Equibles

10-Q

HG Holdings, Inc. (STLY)

10-Q 2025-11-13 For: 2025-09-30
View Original
Added on April 06, 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission file number: 001-34964

HG HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware 54-1272589
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

6265 Old Water Oak Road, Suite 204, Tallahassee, FL 32312 (Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (850) 201-9204

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.02 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 11, 2025, there were 5,204,713 outstanding shares of common stock of HG Holdings, Inc., par value $0.02 per share.

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Page
Part I – Financial Information 3
Item 1. Consolidated Financial Statements (Unaudited) 3
Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 3
Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and September 30, 2024 4
Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2025 and September 30, 2024 5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and September 30, 2024 6
Notes to the Condensed Consolidated Financial Statements 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 28
Item 4. Controls and Procedures 28
Part II – Other Information 29
Item 1. Legal Proceedings 29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29
Item 3. Defaults Upon Senior Securities 30
Item 4. Mine Safety Disclosures 30
Item 5. Other Information 30
Item 6. Exhibits 31
Signatures 32

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PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

HG HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share amounts)

December 31,
2024
ASSETS **** ****
Cash and cash equivalents 10,305 $ 12,145
Restricted cash 10,551 8,264
Investments
Fixed income securities, held-to-maturity - 1,000
Investments in limited partnerships 2,010 2,183
Investments in related parties 22,764 10,073
Accounts receivable 1,169 263
Interest and dividend receivables - 19
Prepaid expenses 295 288
Property, plant and equipment, net 44 62
Lease assets 616 611
Goodwill 6,492 6,492
Intangible assets, net 137 193
Other assets 626 575
Total assets 55,009 $ 42,168
LIABILITIES **** ****
Accounts payable 49 $ 106
Accrued salaries, wages and benefits 493 496
Escrow liabilities 10,396 8,110
Other accrued expenses 429 360
Reserve for title claims 682 637
Lease liabilities 618 616
Other liabilities 18 35
Total liabilities 12,685 $ 10,360
Commitments and contingencies (refer to Note 12)
STOCKHOLDERS’ EQUITY **** ****
Common stock, 0.02 par value, 7,000,000 shares authorized as of September 30, 2025 and 35,000,000 shares authorized as of December 31, 2024; 5,204,713 shares issued and outstanding as of September 30, 2025 and 2,813,214 shares issued and outstanding as of December 31, 2024 100 52
Additional paid-in capital 39,058 30,491
Retained earnings 3,267 1,413
Total stockholders’ equity 42,425 31,956
Noncontrolling interests (101 ) (148 )
Total equity 42,324 31,808
Total liabilities and stockholders’ equity 55,009 $ 42,168

All values are in US Dollars.

The accompanying notes are an integral part of the consolidated financial statements.

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HG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Three Months Nine Months
Ended Ended
September 30, September 30, September 30, September 30,
2025 2024 2025 2024
Revenues:
Net premiums written $ 1,886 $ 1,649 $ 5,272 $ 4,723
Escrow and other title fees 734 669 2,130 1,915
Management fees from related parties 1,500 750 3,500 2,253
Total revenues 4,120 3,068 10,902 8,891
Cost of revenues:
Underwriting expenses 33 41 132 164
(Recoveries of) provision for title claim losses (15 ) 48 87 102
Search and other fees 13 10 68 45
Total cost of revenues 31 99 287 311
Gross underwriting profits and management fee income 4,089 2,969 10,615 8,580
Operating expenses:
General and administrative expenses 3,327 **** 3,252 9,819 9,482
Other income/expenses:
Net investment income 333 325 489 886
Other income (expense), net 4 (7 ) 38 9
Income from investments in related parties, net 196 73 640 8
Income from operations before income taxes 1,295 **** 108 1,963 1
Income tax expense (benefit) 6 **** (49 ) 1 68
Net income (loss) 1,289 **** 157 1,962 (67 )
Net income (loss) attributable to noncontrolling interests 63 **** (13 ) 108 -
Net income (loss) attributable to the Company's shareholders $ 1,226 **** $ 170 $ 1,854 $ (67 )
Basic and diluted per share net income (loss) attributable to the Company's shareholders:
Basic $ 0.23 **** $ 0.06 $ 0.53 $ (0.02 )
Diluted $ 0.23 **** $ 0.06 $ 0.53 $ (0.02 )
Weighted average shares outstanding:
Basic 5,221 2,813 3,520 2,840
Diluted 5,221 2,813 3,520 2,840

The accompanying notes are an integral part of the consolidated financial statements.

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HG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

Additional Retained
Common Stock Paid-in Earnings Noncontrolling
Shares Common Stock Capital (Deficit) Interest Total
Balance at January 1, 2025 2,813 $ 52 $ 30,491 $ 1,413 $ (148 ) $ 31,808
Net loss - - - (257 ) (19 ) (276 )
Balance at March 31, 2025 2,813 $ 52 $ 30,491 $ 1,156 $ (167 ) $ 31,532
Net income - - - 885 **** 63 948 ****
Non-controlling interest shareholders distributions - - - - (17 ) (17 )
Issuance of common stock 2,900 59 12,411 - - 12,470
Repurchase of common stock (492 ) (10 ) (3,824 ) - - (3,834 )
Balance at June 30, 2025 5,221 $ 101 $ 39,078 $ 2,041 $ (121 ) $ 41,099
Net income - - - 1,226 63 1,289
Non-controlling interest shareholders contributions (distributions) - - 111 - (43 ) 68 ****
Repurchase of common stock (16 ) (1 ) (131 ) - - (132 )
Balance at September 30, 2025 5,205 $ 100 $ 39,058 $ 3,267 $ (101 ) $ 42,324
Balance at January 1, 2024 2,862 $ 53 $ 30,491 $ 1,894 $ (17 ) $ 32,421
Net income (loss) - - - 20 (27 ) (7 )
Non-controlling interest shareholders distributions - - - - (53 ) (53 )
Balance at March 31, 2024 2,862 $ 53 $ 30,491 $ 1,914 $ (97 ) $ 32,361
Net (loss) income - - - (258 ) 40 (218 )
Non-controlling interest shareholders distributions - - - - (50 ) (50 )
Repurchase of common stock (49 ) (1 ) - (242 ) - (243 )
Balance at June 30, 2024 2,813 $ 52 $ 30,491 $ 1,414 $ (107 ) $ 31,850
Net income (loss) - - - 170 (13 ) 157
Non-controlling interest shareholders distributions - - - - (19 ) (19 )
Balance at September 30, 2024 2,813 $ 52 $ 30,491 $ 1,584 $ (139 ) $ 31,988

The accompanying notes are an integral part of the consolidated financial statements.

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HG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Nine Months Ended
September 30,
2025 2024
Net income (loss) attributable to the Company's shareholders $ 1,854 **** $ (67 )
Net income attributable to noncontrolling interests 108 -
Net income (loss) 1,962 **** (67 )
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation expense 18 52
Amortization expense 56 56
Change in net asset value of investment in limited partnership (217 ) (273 )
Amortization of premium and accretion of discount, net - (3 )
Loss from investments in related parties 41 273
Non-cash lease expense (3 ) 2
Changes in operating assets and liabilities:
Prepaid expenses (7 ) (75 )
Accounts receivable (906 ) (232 )
Interest and dividends receivable 19 275
Other assets (51 ) (9 )
Accounts payable (57 ) (277 )
Accrued salaries, wages, and benefits (3 ) 150
Escrow liabilities 2,286 4,978
Reserve for title claims 45 102
Other accrued expenses 69 23
Other liabilities (17 ) 50
Net cash provided by operating activities 3,235 5,025
Cash flows from investing activities: **** ****
Purchases of investments - **** (700 )
Purchases of investments in related parties (263 ) (24 )
Proceeds from redemptions of fixed-income securities 1,000 **** 1,050
Proceeds from investment in limited partnerships 390 217
Net cash provided by investing activities 1,127 **** 543
Cash flows from financing activities: **** ****
Repurchase of shares of common stock (3,966 ) (243 )
Subsidiary contributions (distributions) paid to non-controlling interest shareholders, net 51 **** (122 )
Net cash used in financing activities (3,915 ) (365 )
Net increase in cash and cash equivalents and restricted cash 447 5,203
Cash and cash equivalents and restricted cash at beginning of period 20,409 17,752
Cash and cash equivalents and restricted cash at end of period $ 20,856 $ 22,955
Cash and cash equivalents $ 10,305 $ 10,368
Restricted cash 10,551 12,587
Cash and cash equivalents and restricted cash at end of period $ 20,856 $ 22,955
Supplemental Disclosures of Non-Cash Investing Activities
Issuance of common stock for investment in ACMAT Corporation $ 12,469 $ -
Other Supplemental Disclosures
State income tax paid $ 15 $ -

The accompanying notes are an integral part of the consolidated financial statements.

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HG HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and Nature of Operations

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements. However, the Company (as defined below) believes that the disclosures made are adequate for a fair statement of results of operations and financial position. In addition, the year-end consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management of the Company, these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Operating results for the interim periods reported herein may not be indicative of the results expected for the year. These consolidated financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s latest Annual Report on Form 10-K filed with the SEC on *March 27, 2025 (*the “2024 Form 10-K”).

