per share.

During 2024 and 2023 the Company issued 45,752 and 75,767 shares of common stock, respectively, pursuant to the exercise of stock options.

Each share of Series N preferred stock has a voting entitlement equal to 40 common shares, votes with the common stock on an as-converted basis and is senior to all other preferred stock of the Company. Dividends, if any, will be paid on an as-converted basis equal to common stock dividends. The conversion value of each share of Series N preferred stock is $1,000, and each share is convertible to 40 common shares at the rate of $25.00 per common share. The holders of shares of Series N preferred stock are entitled to liquidation preference over common stockholders equivalent to $1,000 per share. During 2023, two shares of the Company’s Series N preferred stock were converted into 80 shares of the Company’s common stock. No shares of the Company’s Series N preferred stock were converted during 2024.

Stock-Based Compensation Plans

At December 31, 2024, the Company had four active stock-based compensation plans which are described below. The fourth of these plans received approval at the Company’s 2022 Annual Meeting of Shareholders, and replaces the 2016 Plan for awards made after June 8, 2022.

2010 Non-Qualified Stock Option Plan

In 2010, the Company’s Board approved the 2010 Non-Qualified Stock Option Plan (the “2010 Plan”) to induce certain key employees of the Company or any of its subsidiaries who are in a position to contribute materially to the Company’s prosperity to remain with the Company, to offer such persons incentives and rewards in recognition of their contributions to the Company’s progress, and to encourage such persons to continue to promote the best interests of the Company. The Company reserved 1,250,000 shares of common stock (subject to adjustment under certain circumstances) for issuance or transfer upon exercise of options granted under the 2010 Plan. Options may be issued under the 2010 Plan to any key employees or consultants selected by the Company’s Board (or an appropriately qualified committee). Options may not be granted with an exercise price less than the fair market value of the common stock of the Company as of the day of the grant. Options granted pursuant to the plan are subject to limitations on transfer and execution and may be issued subject to vesting conditions. Options may also be forfeited in certain circumstances. No awards under this plan were granted during 2024 or 2023.

 

2010 Plan

 

2024

 

 

2023

 

Options outstanding, beginning of year

 

 

238,750

 

 

 

243,750

 

Options exercised

 

 

(21,250

)

 

 

(5,000

)

Options outstanding, end of year

 

 

217,500

 

 

 

238,750

 

The outstanding options vest over four years at exercise prices ranging from $0.40 to $2.77 per share.

Other Options Issued

In 2021, the Company’s Board approved the issuance of options to purchase 150,000 shares at an exercise price of $1.78 to certain accredited personnel. In 2020, the Company’s Board approved the issuance of options to purchase 90,000 shares at an exercise price of $1.41 to certain accredited personnel. Shares issued upon exercise of these options are not registered for public sale. No awards under this plan were granted during 2024 or 2023.

 

Other Options

 

2024

 

 

2023

 

Options outstanding, beginning of year

 

 

383,125

 

 

 

383,125

 

Options exercised

 

 

(90,000

)

 

 

—

 

Options outstanding, end of year

 

 

293,125

 

 

 

383,125

 

The outstanding options vest over four years at exercise prices ranging from $0.70 to $1.78 per share.

Heritage Global Inc. 2016 Stock Option Plan

In 2016, the Company adopted the Heritage Global Inc. 2016 Stock Option Plan (the “2016 Plan”) which provided for the issuance of incentive stock options and non-qualified stock options up to an aggregate of 3,150,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events). Options may be forfeited in certain circumstances. On June 8, 2022 the 2016 plan was replaced by the 2022 Heritage Global Inc. Equity Incentive Plan, and as such, no awards under this plan were granted during 2024 or 2023.

2016 Plan

 

2024

 

 

2023

 

Options outstanding, beginning of year

 

 

1,079,850

 

 

 

1,255,975

 

Options exercised

 

 

(10,000

)

 

 

(91,750

)

Options forfeited

 

 

(4,000

)

 

 

(84,375

)

Options outstanding, end of year

 

 

1,065,850

 

 

 

1,079,850

 

The outstanding options under the 2016 Plan vest over four years at exercise prices ranging from $0.45 to $3.33 per share.

