# EDGAR Filing Document

**Accession Number:** 0000797465
**File Stem:** 0001437749-25-026339
**Filing Date:** 2025-8
**Character Count:** 125328
**Document Hash:** 620df4b692c59c194234ef6585b11939
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-25-026339.hdr.sgml**: 20250813

**ACCESSION NUMBER**: 0001437749-25-026339

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 73

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250813

**DATE AS OF CHANGE**: 20250813

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** HG Holdings, Inc.
- **CENTRAL INDEX KEY:** 0000797465
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **ORGANIZATION NAME:** 05 Real Estate & Construction
- **EIN:** 541272589
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-34964
- **FILM NUMBER:** 251208895

**BUSINESS ADDRESS:**
- **STREET 1:** 6265 OLD WATER OAK ROAD, UNIT 204
- **CITY:** TALLAHASSEE
- **STATE:** FL
- **ZIP:** 32312
- **BUSINESS PHONE:** 850-201-9204

**MAIL ADDRESS:**
- **STREET 1:** 6265 OLD WATER OAK ROAD, UNIT 204
- **CITY:** TALLAHASSEE
- **STATE:** FL
- **ZIP:** 32312

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** STANLEY FURNITURE CO INC.
- **DATE OF NAME CHANGE:** 20060315

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** STANLEY FURNITURE CO INC/
- **DATE OF NAME CHANGE:** 19930908

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** STANLEY FURNITURE CO INC
- **DATE OF NAME CHANGE:** 19930908

?xml version='1.0' encoding='ASCII'? stly20250630_10q.htm

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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 June 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.) |

---

**2115 E. 7<sup>th</sup> Street, Suite 101, Charlotte, NC 28204**

(Address of principal executive offices, Zip Code)

Registrant's telephone number, including area code: <u>(850) 299-9296</u>

**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 August 11, 2025, there were 5,221,464 outstanding shares of common stock of HG Holdings, Inc., par value $0.02 per share.

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true

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
|  | <u>Page</u> |
| [<u>Part I –</u> <u>Financial Information</u>](#p1) | <u>[3](#p1)</u> |
| [<u>Item 1. Consolidated Financial Statements (Unaudited)</u>](#i1) | <u>[3](#i1)</u> |
| [<u>Consolidated Balance Sheets as of</u> <u>June 30, 2025 and December 31, 2024</u>](#bs) | <u>[3](#bs)</u> |
| [<u>Consolidated Statements of Operations for the t</u><u>hree and six months ended</u>](#is)[<u>June 30, 2025</u>](#bs)[<u>and</u>](#is)[<u>June 30, 2024</u>](#bs) | <u>[4](#is)</u> |
| [Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2025 and June 30, 2024](#eq) | <u>[5](#eq)</u> |
| [<u>Consolidated Statements of Cash Flows for the six months ended</u> <u>June 30, 2025</u> <u>and June 30, 2024</u>](#cf) | <u>[6](#cf)</u> |
| [<u>Notes to Consolidated Financial Statements</u>](#notes) | <u>[7](#notes)</u> |
| [<u>Item 2. Management'</u><u>s Discussion and Analysis of Financial Condition and Results of Operations</u>](#i2) | [23](#i2) |
| [<u>Item 3. Quantitative and Qualitative Disclosures About Market Risk</u>](#i3) | <u>[28](#i3)</u> |
| [<u>Item 4. Controls and Procedures</u>](#i4) | <u>[28](#i4)</u> |
| [<u>Part II</u> <u>–</u> <u>Other Information</u>](#p2) | <u>[29](#p2)</u> |
| [<u>Item 1. Legal Proceedings</u>](#p2i1) | <u>[29](#p2i1)</u> |
| [<u>Item 2. Unregistered Sales of Equity Securities and Use of Proceeds</u>](#p2i2) | <u>[29](#p2i2)</u> |
| [<u>Item 3. Defaults Upon Senior Securities</u>](#p2i3) | <u>[30](#p2i3)</u> |
| [<u>Item 4. Mine Safety Disclosures</u>](#p2i4) | <u>[30](#p2i4)</u> |
| [<u>Item 5. Other Information</u>](#p2i5) | <u>[30](#p2i5)</u> |
| [<u>Item 6. Exhibits</u>](#p2i6) | <u>[31](#p2i6)</u> |
| [<u>Signatures</u>](#sigs) | <u>[32](#sigs)</u> |