HG Holdings, Inc. (together with its consolidated subsidiaries, the “Company,” “we,” “us,” “our,” “it,” and “its”), operates through its subsidiaries, National Consumer Title Insurance Company (“NCTIC”), National Consumer Title Group, LLC (“NCTG”), Title Agency Ventures, LLC (“TAV”), HG Managing Agency, LLC (“HGMA”), Omega National Title Agency, LLC (“ONTA” or “Omega”), Omega National Title of Florida, LLC (“ONF”) and Omega National Title of Pensacola, LLC (“ONP”), and through an affiliated investment in HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”).

Description of the Business

Effective January 1, 2025, the Company changed its reportable segments to: (i) Title Insurance and (ii) Corporate and Other. The Corporate and Other segment is comprised of activity previously presented in the Real Estate, Reinsurance and Management Advisory Services segments. This change in reportable segments reflects the changes in the business mix and the manner in which management monitors the performance of its operations. The change in reportable segments had no impact on the Company’s historical consolidated financial positions, results of operations or cash flows as previously reported. Where applicable, all prior periods presented have been revised to conform to this new presentation.

Title Insurance

The Company engages in issuing title insurance through its subsidiary, NCTIC, and providing title agency services through its subsidiaries, NCTG, TAV, ONTA, ONF and ONP. Through NCTIC, the Company underwrites title insurance for owners and mortgagees as the primary insurer. The Company mainly provides title insurance services in the State of Florida.

Title insurance protects against loss or damage resulting from title defects that affect real property. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a covered claim is made against real property, title insurance provides indemnification against insured defects. There are two basic types of title insurance policies – one for the mortgage lender and one for the real property owner. A lender often requires the property owner to purchase a lender’s title insurance policy to protect its position as a holder of a mortgage loan, but the lender’s title insurance policy does not protect the property owner. The property owner has to purchase a separate owner’s title insurance policy to protect its investment.

NCTIC issues title insurance policies through its home office and through a network of affiliated and independent title agents. In the State of Florida, issuing agents are independent agents or subsidiaries of community and regional mortgage lending institutions, depending on local customs and regulations. The ability to attract and retain issuing agents is a key determinant of the Company’s growth in title insurance premiums written.

Revenues for the title insurance segment primarily result from purchases of new and existing residential and commercial real estate, refinance activity and certain other types of mortgage lending such as home equity lines of credit. Title insurance premiums vary from state to state and are subject to extensive regulation. Statutes generally provide that rates must not be excessive, inadequate or unfairly discriminatory. The process of implementing a rate change in most states involves pre-approval by the applicable state insurance regulator.

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The substantial majority of the Company's title insurance business is dependent upon the overall level of residential and commercial real estate activity and mortgage markets, which are cyclical and seasonal. Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months and is sensitive to interest rates. Refinance activity is not seasonal, but is generally correlated with changes in interest rates and general economic cycles. Commercial real estate volumes are less sensitive to changes in interest rates than residential real estate volumes, but fluctuate based on local supply and demand conditions and financing availability. Commercial real estate historically has elevated activity towards the end of the year. However, changes in general economic conditions in the United States and abroad can cause fluctuations in these traditional patterns of real estate activity, and changes in the general economic conditions in a geography can cause fluctuations in these traditional patterns of real estate activity in that geography. The Company’s revenues from title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.

In conducting its title insurance operations, the Company often holds customers’ assets in escrow, pending completion of real estate transactions. This cash is presented as restricted cash on the Company’s Consolidated Balance Sheets. The Company records an offsetting escrow liability given that we are liable for the disposition of these escrowed funds.

Corporate and Other

The Corporate and Other segment contains results of management advisory services and other investment activity, not related to title insurance.

The Company, through its wholly-owned subsidiary, HGMA, engages in providing various management advisory services such as legal entity formation, licensure, regulatory approval, assumption of policies, and other general operational services.

Effective January 1, 2024, the Company, through HGMA, was engaged to provide management advisory services to a related captive managing general agency, HP Managing Agency, LLC ("HPMA"), and its affiliates, including but not limited to general management, legal compliance, strategy services and review of potential acquisitions and transactions. The engagement was initially for twelve months from January 1, 2024 through December 31, 2024, for a monthly fee of $200,000, and was renewed effective January 1, 2025 for an additional six months. HPMA is a related party of the Company as it is controlled by Steven A. Hale II, who serves as our Chairman, Chief Executive Officer and Director. The engagement expired in accordance with its terms on June 30, 2025.

Effective April 1, 2023, the Company, through HGMA, was also engaged to provide management advisory services to a related reinsurance intermediary affiliated with HPMA. The services included legal entity formation, licensure, regulatory approval, and other general operational services to allow the intermediary to adequately perform its business functions. The engagement was initially for twelve months from April 1, 2023 through March 31, 2024, for a monthly fee of $50,000, and was renewed effective April 1, 2024 for an additional nine months, as well as effective January 1, 2025 for an additional six months. The engagement expired in accordance with its terms on June 30, 2025.

On April 21, 2025, the Company entered into a Master Services Agreement, effective June 1, 2025, with HP Risk Solutions, LLC (“HP Risk”), a wholly-owned subsidiary of HP Holding Company, LLC, which is wholly owned by certain affiliates of Mr. Hale, pursuant to which the Company provides certain managerial and operational services to HP Risk for consideration from HP Risk of $6 million per year over the course of three years (the “Services Agreement”). For additional information regarding the Services Agreement, refer to Note 3, Significant Transactions.

Additionally, the Company owns 250 shares of HC Realty’s Common Stock (the “HC Common Stock”) and 1,025,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”). As of September 30, 2025, the Company owns approximately 28.0% of the voting interest of HC Realty. In June 2024, HC Realty effected a one (1) for one thousand two hundred (1,200) reverse stock split of its common stock, which resulted in a reduction in the number of our shares of HC Common Stock from 300,000 to 250.

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HC Realty is an internally-managed real estate investment trust (“REIT”) focused on acquiring, financing, owning and managing build-to-suit or renovate-to-suit, single-tenant properties leased primarily to the U.S. government and administered by the U.S. General Services Administration or directly by the federal government agencies or sub-agencies occupying such properties (referred to as “Government Properties”). HC Realty invests primarily in Government Properties ranging from 10,000 to 100,000 rentable square feet that are in their initial lease term after original construction or renovation-to-suit. HC Realty further emphasizes Government Properties that perform law enforcement, public service or other functions that support the mission of the agencies or sub-agencies occupying such properties. Leases associated with the Government Properties in which HC Realty invests are full faith and credit obligations of the United States of America. HC Realty intends to grow its portfolio primarily through direct acquisitions of Government Properties; although, HC Realty may elect to invest in Government Properties through indirect investments, such as joint ventures. Steven A. Hale II, our Chairman and Chief Executive Officer, serves as HC Realty’s Chairman, Chief Executive Officer and President and a member of the HC Realty board of directors. In addition, Mr. Hale, and certain investors affiliated with Mr. Hale, founded Hale Partnership Capital Management, LLC (“HPCM”), and Mr. Hale currently serves as HPCM’s sole manager. HPCM serves as investment manager and adviser to, and may possess voting and/or investment power over the securities of HC Realty held by, certain other investors in HC Realty. HC Realty is considered to be a related party to the Company.

2. Significant Accounting Policies

During the nine months ended September 30, 2025, there have been no material changes to the Company’s significant accounting policies as described in its 2024 Form 10-K.

Recently Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), that requires public entities to provide enhanced segment disclosures, including significant segment expenses and other segment items. The amendment was effective for public entities for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The Company has adopted ASU 2023-07 for the 2024 annual reporting period and applied it retrospectively to all periods presented. The updated guidance did not have a material impact on the Company's consolidated financial statements except for the disclosure requirements provided in Note 8, Segment Information.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), that requires public entities, on an annual basis, to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and provide more details about the reconciling items in some categories if items meet a quantitative threshold. The guidance will require all entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. All entities are required to apply the guidance prospectively, with the option to apply it retrospectively. ASU 2023-09 became effective for the Company on January 1, 2025. The Company will provide the required disclosures in its Annual Report on Form 10-K for the year ended December 31, 2025, and the adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024,the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires public business entities to disclose disaggregated information about certain income statement expenses, including categories such as employee compensation, intangible asset amortization and depreciation, and selling expense, in the notes to the financial statements. Public business entities are required to apply the guidance prospectively and may apply it retrospectively. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impacts of this standard on our tax disclosures and is not planning to early adopt.

Reclassifications

Certain comparative figures have been reclassified to conform to the current quarter presentation.

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3. Significant Transactions

Stock Repurchase Agreement

On April 21, 2025, the Company entered into a Stock Repurchase Agreement with certain of its existing stockholders who are managed by Solas Capital Management, LLC (the “Sellers”), pursuant to which the Sellers agreed to sell to the Company, and the Company agreed to repurchase from the Sellers, an aggregate of 402,322 shares of the Company’s common stock held by the Sellers, for an aggregate price of $3,138,112 (the “Repurchase”). The Repurchase was made outside of, and as an exception to, the 2024 Repurchase Program (as defined below).