2022 Heritage Global Inc. Equity Incentive Plan

In 2022, at the Company's 2022 Annual Meeting of Shareholders, the Company's shareholders approved the 2022 Heritage Global Inc. Equity Incentive Plan, which replaces the Heritage Global Inc. 2016 Plan and authorized the issuance of an aggregate of 3.5 million shares of Common Stock for awards made after June 8, 2022. Options may not be granted with an exercise price less than the fair market value of the common stock of the Company as of the day of the grant. Options granted pursuant to the plan are subject to limitations on transfer and execution and may be issued subject to vesting conditions. Options may also be forfeited in certain circumstances. In 2024 and 2023, the Company issued options to purchase 112,500 and 470,000 shares of common stock to certain of the Company's employees under this plan, respectively.

 

2022 Plan

 

2024

 

 

2023

 

Options outstanding, beginning of year

 

 

563,625

 

 

 

144,500

 

Options granted

 

 

112,500

 

 

 

470,000

 

Options exercised

 

 

(3,750

)

 

 

(5,375

)

Options forfeited

 

 

(17,250

)

 

 

(45,500

)

Options outstanding, end of year

 

 

655,125

 

 

 

563,625

 

The outstanding options under the 2022 Plan vest over four years at exercise prices ranging from $1.60 to $3.55 per share.

Stock-Based Compensation Expense

Total compensation cost related to stock options was $0.7 million in 2024 and $0.5 million in 2023. These amounts were recorded in selling, general and administrative expense in both years. During 2024 and 2023, options to purchase 111,250 and 102,125 shares were exercised, respectively. The tax benefit recognized by the Company related to these option exercises was approximately $0.1 million in 2024, as compared to $0.4 million recognized in 2023.

In connection with the stock option grants during 2024 and 2023, the fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

 

 

 

2024

 

2023

Risk-free interest rate

 

4%

 

4%

Expected life (years)

 

7

 

7

Expected volatility

 

73%

 

65%

Expected dividend yield

 

Zero

 

Zero

The risk-free interest rates are those for U.S. Treasury constant maturities for terms matching the expected term of the option. The expected life of the options is calculated according to the simplified method for estimating the expected term of the options, based on the vesting period and contractual term of each option grant. Expected volatility is based on the Company’s historical volatility. The Company has never paid a dividend on its common stock and therefore the expected dividend yield is zero.

The following summarizes the changes in common stock options:

 

 

 

2024

 

 

2023

 




 

 

Options

 

 

Weighted
Average
Exercise
Price

 

 

Aggregate Intrinsic Value
(In thousands)

 

 

Options

 

 

Weighted
Average
Exercise
Price

 

 

Aggregate Intrinsic Value
(In thousands)

 

Outstanding at beginning of year

 

 

2,265,350

 

 

$

1.71

 

 

 

 

 

 

2,027,350

 

 

$

1.38

 

 

 

 

Granted

 

 

112,500

 

 

 

2.01

 

 

 

 

 

 

470,000

 

 

 

2.91

 

 

 

 

Exercised

 

 

(125,000

)

 

 

0.83

 

 

 

 

 

 

(102,125

)

 

 

0.86

 

 

 

 

Forfeited

 

 

(21,250

)

 

 

1.88

 

 

 

 

 

 

(129,875

)

 

 

1.72

 

 

 

 

Outstanding at end of year

 

 

2,231,600

 

 

$

1.77

 

 

$

971

 

 

 

2,265,350

 

 

$

1.71

 

 

$

2,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at year end

 

 

1,536,725

 

 

$

1.48

 

 

$

926

 

 

 

1,275,225

 

 

$

1.02

 

 

$

2,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average fair value of options granted
   during the year

 

 

 

 

$

1.46

 

 

 

 

 

 

 

 

$

2.91

 

 

 

 

 

As of December 31, 2024, the Company had unvested options for the purchase of 694,875 shares with a weighted average grant date fair value of $1.81 per share. As of December 31, 2023, the Company had unvested options for the purchase of 990,125 shares with a weighted average grant date fair value of $1.90 per share. At December 31, 2024 and 2023, the aggregate intrinsic value of exercisable options was $0.9 million and $2.0 million, respectively. At December 31, 2024 and 2023, the aggregate intrinsic value of options exercised was $0.1 million and $0.2 million, respectively.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to unvested stock options was $0.9 million, which is expected to be recognized over a weighted-average period of 1.6 years.

The total fair value of options vesting during both 2024 and 2023 was $0.6 million. The unvested options have no associated performance conditions. In general, the Company’s employee turnover is low, and the Company expects that the majority of the unvested options will vest according to the standard four-year timetable.