---

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<u>PART I. FINANCIAL INFORMATION</u>

**ITEM 1. <u>Consolidated</u> <u><u>Fin</u>ancial Statements</u>**

**HG HOLDINGS, INC.**

**CONSOLIDATED BALANCE SHEETS**

&nbsp;&nbsp;&nbsp;&nbsp; (in thousands, except per share and share amounts)

---

| | | |
|:---|:---|:---|
|  | ***June 30,*** | *December 31,* |
|  | ***2025*** | *2024* |
|  | (unaudited) |  |
| **ASSETS** |  |  |
| Cash and cash equivalents | $**9453** | $12145 |
| Restricted cash | **11071** | 8264 |
| Investments |  |  |
| Fixed income securities, held-to-maturity | **-** | 1000 |
| Investments in limited partnerships | **1818** | 2183 |
| Investments in common stock | **12469** |  |
| Investments in related parties | **10311** | 10073 |
| Accounts receivable | **902** | 263 |
| Interest and dividend receivables | **-** | 19 |
| Prepaid expenses | **308** | 288 |
| Property, plant and equipment, net | **49** | 62 |
| Lease assets | **585** | 611 |
| Goodwill | **6492** | 6492 |
| Intangible assets, net | **155** | 193 |
| Other assets | **634** | 575 |
| Total assets | $**54247** | $42168 |
| **LIABILITIES** |  |  |
| Accounts payable | $**97** | $106 |
| Accrued salaries, wages and benefits | **575** | 496 |
| Escrow liabilities | **10916** | 8110 |
| Other accrued expenses | **247** | 360 |
| Reserve for title claims | **707** | 637 |
| Lease liabilities | **587** | 616 |
| Other liabilities | **19** | 35 |
| Total liabilities | $**13148** | $10360 |
| **STOCKHOLDERS' EQUITY** |  |  |
| Common stock, $0.02 par value, 35,000,000 shares authorized as of June 30, 2025 and December 31, 2024; 5,221,464 shares issued and outstanding as of June 30, 2025 and 2,813,214 shares issued and outstanding as of December 31, 2024 | **101** | 52 |
| Additional paid-in capital | **39078** | 30491 |
| Retained earnings | **2041** | 1413 |
| Total stockholders' equity | **41220** | 31956 |
| Noncontrolling interests | **(121)** | (148) |
| Total equity | **41099** | 31808 |
| Total liabilities and stockholders' equity | $**54247** | $42168 |

---

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3

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**HG HOLDINGS, INC.**

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | *Three Months* | *Three Months* | *Six Months* | *Six Months* |
|  | *Ended* | *Ended* | *Ended* | *Ended* |
|  | ***June 30,*** | *June 30,* | ***June 30,*** | *June 30,* |
|  | ***2025*** | *2024* | ***2025*** | *2024* |
| Revenues: |  |  |  |  |
| Net premiums written | $**1998** | $1670 | $**3386** | $3074 |
| Escrow and other title fees | **812** | 704 | **1396** | 1246 |
| Management fees from related parties | **1250** | 750 | **2000** | 1503 |
| Total revenues | **4060** | 3124 | **6782** | 5823 |
| Cost of revenues: |  |  |  |  |
| Underwriting expenses | **43** | 52 | **99** | 123 |
| Provision for title claim losses | **85** | 18 | **102** | 54 |
| Search and other fees | **29** | 24 | **56** | 35 |
| Total cost of revenues | **157** | 94 | **257** | 212 |
| Gross underwriting profit | **3903** | 3030 | **6525** | 5611 |
| Operating expenses: |  |  |  |  |
| General and administrative expenses | **(3321)** | (3150) | **(6492)** | (6231) |
| Other income/expenses: |  |  |  |  |
| Net investment income | **124** | 138 | **156** | 561 |
| Other income, net | **2** | 13 | **35** | 15 |
| Income (loss) from investments in related parties, net | **240** | (200) | **444** | (65) |
| Income (loss) from operations before income taxes | **948** | (169) | **668** | (109) |
| Income tax expense (benefit) | **-** | 49 | **(5**) | 117 |
| Net income (loss) | **948** | (218) | **673** | (226) |
| Net income attributable to noncontrolling interests | **63** | 40 | **45** | 13 |
| Net income (loss) attributable to the Company's shareholders | $**885** | $(258) | $**628** | $(239) |
| Basic and diluted per share net income (loss) attributable to the Company's shareholders: |  |  |  |  |
| Basic | $**0.35** | $(0.09) | $**0.24** | $(0.08) |
| Diluted | $**0.35** | $(0.09) | $**0.24** | $(0.08) |
| Weighted average shares outstanding: |  |  |  |  |
| Basic | **2517** | 2845 | **2665** | 2853 |
| Diluted | **2517** | 2845 | **2665** | 2853 |