Prior to the Repurchase, the Sellers owned an aggregate of approximately 41.4% of the Company’s outstanding shares of common stock. After giving effect to the Repurchase and the transactions effected pursuant to the Contribution Agreement (defined and described below), the Sellers owned an aggregate of approximately 14.4% of the Company’s outstanding shares of common stock.

Master Services Agreement

On April 21, 2025, the Company entered into the Services Agreement, effective June 1, 2025, with HP Risk, a wholly-owned subsidiary of HP Holding Company, LLC, which is wholly owned by certain affiliates of Mr. Hale, pursuant to which the Company provides certain managerial and operational services to HP Risk for consideration from HP Risk of $6 million per year over the course of three years. Such services to be performed pursuant to the Services Agreement include, but are not limited to:  reinsurance brokerage services; the review and improvement of financial goals; compliance with legal and regulatory mandates; maintenance of an ethical business environment; investment and asset manager compliance; cash and equity management; corporate tax management; personnel management; related party transaction oversight; tax preparation administration; strategic capital modeling; the review of potential acquisitions and transactions involving affiliates and third parties, including but not limited to, renewal rights deals, loss portfolio transfers or entity acquisitions; execution of (or provision for the execution of) all general corporate legal matters; and provision of internal control management services.

Assignment and Contribution Agreement

On April 21, 2025, the Company entered into an Assignment and Contribution Agreement (the “Contribution Agreement”) with the certain assignors listed therein (the “Assignors”), pursuant to which the Assignors agreed to assign and contribute to the Company an aggregate of 10,203 shares of common stock, no par value ("ACMAT Common Stock"), and 291,656 shares of Class A stock, no par value ("ACMAT Class A Stock"), of ACMAT Corporation (“ACMAT”), a Connecticut corporation, and, in consideration of and exchange therefor, the Company agreed to issue to the Assignors an aggregate of 2,899,876 shares of Company common stock, contingent upon the closing of the transactions contemplated by the Services Agreement described in the previous paragraph. After giving effect to the transactions pursuant to the Contribution Agreement, the Company owns approximately 39.1% of the outstanding equity of ACMAT and approximately 10.4% of the voting power of ACMAT, based on ACMAT's outstanding equity as of August 5, 2025. Holders of ACMAT Class A Stock are entitled to one-tenth vote per share in relation to ACMAT Common Stock, holders of which are entitled to one vote per share, with respect to matters subject to approval by ACMAT stockholders. ACMAT, through its subsidiaries, offers surety bonds for prime, sub-prime, specialty trade, environmental, asbestos and lead abatement contractors and miscellaneous obligations nationwide. ACMAT also provides other miscellaneous surety bonds such as workers’ compensation bonds, supply bonds, subdivision bonds, and license and permit bonds.

HPCM, an entity wholly owned by Mr. Hale, is the registered investment advisor or investment manager for each of the Assignors, and Mr. Hale is the sole principal owner of Hale Partnership Capital Advisors, LLC, the general partner of all but one of the Assignors.

Prior to the transactions effected pursuant to the Contribution Agreement and the Repurchase described above, the Assignors owned an aggregate of approximately 34.7% of the Company’s outstanding shares of common stock. After giving effect to the transactions effected pursuant to the Contribution Agreement and the Repurchase described above, the Assignors owned an aggregate of approximately 73.0% of the Company’s outstanding shares of common stock. This transaction closed on June 30, 2025.

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4. Investments

Investments in Related Parties

On June 30, 2025, the Company completed a non-cash equity-for-equity exchange transaction acquiring a 39.1% equity interest (10.4% voting interest) in ACMAT. ACMAT was considered a related party as the Company is a principal owner of ACMAT, owning approximately 10.4% of its voting interest. For further information, refer to Note 3, Significant Transactions. As of September 30, 2025, the Company's investment in ACMAT was carried at $12.5 million and accounted for under the equity method of accounting as the Company has concluded it has a significant influence over the investee. During the three and nine months ended September 30, 2025, the Company did not record any income or loss from its investment in ACMAT as the Company made an election to account for the results of ACMAT on a quarter lag.

As a result of the Company’s holdings in ACMAT, the Company includes the following summarized income statement information of ACMAT for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Nine Months
Ended Ended
September 30, September 30, September 30, September 30,
2025 2024 2025 2024
Total revenue $ 1,044 $ 1,268 $ 2,719 $ 2,809
Total expense **** 774 824 **** 2,416 2,365
Pre-tax earnings **** 270 444 **** 303 444
Provision for income tax **** (36 ) (36 ) **** (36 ) 4
Net earnings $ 306 $ 480 $ 339 $ 440

Additionally, the Company owns approximately 28.0% of the voting interest of HC Realty through its ownership of 250 shares of HC Common Stock and 1,025,000 shares of HC Series B Stock.

The following table summarizes the Company’s investment in HC Realty as of September 30, 2025 and  December 31, 2024 and for the three and nine months ended September 30, 2025 and 2024 (amounts in thousands, except ratios):

Loss recorded in the Consolidated
Ownership % Carrying Value Statements of Operations (b)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
September 30, December 31, September 30, December 31,
2025 2024 2025 2024 2025 2024 2025 2024
HC Series B Stock (a) 27.9 % 27.9 % $ 9,215 $ 9,256 $ - $ - $ (41 ) $ -
HC Common Stock 0.1 % 0.1 % 9 9 - (2 ) - **** (273 )
Total 28.0 % 28.0 % $ 9,224 $ 9,265 $ - $ (2 ) $ (41 ) $ (273 )
(a) Represents investments in shares of HC Series B Stock with a basis of $10.25 million. Each share of HC Series B Stock has voting rights on an as converted basis and can be converted into shares of HC Common Stock at a conversion ratio equal to $10.00 per share divided by the lesser of $9.10 per share or the fair market value per share of HC Common Stock, subject to adjustment upon the occurrence of certain events.
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(b) Loss from these investments is included in “Income from investments in related parties, net” in the Unaudited Consolidated Statements of Operations. Since HC Realty is a REIT and not a taxable entity, the loss is not reported net of taxes.
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The Company’s investment in HC Common Stock is accounted for under the equity method of accounting as the Company has concluded it has a significant influence over the investee. The HC Series B Stock is not deemed to be in-substance common stock and is accounted for under the cost adjusted for market observable events less impairment method. Both investments in HC Common Stock and HC Series B Stock are evaluated quarterly for impairment. During the three and nine months ended September 30, 2025, the Company did not recognize any impairment of HC Common Stock. During the three and nine months ended September 30, 2024, the Company recognized an impairment of HC Common Stock in the amount of $0 and $241,000. During the three and nine months ended September 30, 2025, the Company recognized impairment of HC Series B Stock of $0 and $41,000 respectively. During the three and nine months ended September 30, 2024, the Company did not recognize any impairment of HC Series B Stock.

As a result of the Company’s holdings in HC Realty, the Company includes the following summarized income statement information of HC Realty for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Nine Months
Ended Ended
September 30, September 30, September 30, September 30,
2025 2024 2025 2024
Total revenue $ 5,333 $ 5,365 $ 15,943 $ 15,977
Total expense 8,837 10,490 25,504 28,139
Net loss $ (3,504 ) $ (5,125 ) $ (9,561 ) $ (12,162 )

The Company’s other investments in related parties totaled $1.1 million as of September 30, 2025 and $808,000 as of  December 31, 2024, and included investments in limited liability companies and corporations. These investments do not meet the criteria for accounting under the equity method and are accounted for under the cost adjusted for market observable events less impairment method. As of September 30, 2025, the Company had total receivables and payables from the related parties of $526,000 and $254,000, respectively. As of December 31, 2024, the Company had total receivables and payables from these related parties of $3,000 and $136,000, respectively. During the three- and nine-month periods ended September 30, 2025, the Company received $196,000 and $681,000 of distributions from the related party investees, respectively, which are included in “Income from investments in related parties, net” in the Unaudited Consolidated Statements of Operations. During the three- and nine-month periods ended September 30, 2024, the Company received $75,000 and $275,000 of distributions from other investments in related parties, respectively, which are included in “Income from investments in related parties, net” in the Unaudited Consolidated Statements of Operations.

Other Investments

The following table details investments by major investment category, other than investments in related parties, at September 30, 2025 and December 31, 2024 (in thousands):

September 30, 2025 December 31, 2024
Cost/Amortized Cost/Amortized
Fair Value Cost, Net Fair Value Cost, Net
U.S. government and agency securities, held-to-maturity ^(1)^ $ - $ - $ 1,000 $ 1,000
Investment in limited partnership, at net asset value ^(2)^ 2,010 2,010 2,183 2,183
Total investments $ 2,010 $ 2,010 $ 3,183 $ 3,183
(1) The Company's fixed-income securities portfolio was classified as held-to-maturity and reported at amortized cost as of December 31, 2024. The fixed-income securities were classified as Level 2 in the fair value hierarchy. As of December 31, 2024, there were no unrealized gains or losses on fixed-income securities. The Company's fixed-income securities matured in the first quarter of 2025.
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(2) As of September 30, 2025, there are no unfunded commitments related to the investment in limited partnership. This limited partnership invests in property catastrophe risk through customized reinsurance solutions. The underlying assets of the limited partnership are one year or less in duration and the Company’s proceeds may be redeemed or reinvested annually. Changes in net asset value of the investment in limited partnership are included in "Net investment income" on the Company’s Unaudited Consolidated Statements of Operations.