The following table summarizes information about all stock options outstanding as of December 31, 2024:

 

Exercise price

 

Options
Outstanding

 

 

Weighted
Average
Remaining
Life (years)

 

 

Weighted
Average
Exercise
Price

 

 

Number
Exercisable

 

 

Weighted
Average
Remaining
Life (years)

 

 

Weighted
Average
Exercise
Price

 

$ 0.40 to $ 0.53

 

 

432,850

 

 

 

2.1

 

 

$

0.45

 

 

 

432,850

 

 

 

2.1

 

 

$

0.45

 

$ 0.70 to $ 0.85

 

 

180,625

 

 

 

4.5

 

 

$

0.73

 

 

 

180,625

 

 

 

4.5

 

 

$

0.73

 

$ 1.37 to $ 1.90

 

 

860,625

 

 

 

6.9

 

 

$

1.66

 

 

 

582,000

 

 

 

6.4

 

 

$

1.65

 

$ 2.39 to $ 3.55

 

 

757,500

 

 

 

7.6

 

 

$

2.90

 

 

 

341,250

 

 

 

6.8

 

 

$

2.88

 

 

 

2,231,600

 

 

 

 

 

 

 

 

 

1,536,725

 

 

 

 

 

 

 

 

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 of the shares of common stock 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 Addenda to the Employment Agreements of David Ludwig and Tom Ludwig. The shares were subject to certain restrictions on transfer and a right of repurchase over five years, which ended on May 31, 2023. Stock-based compensation expense related to the restricted stock awards, calculated by using the grant date fair value of $0.43 per share, was $21,500 for the year ended December 31, 2023. There was no stock based compensation expense related to the restricted stock awards in 2024 and there was no unrecognized stock-based compensation expense as of December 31, 2024 or 2023.

On August 3, 2022, the Company granted 115,000 shares of Company restricted common stock to non-executive directors under the 2022 Heritage Global Inc. Equity Incentive Plan. Of the shares of Company restricted common stock granted during 2022, 40,000 shares were granted with a vesting term that was completed prior to the grant date due to a delay in the Company’s ability to grant such shares, and the remaining 75,000 shares vested in full on March 31, 2023. We determined the fair value of the shares awarded by using the closing price of our common stock as of the grant date. Stock-based compensation expense related to the restricted stock awards, calculated by using the grant date fair value of $1.58 per share, was $44,400 for the year ended December 31, 2023. There was no stock based compensation expense related to the restricted stock awards in 2024 and there was no unrecognized stock-based compensation expense as of December 31, 2024 or 2023.

The following summarizes the restricted stock awards and related stock based compensation expense in 2024 and 2023 (in thousands, except share count and award fair value):

 

 

 

 

 

 

 

 

 

Compensation Expense for the year ended,

 

Unrecognized Compensation Expense as of,

 

 

 

Grant Date

Vesting Date

Restricted Stock Granted

 

Grant Date Fair Value

 

2023

 

2024

 

December 31, 2024

 

Ludwig Employment Agreements

 

June 1, 2018

May 31, 2023

 

600,000

 

$

0.43

 

$

22

 

$

—

 

$

—

 

Non-executive directors

 

August 3, 2022

March 31, 2023

 

75,000

 

$

1.58

 

 

44

 

 

—

 

 

—

 

Employees

 

March 1, 2023

March 1, 2024

 

97,290

 

$

2.53

 

 

—

 

 

—

 

 

—

 

Non-executive directors

 

March 31, 2023

March 31, 2024

 

90,000

 

$

2.87

 

 

176

 

 

45

 

 

—

 

Employees

 

March 7, 2024

March 7, 2025

 

128,044

 

$

2.93

 

 

—

 

 

308

 

 

68

 

Non-executive directors

 

March 7, 2024

March 7, 2025

 

75,000

 

$

2.93

 

 

—

 

 

180

 

 

40

 

Total

 

 

 

 

 

 

 

$

242

 

$

532

 

$

107

 

The Company's unrecognized stock-based compensation expense related to restricted stock as of December 31, 2024 is expected to be recognized over a weighted average period of 0.2 years. The tax benefit recognized by the Company related to restricted stock awards was approximately $0.4 million in 2024, as compared to $2.2 million recognized in 2023.