---

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4

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**HG HOLDINGS, INC.**

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | *Additional* | *Retained* |  |  |
|  | ***Common Stock*** | ***Common Stock*** | *Paid-in* | *Earnings* | *Noncontrolling* |  |
|  | ***Shares*** | *Common Stock* | *Capital* | *(Deficit)* | *Interest* | *Total* |
| **Balance at January 1, 2025** | **2813** | $**52** | $**30491** | $**1413** | $***(148*)** | $**31808** |
| **Net loss** | ***-*** | ***-*** | ***-*** | **(257)** | **(19)** | **(276)** |
| **Balance at March 31, 2025** | **2813** | $**52** | $**30491** | $**1156** | $**(167)** | $**31532** |
| **Net income** | ***-*** | ***-*** | ***-*** | **885** | **63** | **948** |
| **Subsidiary distributions paid to non-controlling interest shareholders** | ***-*** | **-** | **-** | **-** | **(17)** | **(17)** |
| **Issuance of common stock** | **2900** | **59** | **12411** |  |  | **12470** |
| **Repurchase of common stock** | **(492**) | **(10**) | **(3824**) | **-** | **-** | **(3834**) |
| **Balance at June 30, 2025** | **5221** | $**101** | $**39078** | $**2041** | $**(121)** | $**41099** |
| Balance at January 1, 2024 | 2862 | $53 | $30491 | $1894 | $(17) | $32421 |
| Net income (loss) | *-* |  |  | 20 | (27) | (7) |
| Subsidiary distributions paid to non-controlling interest shareholders | ***-*** | **-** | **-** | **-** | **(53**) | **(53**) |
| Balance at March 31, 2024 | 2862 | $53 | $30491 | $1914 | $(97) | $32361 |
| Net (loss) income | *-* |  |  | (258) | 40 | (218) |
| Subsidiary distributions paid to non-controlling interest shareholders | ***-*** | **-** | **-** |  | (50) | (50) |
| Repurchase of common stock | (49) | (1) | *-* | (242) | *-* | (243) |
| Balance at June 30, 2024 | 2813 | $52 | $30491 | $1414 | $(107) | $31850 |