The Company has elected the practical expedient for fair value for its investment in limited partnership which is estimated based on our share of the net asset value (“NAV”) of the limited partnership, as provided by the independent fund administrator. The Company’s share of the NAV represents the Company’s proportionate interest in the members’ equity of the limited partnership.

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Net investment income

Net investment income for the three and nine months ended September 30, 2025 and 2024 is detailed below (in thousands):

For the Three Months Ended For the Nine Months Ended
September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Interest on:
Cash equivalents $ 89 $ 70 $ 272 $ 273
Fixed income securities - 35 1 88
Dividends on investment in HC Series B Stock - - - 256
Change in NAV of investment in limited partnership 244 222 217 273
Less: Investment expense - (2 ) (1 ) (4 )
Net investment income $ 333 $ 325 $ 489 $ 886
5. Reserve for Title Claims
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NCTIC’s reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the total reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through September 30, 2025. We continually update loss reserve estimates as new information becomes known, new loss patterns emerge or as other contributing factors are considered and incorporated into the analysis of reserve for claim losses. Due to the uncertainty inherent in the process and to the judgment used by management, the ultimate liability may be greater or less than our current reserves. If actual claims loss development varies from what is currently expected and is not offset by other factors, it is possible that additional reserve adjustments may be required in future periods in order to maintain our recorded reserve within a reasonable range of our actuary's central estimate.

A reconciliation of the activity in the reserves account for the nine-month periods ended September 30, 2025 and 2024 is as follows (in thousands):

For the Nine For the Nine
Months Ended Months Ended
September 30, 2025 September 30, 2024
Beginning Reserves $ 637 $ 313
Provision for claims related to:
Current year 188 102
Prior years (67 ) -
Total provision for claim losses 121 102
Claims paid related to:
Current year - -
Prior years 76 -
Total title claims paid 76 -
Ending Reserves $ 682 $ 415

At September 30, 2025, there were no reinsurance recoverables on paid claims or unpaid reserves.

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For the three months ended September 30, 2025, the Company recognized favorable title claims loss and loss adjustment expense development of $34,000 attributable to insured events of the prior years as a result of estimation of the reserve for claims loss and loss adjustment expenses. For the nine months ended September 30, 2025, the Company recognized an additional $15,000 net provision for title claims loss and loss adjustment expense attributable to insured events of the prior years as a result of estimation of the reserve for claims loss and loss adjustment expenses. Original estimates of ultimate loss exposures are decreased or increased as additional information becomes known during the adjustment process regarding individual claims.

A summary of the Company’s loss reserves at September 30, 2025 and December 31, 2024 is as follows (in thousands):

As of September 30, 2025 As of December 31, 2024
Known title claims $ 65 $ 114
IBNR title claims 617 523
Total title claims 682 637
Non-title claims - -
Total title claims reserves $ 682 $ 637
6. Reinsurance
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Certain premiums and benefits at NCTIC are ceded to other insurance companies under various reinsurance agreements. The reinsurance agreements provide NCTIC with increased capacity to write more risk and maintain its exposure to loss within its capital resources. For the three- and nine-month periods ended September 30, 2025 and 2024, NCTIC's reinsurance program consisted of excess of loss reinsurance treaties. The following is a summary of the reinsurance coverage:

Effective January 1, 2025, NCTIC entered into a per risk excess of loss reinsurance agreement that provides coverage of $4,000,000 in excess of $1,000,000 on each and every risk. The contract allows for one full reinstatement without additional premium. This per risk agreement is shared with other non-affiliated companies. Each company pays its share of the reinsurance cost based on separate company earned premiums. The agreement expires December 31, 2025.

Effective January 1, 2024, NCTIC entered into a per risk excess of loss reinsurance agreement that provided coverage of $4,000,000 in excess of $1,000,000 on each and every risk. The contract allowed for one full reinstatement without additional premium. This per risk agreement was shared with other non-affiliated companies. Each company paid its share of the reinsurance cost based on separate company earned premiums. The agreement expired  December 31, 2024.

NCTIC’s reinsured risks are treated, to the extent of reinsurance, as though they are risks for which the Company is not liable. However, NCTIC remains contingently liable in the event its reinsurers do not meet their obligations under these reinsurance contracts. NCTIC uses a broker to place its reinsurance through Lloyd’s syndicates, a group of underwriters who work together to provide insurance coverage for a variety of risks. Chaucer Syndicates Ltd. (“Chaucer Syndicates”) and Beazley Syndicate (“Beazley”) are each 50% participants in the Lloyd’s syndicate. As such, NCTIC has a concentration of reinsurance risk with these third-party reinsurers that could have a material impact on NCTIC’s financial position in the event that either of these reinsurers fail to perform their obligations under the reinsurance treaty. As of September 30, 2025, Chaucer Syndicates was rated A (excellent) by A.M. Best, A+ (strong) by Standard & Poor's and AA- (very strong) by Fitch. Beazley was rated A+ (superior) by A.M. Best, AA- (very strong) by Standard & Poor's and AA- (very strong) by Fitch. The Company monitors the financial condition of individual reinsurers, risk concentration arising from similar activities as well as economic characteristics of reinsurers to attempt to reduce the risk of default by such reinsurers. Given the quality of the reinsurers, management believes this possibility to be remote. At September 30, 2025, there were no reinsurance recoverables on paid claims or unpaid reserves.

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The effects of reinsurance on the title premiums written and earned at NCTIC for the three and nine -month periods ended September 30, 2025 and 2024 are as follows (in thousands):

Three Months Nine Months
Ended Ended
September 30, September 30, September 30, September 30,
2025 2024 2025 2024
Direct title premiums $ 1,460 $ 1,490 $ 3,807 $ 3,555
Ceded title premiums (13 ) (10 ) (39 ) (30 )
Net title premiums written ^(1)^ $ 1,447 $ 1,480 $ 3,768 $ 3,525
(1) Net title premiums written disclosed in the table above is of NCTIC only and is included as part of the "Net premiums written" on the Unaudited Consolidated Statements of Operations.
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The Company did not have any written reinsurance contracts in-force during the three- and nine-month periods ended September 30, 2025 and 2024.

7. Statutory Reporting and Requirements

NCTIC's assets, liabilities, and results of operations have been reported in accordance with U.S. GAAP, which varies from statutory accounting practices (“SAP”) prescribed or permitted by insurance regulatory authorities. Prescribed SAP are found in a variety of publications of the National Association of Insurance Commissioners, state laws and regulations, as well as through general practices. The principal differences between SAP and U.S. GAAP are that under SAP: (1) certain assets that are not admitted assets are eliminated from the balance sheet, (2) a supplemental reserve for claims is charged directly to unassigned surplus rather than provision for claims under U.S. GAAP, and (3) differences may arise in the computation of deferred income taxes. The Company must file with applicable state insurance regulatory authorities an “Annual Statement” which reports, among other items, net income (loss) and stockholders' equity (called “surplus as regards policyholders” in statutory reporting).

NCTIC is subject to regulations and standards of the Florida Office of Insurance Regulation. These standards and regulations include a requirement that the insurance entities domiciled in the State of Florida maintain specified levels of statutory capital and restrict the timing and amount of dividends and other distributions that may be paid by the insurance entities to the parent company. As of September 30, 2025, NCTIC’s statutory surplus is $8.5 million and exceeded the minimum of $3.0 million required by the State of Florida for title insurance companies. The maximum amount of dividends which can be paid by State of Florida insurance companies to shareholders without prior approval of the Insurance Commissioner is subject to restrictions relating to statutory surplus. Cash dividends may only be paid out of accumulated surplus funds derived from net operating profits and realized capital gains not exceeding 10% of such surplus in any one year, although there are no restrictions on cash dividend payments out of profits and gains derived during the immediately preceding year. For the three and nine months ended September 30, 2025 and 2024, no dividends were paid from NCTIC to the Company.

8. Segment Information

Effective January 1, 2025, the Company changed its reportable segments to two reportable segments: (i) Title Insurance and (ii) Corporate and Other. This change in reportable segments reflects the changes in the business mix and the manner in which the Company's chief operating decision maker, Steven A. Hale II, Chief Executive Officer, monitors the performance of operations. The change in reportable segments had no impact on the Company’s historical consolidated financial positions, results of operations or cash flows as previously reported. Where applicable, all prior periods presented have been revised to conform to this new presentation. The measure of Company's segment performance is income before income taxes.

Title Insurance

Our title insurance segment issues title insurance policies and provides title agency services on residential and commercial real estate transactions. This segment also provides closing and/or escrow services to facilitate real estate transactions.

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Corporate and Other

The Corporate and Other segment is comprised of activity previously presented in the Real Estate, Reinsurance and Management Advisory Services segments. Activity in the Corporate and Other segment primarily consists of management advisory services that the Company performs through its Services Agreement with HP Risk. Pursuant to this agreement, the Company provides certain managerial and operational services that include, but are not limited to: reinsurance brokerage services; the review and improvement of financial goals; compliance with legal and regulatory mandates; maintenance of an ethical business environment; investment and asset manager compliance; cash and equity management; corporate tax management; personnel management; related party transaction oversight; tax preparation administration; strategic capital modeling; the review of potential acquisitions and transactions involving affiliates and third parties, including but not limited to, renewal rights deals, loss portfolio transfers or entity acquisitions; execution of (or provision for the execution of) all general corporate legal matters; and provision of internal control management services.

The Corporate and Other segment also includes results of the Company's investment in a related party - HC Realty. HC Realty is an internally-managed REIT focused on acquiring, financing, owning and managing build-to-suit or renovate-to-suit, single-tenant properties leased primarily to the U.S. government and administered by the U.S. General Services Administration or directly by the federal government agencies or sub-agencies occupying such properties. As of September 30, 2025, the Company owns approximately 28.0% of the voting interest of HC Realty.

Provided below is selected financial information about the Company’s operations by segment for the three months ended September 30, 2025 (in thousands):

Title Corporate ****
Insurance and Other Total
Insurance and other services revenue $ 2,620 $ 1,500 $ 4,120
Cost of revenues:
Underwriting expenses (33 ) - (33 )
Recoveries of title claim losses 15 - 15
Search and other fees (13 ) - (13 )
Total cost of revenue (31 ) - (31 )
Gross profit $ 2,589 $ 1,500 $ 4,089
Operating expenses:
Personnel costs (1,742 ) (330 ) (2,072 )
Other operating expense ^(1)^ (904 ) (327 ) (1,231 )
Amortization and depreciation (24 ) - (24 )
Total operating expense (2,670 ) (657 ) (3,327 )
Other income, net 109 424 533
Income before income taxes $ 28 $ 1,267 $ 1,295
Goodwill and intangible assets, net ^(2)^ $ 6,629 $ - $ 6,629
(1) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.
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(2) The Company does not allocate its assets by segment, with the exception of Goodwill and Intangible assets.

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Provided below is selected financial information about the Company’s operations by segment for the three months ended  *September 30, 2024 (*in thousands):

Title Corporate ****
Insurance and Other Total
Insurance and other services revenue $ 2,318 $ 750 $ 3,068
Cost of revenues:
Underwriting expenses (41 ) - (41 )
Provision for title claim losses (48 ) - (48 )
Search and other fees (10 ) - (10 )
Total cost of revenue (99 ) - (99 )
Gross profit $ 2,219 $ 750 $ 2,969
Operating expenses:
Personnel costs (1,618 ) (402 ) (2,020 )
Other operating expense ^(1)^ (1,025 ) (179 ) (1,204 )
Amortization and depreciation (28 ) - (28 )
Total operating expense (2,671 ) (581 ) (3,252 )
Other income, net 72 319 391
(Loss) income before income taxes $ (380 ) $ 488 $ 108 ****
Goodwill and intangible assets, net ^(2)^ $ 6,703 $ - $ 6,703
(1) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.
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(2) The Company does not allocate its assets by segment, with the exception of Goodwill and Intangible assets.

Provided below is selected financial information about the Company’s operations by segment for the nine months ended  September 30, 2025 (in thousands):

Title Corporate ****
Insurance and Other Total
Insurance and other services revenue $ 7,402 $ 3,500 $ 10,902
Cost of revenues:
Underwriting expenses (132 ) - (132 )
Provision for title claim losses (87 ) - (87 )
Search and other fees (68 ) - (68 )
Total cost of revenue (287 ) - (287 )
Gross profit $ 7,115 $ 3,500 $ 10,615
Operating expenses:
Personnel costs (5,081 ) (1,085 ) (6,166 )
Other operating expense ^(1)^ (2,572 ) (1,007 ) (3,579 )
Amortization and depreciation (74 ) - (74 )
Total operating expense (7,727 ) (2,092 ) (9,819 )
Other income, net 247 920 1,167
(Loss) income before income taxes $ (365 ) $ 2,328 $ 1,963
Goodwill and intangible assets, net (2) $ 6,629 $ - $ 6,629
(1) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.
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(2) The Company does not allocate its assets by segment, with the exception of Goodwill and Intangible assets.

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Provided below is selected financial information about the Company’s operations by segment for the nine months ended  *September 30, 2024 (*in thousands):

Title Corporate ****
Insurance and Other Total
Insurance and other services revenue $ 6,638 $ 2,253 $ 8,891
Cost of revenues:
Underwriting expenses (164 ) - (164 )
Provision for title claim losses (102 ) - (102 )
Search and other fees (45 ) - (45 )
Total cost of revenue (311 ) - (311 )
Gross profit $ 6,327 $ 2,253 $ 8,580
Operating expenses:
Personnel costs (4,871 ) (1,102 ) (5,973 )
Other operating expense ^(1)^ (2,593 ) (807 ) (3,400 )
Amortization and depreciation (109 ) - (109 )
Total operating expense (7,573 ) (1,909 ) (9,482 )
Other income, net 197 706 903
(Loss) income before income taxes $ (1,049 ) $ 1,050 $ 1 ****
Goodwill and intangible assets, net (2) $ 6,703 $ - $ 6,703
(1) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.
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(2) The Company does not allocate its assets by segment, with the exception of Goodwill and Intangible assets.
9. Income Taxes
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During the nine months ended September 30, 2025, the Company recorded an additional valuation allowance of $120,000, increasing its valuation allowance against deferred tax assets to $8.4 million as of September 30, 2025. The primary assets covered by this valuation allowance are federal net operating losses, which approximate $33.5 million at September 30, 2025. The Company made cash payments for state income tax of $15,000 during the three- and nine-month periods ended September 30, 2025, and no cash payments during the same periods in 2024, due to net operating loss carryforwards at both federal and state tax jurisdictions.

The Company maintains a valuation allowance against deferred tax assets that currently exceeds our deferred tax liabilities. The primary assets covered by this valuation allowance are net operating loss carryforwards. The valuation allowance was calculated in accordance with the provisions of Accounting Standard Codification ("ASC") 740, Income Taxes, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance. The Company’s results over the most recent periods were heavily affected by business restructuring activities. The Company’s cumulative loss represented sufficient negative evidence to require a valuation allowance. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support the reversal of some or all of the valuation allowance, resulting in no deferred tax asset balance being recognized.

Income taxes provided in the accompanying statements of operations for the three- and nine-month periods ended September 30, 2025 and 2024 differ from the income taxes at the statutory federal rate due primarily to the change in the valuation allowance for deferred tax assets during the period and due to state income taxes in jurisdictions without prior net operating loss carryforwards available to offset taxable income.

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10. Stockholders’Equity

Basic earnings (loss) per common share are based upon the weighted average shares outstanding. Outstanding stock options and restricted stock are treated as potential common stock for purposes of computing diluted earnings (loss) per share. Basic and diluted earnings (loss) per share are calculated using the following share data (in thousands):

Three Months Nine Months
Ended Ended
September 30, September 30, September 30, September 30,
2025 2024 2025 2024
Weighted average shares outstanding for basic calculation 5,221 2,813 3,520 2,840
Add: Effect of dilutive stock awards - - - -
Weighted average shares outstanding, adjusted for diluted calculation 5,221 2,813 3,520 2,840

For the three- and nine-month periods ended September 30, 2025 and 2024, there were no stock options or restricted stock awards outstanding.

On May 14, 2024, the Company’s board of directors (the “Board”) authorized the repurchase of up to $1.5 million of shares of the Company’s common stock (the "2024 Repurchase Program"). The authorization does not obligate the Company to acquire a specific number of shares during any period and does not have an expiration date. Repurchases under the 2024 Repurchase Program may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in such quantities, at such prices, in such manner and on such terms and conditions as the authorized officers of the Company determine are in the best interests of the Company. Repurchases may also be made under a plan adopted pursuant to Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

During the three and nine months ended September 30, 2025, the Company repurchased 16,751 and 508,377 shares of common stock, respectively, at a weighted average price per share of $7.80, 402,322 shares of which were repurchased outside of, and as an exception to, the 2024 Repurchase Program. The total cost of shares repurchased, inclusive of fees and commissions, during the three and nine months ended September 30, 2025 was approximately $0.1 million and $4.0 million, respectively, or $7.80 per share.

During the nine months ended September 30, 2024, the Company repurchased 48,333 shares of common stock, at a weighted average price per share of $5.00. The total cost of shares repurchased, inclusive of fees and commissions, during the nine months ended September 30, 2024 was $0.2 million or $5.02 per share. The Company did not repurchase any shares of common stock during the three months ended September 30, 2024.

During the three and nine months ended September 30, 2025 and 2024, the Company did not declare or pay any dividends to its holders of common stock.

Effective September 2, 2025, the Company amended its Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) to reduce the number of authorized shares to 8,000,000 shares which are divided into two classes as follows: (a) 7,000,000 shares of common stock, $0.02 par value per share; and (b) 1,000,000 shares of Blank Check Preferred Stock, $0.01 par value per share (the “Amendment”). The Certificate of Incorporation previously provided that the number of authorized shares was 36,000,000 shares which were divided into two classes as follows: (a) 35,000,000 shares of common stock, $0.02 par value per share; and (b) 1,000,000 shares of Blank Check Preferred Stock, $0.01 par value per share. No issued shares of the Company are impacted by the Amendment; the Amendment only reduces the Company’s authorized but unissued shares.