---

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5

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**HG HOLDINGS, INC.**

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

---

| | | |
|:---|:---|:---|
|  | *For the Six Months Ended* | *For the Six Months Ended* |
|  | *June 30,* | *June 30,* |
|  | ***2025*** | *2024* |
| Net income (loss) attributable to the Company's shareholders | $**628** | $(239) |
| Net income attributable to noncontrolling interests | **45** | 13 |
| Net income (loss) | **673** | (226) |
| Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: |  |  |
| Depreciation expense | **13** | 44 |
| Amortization expense | **38** | 37 |
| Change in net asset value of investment in limited partnership | **27** | (51) |
| Amortization of premium and accretion of discount, net |  | (2) |
| Loss from investments in related parties | **41** | 271 |
| Changes in operating assets and liabilities: |  |  |
| Prepaid expenses | **(20)** | 161 |
| Accounts receivable | **(639**) | (203) |
| Lease assets | **26** | 136 |
| Interest and dividends receivable | **19** |  |
| Other assets | **(59)** | (18) |
| Accounts payable | **(9)** | (367) |
| Accrued salaries, wages, and benefits | **79** | 182 |
| Escrow liabilities | **2806** | 7774 |
| Reserve for title claims | **70** | 54 |
| Other accrued expenses | **(113**) | 93 |
| Lease liabilities | **(29)** | (132) |
| Other liabilities | **(16**) | 1 |
| Net cash provided by operating activities | **2907** | 7754 |
| **Cash flows from investing activities:** |  |  |
| Purchases of investments | **-** | (700) |
| Purchases of investments in related parties | **(279)** |  |
| Proceeds from redemptions of fixed-income securities | **1000** |  |
| Proceeds from investment in limited partnerships | **338** | 200 |
| Net cash provided by (used in) investing activities | **1059** | (500) |
| **Cash flows from financing activities:** |  |  |
| Repurchase of shares of common stock | **(3834)** | (243) |
| Subsidiary distributions paid to non-controlling interest shareholders | **(17)** | (103) |
| Net cash used in financing activities | **(3851**) | (346) |
| Net increase in cash and cash equivalents and restricted cash | **115** | 6908 |
| Cash and cash equivalents and restricted cash at beginning of period | **20409** | 17752 |
| **Cash and cash equivalents and restricted cash at end of period** | $**20524** | $24660 |
| Cash and cash equivalents | $**9453** | $9379 |
| Restricted cash | **11071** | 15281 |
| **Cash and cash equivalents and restricted cash at end of period** | $**20524** | $24660 |
| **Supplemental Disclosures of Non-Cash Investing Activities** |  |  |
| Issuance of common stock for investment in ACMAT Corporation | $**12469** | $- |

---

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6

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**HG HOLDINGS, INC.**

NOTES TO THE 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 presentation 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 presentation 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *7*

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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 *June 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 *six* months ended *June 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 *9,* Segment Information*.

**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.

In *December 2023,* the FASB issued ASU *2023*-*09, Income Taxes (Topic *740*): Improvements to Income Tax Disclosures*, 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. The amendment is effective for public entities for fiscal years beginning after *December 15, 2024.* 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *9*

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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 own 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 *May 6, 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.

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 own an aggregate of approximately 73.0% of the Company's outstanding shares of common stock. This 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 transfer between related parties and did *not* constitute a business combination under Accounting Standards Codification ("ASC") *805, Business Combinations* ("ASC *805"*). *No* cash consideration was exchanged. Refer to *Note *5,* Investments* for initial and subsequent measurements of the Company's investments in ACMAT Common Stock and ACMAT Class A Stock.

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***4.*** **Investments in Related Parties** 

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  | *Loss recorded in the Consolidated* | *Loss recorded in the Consolidated* | *Loss recorded in the Consolidated* | *Loss recorded in the Consolidated* |
|  | *Ownership %* | *Ownership %* | *Carrying Value* | *Carrying Value* | *Statements of Operations (b)* | *Statements of Operations (b)* | *Statements of Operations (b)* | *Statements of Operations (b)* |
|  |  |  |  |  | *For the Three* | *For the Three* | *For the Six* | *For the Six* |
|  |  |  |  |  | *Months Ended* | *Months Ended* | *Months Ended* | *Months Ended* |
|  |  |  |  |  | *June 30,* | *June 30,* | *June 30,* | *June 30,* |
|  | ***June 30,*** | *December 31,* | ***June 30,*** | *December 31,* |  |  |  |  |
|  | ***2025*** | *2024* | ***2025*** | *2024* | ***2025*** | *2024* | ***2025*** | *2024* |
| HC Series B Stock (a) | **27.9%** | 27.9% | $**9215** | $9256 | $**-** | $- | $**(41**) | $- |
| HC Common Stock | **0.1%** | 0.1% | **9** | 9 | **-** | (245) | **-** | (271) |
| **Total** | **28.0%** | 28.0% | $**9224** | $9265 | $**-** | $(245) | $**(41)** | $(271) |

---

(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.

(b) Loss from these investments is included in "Income (loss) 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.

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 *six* months ended *June 30, 2025,* the Company did *not* recognize any impairment of HC Common Stock. During the *three* and *six* months ended *June 30, 2024,* the Company recognized an impairment of HC Common Stock in the amount of *$241,000.* During the *three* and *six* months ended *June 30, 2025*, the Company recognized impairment of HC Series B Stock of $0 and $41,000 respectively. During the *three* and *six* months ended *June 30, 2024*, the Company did *not* recognize any impairment of HC Series B Stock.