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11. Goodwill and Intangible Assets

Goodwill

The Company historically recognized $4.5 million in goodwill as the result of the acquisition of 50% of TAV on September 1, 2021, and an additional $2.0 million in goodwill as a result of the business combination with Omega Title Florida, LLC ("OTF") on August 1, 2022. In accordance with ASC Topic 350, Intangibles – Goodwill and Other, the Company did not record any goodwill impairment losses during the three or nine months ended September 30, 2025 and 2024. The Company’s goodwill is allocated to the Title Insurance Segment. See Note 8, Segment Information for allocation of goodwill and intangible assets to the Company’s segments.

Intangible Assets

The following is a summary of intangible assets excluding goodwill recorded as intangible assets on our Unaudited Consolidated Balance Sheets at  September 30, 2025 and  December 31, 2024 (in thousands):

September 30, December 31,
2025 2024
Intangible assets subject to amortization $ 137 $ 193
Total $ 137 $ 193

Intangible assets subject to amortization consisted of the following as of September 30, 2025 (dollars in thousands):

Weighted-average ****
remaining ****
amortization period Gross carrying Accumulated Net carrying
(in years) amount amortization amount
Noncompetition agreement 1.8 $ 372 $ (235 ) $ 137
Total $ 372 $ (235 ) $ 137

No impairment in the value of intangible assets was recognized during the three or nine months ended September 30, 2025 and 2024.

Amortization expense of the intangible assets for the three- and nine-month periods ended September 30, 2025 was $19,000 and $56,000, respectively. Amortization expense of the intangible assets for the three- and nine-month periods ended September 30, 2024 was $19,000 and $56,000, respectively.

Estimated amortization expense of the intangible assets to be recognized by the Company during the remainder of 2025 and over the following years is as follows (in thousands):

Estimated Amortization
Year ending December 31, Expense
Remaining in 2025 $ 18
2026 74
2027 45
Total $ 137

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12. Commitments and Contingencies

The Company and its subsidiaries are parties to claims and lawsuits related to the normal course of business operations. When the Company determines that a loss is both probable and reasonably estimable, a liability representing the best estimate of the Company’s financial exposure is recorded. Actual losses may materially differ from the Company’s estimates. With respect to our title insurance operations, this customary litigation includes but is not limited to a wide variety of cases arising out of or related to title and escrow claims, for which we make provisions through our loss reserves. See Note 5, Reserve for Title Claims, for further information. None of these claims and lawsuits, in management’s opinion, will have a material adverse effect on our Consolidated Financial Statements.

Litigation

The Company’s subsidiaries are parties to legal actions incidental to their business. As of September 30, 2025, management believed that the resolution of these matters would not materially affect our financial condition or results of operations.

ONF Litigation

During the third quarter of 2025, one of the Company’s subsidiaries, ONF, was included as a defendant in connection with litigation in the County Court in and for Lee County, Florida. ONF was served with the initial summons on October 2, 2025. The case, instituted by Delta Build Services, Inc., a sub-contractor who provided labor and supplies, and Gretchel De Los Milagros Castaneda-Vazquez, the purchaser of the property (collectively "Lee County Plaintiffs”), is a multi-count civil lawsuit filed against multiple parties, including the general contractor, its managers and managing members, ONF, a former employee of Delta Build Services,Inc., the buyer’s realtor and supervising broker . The single alleged count against ONF is a claim of negligence. Lee County Plaintiffs allege that ONF breached a duty of care owed to Lee County Plaintiffs by accepting an allegedly forged document at closing. ONF has retained outside counsel. The Company believes it is unlikely that the case will result in a material adverse effect on the Company's consolidated financial statements.

Omega Litigation

During the fourth quarter of 2024, Omega was served with litigation in the Circuit Court in and for Charlotte County, Florida. The case, instituted by ABL RPC Residential Credit Acquisition, LLC, is a mortgage foreclosure action filed against multiple parties including the borrower, the current UCC lien holder, the current owners of the collateralized properties, and unknown tenants of the properties (collectively "Charlotte County Defendants”). Two of the Charlotte County Defendants, 760 Anatalya Holding LLC and 562 Monaco Holding LLC (“Anatalya and Monaco”), through their majority owners, filed Affirmative Defenses and Counter Claims in the foreclosure action alleging a count of negligence against Omega and naming Omega as a Third-Party Defendant. Anatalya and Monaco allege that Omega was negligent in conducting the closing of the mortgage transaction when Omega allowed the Manager of Anatalya and Monaco to execute all documents on their behalf including deeds transferring the properties into the name of the borrowing entity. Omega has retained outside counsel. Though the procedural posture of the case has changed given amendments to the relevant complaint filed by Anatalya and Monaco, the Company continues to believe it is unlikely that the case will result in a material adverse effect on the Company's consolidated financial statements.

Citibank Foreclosure Against Unrelated Third Party

On May 13, 2024, the Company was served with a foreclosure action filed by Citibank, N.A., primarily against two individually named defendants. The Company was identified as a co-defendant in this matter as the Company has a recorded judgment against one of the primary defendants. The Company has retained outside counsel in this matter in efforts to preserve any claim the Company may have to said recorded judgment against the primary defendant. Given the posture of the litigation, management does not believe this matter will result in a material adverse effect on the Company’s consolidated financial statements.

Omega Employee Litigation

During the first quarter of 2024, Omega became involved in litigation in the United States District Court for the Middle District of Florida. The case, instituted by a former Omega employee, alleges that the former employee was separated from Omega in a manner inconsistent with the Americans with Disabilities Act and the Florida Civil Rights Act. Omega entered into a settlement agreement to resolve all counts against Omega effective  *March 28, 2025.*The monetary amount conveyed under the settlement agreement did not result in a material adverse effect to the Company’s consolidated financial statements.

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13. Leases

Right-of-use assets and lease liabilities related to operating leases are recorded when the Company and its subsidiaries are party to a contract, which conveys the right for it to control an asset for a specified period of time. Substantially all of our operating lease arrangements relate to rented office space and real estate for our title operations. The Company is not a party to any material contracts considered finance leases. Right-of-use assets and lease liabilities are recorded as Lease assets and Lease liabilities, respectively, on the Unaudited Consolidated Balance Sheets.

The Company’s operating leases range in term from one to five years. As of September 30, 2025 and December 31, 2024, the weighted-average remaining lease term of our operating leases was 2.0 years and 2.1 years, respectively.

The Company’s lease agreements do not contain material variable lease payments, buyout options, residual value guarantees or restrictive covenants.

Most of the Company’s leases include one or more options to renew, with renewal terms that can extend the lease term by varying amounts. The exercise of lease renewal options is at our sole discretion. We do not include options to renew in our measurement of lease assets and lease liabilities as they are not considered reasonably assured of exercise as of September 30, 2025.

The lease liability is determined by discounting future lease payments using a discount rate based on the Company’s incremental borrowing rate for similar collateralized borrowing. The discount rate is calculated using estimates of capitalization rates and borrowing rates. As of September 30, 2025 and December 31, 2024, the weighted-average discount rate used to determine our operating lease liability was 6.0%.

Lease expense included in general and administrative expenses on the Unaudited Consolidated Statements of Operations was $178

,000 and $219,000 for the three months ended September 30, 2025 and 2024, respectively, and $597,000 and $769,000 for the nine months ended September 30, 2025 and 2024, respectively. The Company's lease liabilities recognized in exchange for lease right-of-use assets were $124,000 and $129,000 for the three months ended September 30, 2025 and 2024, respectively, and $280,000 and $129,000 for the nine months ended September 30, 2025 and 2024, respectively.

Future minimum rental commitments as of September 30, 2025 under these leases are expected to be as follows (in thousands):

Remainder of 2025 $ 95
2026 349
2027 178
2028 32
Total lease payments, undiscounted $ 654
Less: present value discount (36 )
Lease liabilities, at present value $ 618

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ITEM 2. **** Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the accompanying Unaudited Consolidated Financial Statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the audited consolidated financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025. The terms the “Company”, “we”, “our” or “us” refer to HG Holdings, Inc., together with its consolidated subsidiaries, and unless otherwise defined herein, capitalized terms used herein shall have the same meanings as set forth in our accompanying Unaudited Consolidated Financial Statements and the notes thereto.

Forward-Looking Statements

Certain statements made in this report are not based on historical facts, but are forward-looking statements. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “may,” “will,” “should,” “could,” "would," "intends" or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These statements reflect our reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include the occurrence of events that negatively impact the Company’s liquidity in such a way as to limit or eliminate the Company’s ability to use its cash on hand to fund further asset acquisitions, an inability on the part of the Company to identify additional suitable businesses to acquire or develop, and the occurrence of events that negatively impact the title insurance operations of the Company’s subsidiaries and/or the business or assets of HC Realty and the value of our investment in HC Realty, such as HC Realty’s dependence on leases by the U.S. government and its agencies for substantially all of its revenues, and the risk that the U.S. government reduces its spending on real estate or that it changes its preference away from leased properties. Any forward-looking statement speaks only as of the date of this filing and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Overview

For a description of our business, including descriptions of segments and recent business developments, see the discussion in Note 1, Basis of Presentation and Nature of Operations – Description of the Business in the accompanying Unaudited Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I, Item 2.

As of September 30, 2025, our sources of income include earnings from our title insurance subsidiaries, management service fees and interest earned on invested assets. The Company believes that the revenue generated from these sources and cash on hand is sufficient to fund operating expenses for at least 12 months from the date of the accompanying Unaudited Consolidated Financial Statements.

The Company will continue to pursue acquisition opportunities which will allow us to potentially derive benefit from the Company’s net operating loss carryforwards and also create appropriate risk adjusted returns for stockholders.

Title Insurance Segment Trends and Conditions

Our title insurance segment revenue is closely related to the level of real estate activity, such as sales, mortgage financing and mortgage refinancing. Declines in the level of real estate activity or the average price of real estate sales will adversely affect our title insurance revenues. The industry as a whole saw declined levels in total real estate transactions in the last several years, largely due to higher mortgage interest rates. During its September and October 2025 meetings, the Federal Reserve lowered the federal funds rate by a total of 50 basis points to a current range of 3.75% to 4.00%; however, the ongoing political and market uncertainties have prevented the Federal Reserve from reducing the federal funds rate further, stalling any small improvements in real estate activity. While recent and potential future Federal Reserve rate decreases may positively impact the title insurance market, recent geopolitical uncertainties and federal government efforts have created elevated volatility in domestic and global arenas, making it challenging to forecast industry trends. Per the Mortgage Bankers Association's (“MBA”) Mortgage Finance Forecast as of October 2025, interest rates on a Freddie Mac 30-year, fixed rate mortgage averaged 6.8% in the first half of 2025 but are projected to decrease to 6.4% by the end of the year. Despite the Federal Reserve lowering the federal funds rate in 2024 and 2025, current interest rates remain at elevated levels compared to pre-2021 interest rates.

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Because commercial real estate transactions tend to be generally driven by supply and demand for commercial space and occupancy rates in a particular area rather than by interest rate fluctuations, we believe that our commercial real estate title insurance business is less dependent on the industry cycles discussed above than our residential real estate title business. Commercial real estate transaction volume is also often linked to the availability of financing. Factors including U.S. tax reform and a shift in U.S. monetary policy have had, or are expected to have, varying effects on availability of financing in the U.S. Lower corporate and individual tax rates, and corporate tax-deductibility of capital expenditures have provided increased capacity and incentive for investments in commercial real estate.

Historically, real estate transactions have produced seasonal revenue fluctuations in the real estate industry. The first calendar quarter is typically the weakest quarter in terms of revenue due to the generally low volume of home sales during January and February. The second and third calendar quarters are typically the strongest quarters in terms of revenue, primarily due to a higher volume of residential transactions in the spring and summer months. The fourth quarter is typically strong due to the desire of commercial entities to complete transactions by year-end. Seasonality in recent years deviated from historical patterns due to COVID-19 and the subsequent rapid increase in interest rates. We have noted short-term fluctuations through recent years in resale and refinance transactions as a result of changes in interest rates.

Results from Operations

(in thousands)

Three Months Ended Nine Months Ended
September 30, September 30, **** September 30, September 30,
2025 2024 Change 2025 2024 Change
Net title premium written $ 1,886 $ 1,649 $ 237 $ 5,272 $ 4,723 $ 549
Escrow and other title fees 734 669 65 2,130 1,915 215
Management fees 1,500 750 750 3,500 2,253 1,247
Total revenue 4,120 3,068 1,052 10,902 8,891 2,011
Cost of revenues (31 ) (99 ) 68 (287 ) (311 ) 24
Gross profit $ 4,089 $ 2,969 $ 1,120 $ 10,615 $ 8,580 $ 2,035
Operating expenses (3,327 ) (3,252 ) (75 ) (9,819 ) (9,482 ) (337 )
Other income, net 533 391 142 1,167 903 264
Income before income taxes $ 1,295 **** $ 108 $ 1,187 **** $ 1,963 $ 1 **** $ 1,962

Comparison of three and nine months ended September 30, 2025 and 2024

The Company’s net title premiums written for the three- and nine-month periods ended September 30, 2025 were $1.9 million and $5.3 million, respectively, compared to net title premiums written for the three- and nine-month periods ended September 30, 2024 of $1.6 million and $4.7 million, respectively. The increase in net title premiums written for the three- and nine-month periods ended September 30, 2025 as compared to the same periods of last year was due to higher volume of affiliated title business written. Escrow and other title fees revenue also increased by $0.1 million for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, and increased $0.2 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, due to higher volume of affiliated title business written during the third quarter of 2025.

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Management fees increased to $1.5 million and $3.5 million for the three and nine months ended September 30, 2025, respectively, as compared to $0.8 million and $2.3 million for the three and nine months ended September 30, 2024, respectively. The increase was due to the new Services Agreement with HP Risk becoming effective June 1, 2025. HP Risk is a wholly-owned subsidiary of HP Holding Company, LLC, which, in turn, is wholly owned by certain affiliates of Steven A. Hale II, our Chairman and Chief Executive Officer, pursuant to which the Company is providing certain managerial and operational services to HP Risk for consideration from HP Risk of $6.0 million per year over the course of three years. Such services include, but are not limited to: reinsurance brokerage services; the review and improvement of financial goals; compliance with legal and regulatory mandates; maintenance of an ethical business environment; investment and asset manager compliance; cash and equity management; corporate tax management; personnel management; related party transaction oversight; tax preparation administration; strategic capital modeling; the review of potential acquisitions and transactions involving affiliates and third parties, including but not limited to, renewal rights deals, loss portfolio transfers or entity acquisitions; execution of (or provision for the execution of) all general corporate legal matters; and provision of internal control management services.

Total revenue was $4.1 million and $3.1 million for the three-month periods ended September 30, 2025 and September 30, 2024, respectively, and $10.9 million and $8.9 million for the nine-month periods ended September 30, 2025 and September 30, 2024, respectively. The increase in revenue was primarily a result of the management fees derived from the Services Agreement with HP Risk and higher title affiliated business volume written in 2025 as compared to the prior year.

The Company’s cost of revenues consists primarily of a provision for title claim losses and underwriting expenses, which are largely comprised of commissions to unaffiliated title agencies. Cost of revenues for the three-month periods ended September 30, 2025 and September 30, 2024 was $0.03 million and $0.1 million, respectively. Cost of revenues for the nine-month periods ended September 30, 2025 and 2024 was $0.3 million. The decrease in cost of revenue for the three months ended September 30, 2025, as compared to the prior period, was attributable to positive prior year development on one title insurance claim. Original estimates of ultimate loss exposures are decreased or increased as additional information becomes known during the adjustment process regarding individual claims.

The Company’s operating expenses primarily consist of general and administrative expenses such as personnel expenses, office and technology expenses, and professional fees. Operating expenses increased $0.1 million for the three months ended September 30, 2025 as compared to three months ended September 30, 2024, and $0.3 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The increase is primarily due to higher legal and professional fees related to transactions described in Note 3, Significant Transactions, in the accompanying Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as an increase in employee health and benefit costs in 2025 as compared to 2024.

Other income, net primarily consists of net interest income, dividend income, change in the net asset value of investment in limited partnership as well as changes in value and distributions from our related party investments. Other income, net was $0.5 million for the three-month period ended September 30, 2025, compared to Other income, net of $0.4 million for the three-month period ended September 30, 2024. The increase in Other income was primarily a result of higher distributions from related parties for the three-month period ended September 30, 2025 of $196,000, as compared to $75,000 distributed during the three-month period ended September 30, 2024. Other income, net was $1.2 million for the nine-month period ended September 30, 2025, compared to $0.9 million for the nine-month period ended September 30, 2024. The increase in Other income was primarily driven by higher distributions from related parties for the nine-month period ended September 30, 2025 of $681,000, as compared to $275,000 distributed during the nine-month period ended September 30, 2024, as well as lower impairment taken on the Company's investments in HC Common Stock and HC Series B Stock of $41,000 during the nine-month period ended September 30, 2025 as compared to impairment of $241,000 during the nine-month period ended September 30, 2024. Offsetting this increase is the reduction of dividends as HC Realty did not declare or pay dividends on HC Common Stock or HC Series B Stock during the nine-month period ended September 30, 2025, compared to $0.3 million of dividends declared on the HC Series B Stock for the nine-month period ended September 30, 2024.

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Financial Condition, Liquidity and Capital Resources

Sources of liquidity include cash on hand, earnings from our title insurance subsidiaries, management service fees and interest earned on invested assets. At September 30, 2025, we had $10.3 million in cash and cash equivalents and an additional $10.6 million in restricted cash, substantially all of which is cash held in escrow for title insurance transactions. A portion of our unrestricted and restricted cash is currently held in savings accounts earning interest at approximately 4.1% annually. Historically, we also received discretionary dividends on our HC Common Stock and HC Series B Stock at annual dividend rates of approximately 0.4% and 10%, respectively. No dividends have been declared on HC Common Stock and HC Series B Stock since the first quarter of 2024. During the second quarter of 2025, the Company entered into the Services Agreement with HP Risk under which the Company earns a management advisory fee of $6.0 million per year over the course of three years. We believe that the sources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months, even if no dividends are declared on HC Common Stock and HC Series B Stock within the next 12 months.

Cash Flows

(in thousands)

Nine Months Ended Nine Months Ended
September 30, 2025 September 30, 2024
Net cash provided by operating activities $ 3,235 $ 5,025
Net cash provided by investing activities 1,127 **** 543
Net cash used in financing activities (3,915 ) (365 )
Net increase in cash and cash equivalents and restricted cash 447 5,203
Cash and cash equivalents and restricted cash at beginning of period $ 20,409 $ 17,752
Cash and cash equivalents and restricted cash at end of period $ 20,856 $ 22,955

Cash flows provided by operating activities differ from net income (loss) due to adjustments for non-cash items, such as gains and losses on investments, the timing of disbursements for taxes, claims and other accrued liabilities, and collections or changes in receivables and other assets. Net cash provided by operating activities of $3.2 million differs from operating results for the nine-month period ended September 30, 2025, primarily due to an increase of $2.3 million in escrow liabilities on the title insurance subsidiaries. Net cash provided by operating activities of $5.0 million differs from operating results for the nine-month period ended September 30, 2024, primarily due to an increase of $5.0 million in escrow liabilities on the title insurance subsidiaries.

Cash flows provided by investing activities include effects of purchases of investments and proceeds from sales or maturities of investments. During the nine-month period ended September 30, 2025, the Company's fixed-income portfolio has matured, resulting in $1.0 million in proceeds. Additionally, during the nine-month period ended September 30, 2025, the Company received proceeds from its investments in limited partnership of $0.4 million and provided additional contributions to related parties of $0.3 million. During the nine-month period ended September 30, 2024, the Company purchased $0.7 million and received proceeds of $0.2 million from its investments in limited partnerships, as well as redeemed $1.1 million of fixed income securities.

Cash flows used in financing activities include share repurchases and effects of changes in noncontrolling interest. Cash flows used in financing activities for the nine-month period ended September 30, 2025 of $3.9 million consisted of $4.0 million of repurchases of common stock, partially offset by $51,000 in net contributions from non-controlling interest shareholders. Cash flows used in financing activities for the nine-month period ended September 30, 2024 of $0.4 million consisted of $0.2 million of repurchases of common stock and $0.1 million of distributions to non-controlling interest shareholders.

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Non-cash Transactions

Additionally, during the second quarter of 2025, the Company entered into an Assignment and Contribution Agreement (the “Contribution Agreement”) with the certain assignors listed therein (the “Assignors”), pursuant to which the Assignors agreed to assign and contribute to the Company an aggregate of 10,203 shares of common stock, no par value ("ACMAT Common Stock"), and 291,656 shares of Class A stock, no par value ("ACMAT Class A Stock"), of ACMAT Corporation (“ACMAT”), a Connecticut corporation, and, in consideration of and exchange therefor, the Company agreed to issue to the Assignors an aggregate of 2,899,876 shares of Company common stock, contingent upon the closing of the transactions contemplated by the Services Agreement. After giving effect to the transactions pursuant to the Contribution Agreement, the Company owns approximately 39.1% of the outstanding equity of ACMAT and approximately 10.4% of the voting power of ACMAT, based on ACMAT's outstanding equity as of August 5, 2025. Holders of ACMAT Class A Stock are entitled to one-tenth vote per share in relation to ACMAT Common Stock, holders of which are entitled to one vote per share, with respect to matters subject to approval by ACMAT stockholders. ACMAT, through its subsidiaries, offers surety bonds for prime, sub-prime, specialty trade, environmental, asbestos and lead abatement contractors and miscellaneous obligations nationwide. ACMAT also provides other miscellaneous surety such as workers’ compensation bonds, supply bonds, subdivision bonds, and license and permit bonds. Hale Partnership Capital Management, LLC, an entity wholly owned by Mr. Hale, is the registered investment advisor or investment manager for each of the Assignors, and Mr. Hale is the sole principal owner of Hale Partnership Capital Advisors, LLC, the general partner of all but one of the Assignors. The transaction closed on June 30, 2025.

As a result of the transaction, the Company recorded a $12.5 million investment in ACMAT Corporation based on the value of the Company's 2,899,876 shares of common stock issued as a consideration given. The transaction is classified as a nonmonetary, non-reciprocal transfer between related parties and did not constitute a business combination under ASC 805, Business Combinations. No cash consideration was exchanged. Refer to Note 4, Investments, in the accompanying Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for initial and subsequent measurements of the Company's investments in ACMAT Common Stock and ACMAT Class A Stock.

Critical Accounting Policies

Our critical accounting policies and estimates are provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the year ended December 31, 2024. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the three and nine months ended September 30, 2025.

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ITEM 3. **** Quantitative and Qualitative Disclosures about Market Risk

Not required to be provided by a smaller reporting company.

ITEM 4. **** Controls and Procedures

Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, 2025 was conducted under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures, as of September 30, 2025, were effective at the reasonable assurance level.

Changes in internal controls over financial reporting.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) that occurred during the three months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

ITEM 1.  Legal Proceedings

The information required for this Part II, Item 1 is incorporated by reference to the discussion under the heading “Litigation” in Note 12, Commitments and Contingencies in the accompanying Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Issuer Purchases of Equity Securities

On May 14, 2024, the Company's board of directors authorized the repurchase of up to $1.5 million of shares of the Company’s common stock (the “2024 Repurchase Program”). The authorization does not obligate the Company to acquire a specific number of shares during any period and does not have an expiration date. Repurchases under the 2024 Repurchase Program may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in such quantities, at such prices, in such manner and on such terms and conditions as the authorized officers of the Company determine are in the best interests of the Company. Repurchases may also be made under a plan adopted pursuant to Rule 10b5-1 promulgated under the Exchange Act.

The following table summarizes the Company’s repurchase activity, including activity under the share repurchase programs, for the three months ended September 30, 2025:

Total number of shares Maximum dollar value
Total number of purchased as part of of shares that may yet
shares Average price paid publicly announced be purchased under the
Period purchased per share plans or programs plans or programs
July 2025 - $ - - $ 561,764
August 2025 - $ - - $ 561,764
September 2025 16,751 $ 7.80 16,751 $ 431,106
Total 16,751 $ 7.80 16,751 $ 431,106

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ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

During the three months ended September 30, 2025, none of our directors or officers, as defined in Section 16 of the Exchange Act, adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K of the Exchange Act.

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ITEM 6.  Exhibits

3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q (Commission File No. 001-34964) filed August 6, 2021).
3.2 By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 001-34964) filed November 20, 2017).
3.3 Certificate of Designation of Series A Participating Preferred Stock of Stanley Furniture Company, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 001-34964) filed December 6, 2016).
3.4 Certificate of Amendment of Restated Certificate of Incorporation of HG Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 001-34964) filed June 30, 2025).
3.5 Certificate of Amendment of Restated Certificate of Incorporation of HG Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 001-34964) filed September 3, 2025).
31.1 Certification by Steven A. Hale II, our Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ^(1)^
31.2 Certification by Anna Lieb, our Principal Financial and Accounting Officer, pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ^(1)^
32.1 Certification of Steven A. Hale II, our Chief Executive Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^(2)^
32.2 Certification of Anna Lieb, our Principal Financial and Accounting Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^(2)^
101.INS Inline XBRL INSTANCE DOCUMENT (1)
101.SCH Inline XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT (1)
101.CAL Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE (1)
101.DEF Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE (1)
101.LAB Inline XBRL TAXONOMY EXTENSION LABELS LINKBASE (1)
101.PRE Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE (1)
104 Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) (1)
(1) Filed herewith
--- ---
(2) In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
--- ---

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 13, 2025 HG HOLDINGS, INC.
By: /s/ Anna Lieb
Name: Anna Lieb
Title: Principal Financial and Accounting Officer

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ex_854751.htm

Exhibit 31.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven A. Hale II, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HG Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
--- ---
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: November 13, 2025 By: /s/ Steven A. Hale II
--- ---
Name: Steven A. Hale II
Title: Chairman and Chief Executive Officer

ex_854752.htm

Exhibit 31.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anna Lieb, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HG Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
--- ---
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: November 13, 2025 By: /s/ Anna Lieb
--- ---
Name: Anna Lieb
Title: Principal Financial and Accounting Officer

ex_854753.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the HG Holdings, Inc. (the “Company”) Quarterly Report on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven A. Hale II, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1).         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2).         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 13, 2025 By: /s/ Steven A. Hale II
Name: Steven A. Hale II
Title: Chairman and Chief Executive Officer

ex_854754.htm

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the HG Holdings, Inc. (the “Company”) Quarterly Report on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anna Lieb, Principal Financial and Accounting Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1).         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2).         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 13, 2025 By: /s/ Anna Lieb
Name: Anna Lieb
Title: Principal Financial and Accounting Officer

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