As a result of the Company's holding in HC Realty, the Company includes the following summarized income statement information of HC Realty for the *three* and *six* months ended *June 30, 2025* and *2024* (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | *Three Months* | *Three Months* | *Six Months* | *Six Months* |
|  | *Ended* | *Ended* | *Ended* | *Ended* |
|  | ***June 30,*** | *June 30,* | ***June 30,*** | *June 30,* |
|  | ***2025*** | *2024* | ***2025*** | *2024* |
| Total revenue | $**5270** | $5369 | $**10610** | $10612 |
| Total expense | **8347** | 8936 | **16667** | 17649 |
| Net loss | $**(3077)** | $(3567) | $**(6057)** | $(7037) |

---

The Company's other investments in related parties totaled $1.1 million as of *June 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 *June 30, 2025,* the Company had total receivables and payables from the related parties of $526,000 and $209,000, 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 *six*-month periods ended *June 30, 2025,* the Company received $240,000 and $485,000 of distributions from the related party investees, respectively, which are included in "Income (loss) from investments in related parties, net" in the Unaudited Consolidated Statements of Operations. During the *three*- and *six*-month periods ended *June 30, 2024,* the Company received $161,000 and $200,000 of distributions from other investments in related parties, respectively, which are included in "Income (loss) from investments in related parties, net" in the Unaudited Consolidated Statements of Operations.

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***5.*** **Investments** 

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***June 30, 2025*** | ***June 30, 2025*** | ***December 31, 2024*** | ***December 31, 2024*** |
|  |  | ***Cost/Amortized*** |  | ***Cost/Amortized*** |
|  | ***Fair Value*** | ***Cost, Net*** | ***Fair Value*** | ***Cost, Net*** |
| U.S. government and agency securities, held-to-maturity <sup>(1)</sup> | $- | $- | $1000 | $1000 |
| Investment in common stock <sup>(2)</sup> | **12469** | **12469** |  |  |
| Investment in limited partnership, at net asset value <sup>(3)</sup> | **1818** | **1818** | 2183 | 2183 |
| **Total investments** | $**14287** | $**14287** | $3183 | $3183 |

---

(*1*) The Company's portfolio of fixed-income securities fully matured in the *first* quarter of *2025.* There were no unrealized gains or losses on fixed-income securities as of *December 31, 2024.*

(*2*) On *April 21, 2025,* the Company acquired 10,203 shares of ACMAT Common Stock and 291,656 shares of ACMAT Class A Stock. Refer to *Note *3,* Significant Transactions* as well as the "Fair value measurement" section of this note below for more information.

(*3*) As of *June 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.

*Fair value measurement*

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on our Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level *1:* Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we can access.

Level *2:* Assets and liabilities whose values are based on the following:

a. Quoted prices for similar assets or liabilities in active markets;

b. Quoted prices for identical or similar assets or liabilities in markets that are *not* active; or

c. Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level *3:* Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect our estimates of the assumptions that market participants would use in valuing the assets and liabilities.

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 Corporation. For further information, refer to *Note *3,* Significant Transactions*. As of *June 30, 2025,* the Company's investment in ACMAT Corporation was carried at $12.5 million. The Company accounts for this investment under ASC *321, Investments – Equity Securities*, and measures it at fair value on a recurring basis through net income.

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The Company did *not* record any re-valuation income or loss from this investment during the *three*- and *six*-month periods ended *June 30, 2025.* The Company determined fair value of its investment in ACMAT Corporation using Level *2* inputs. Specifically, the valuation was based on trades of the Company's common stock on the over-the-counter market on the Over-the-Counter Quotation Bureau, adjusted by management using a control premium assumption, a discount for marketability assumption and an internal valuation incorporating book value of the investee and peer company multiples. Level *2* inputs were used as ACMAT Corporation does *not* have an active trading market and its public float is limited (*4%* of shares outstanding).

The Company's fixed-income securities portfolio was classified as held-to-maturity and reported at amortized cost as of *December 31, 2024.* The Company performed ongoing impairment evaluations, and did *not* record any current expected credit losses in previous periods as U.S. government and agency securities were assumed to have *no* risk of non-payment. The disclosed fair value of our fixed-income securities was calculated by a *third*-party pricing service. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed-income and other securities for which a fair value has been requested. The inputs used by the valuation service providers included, but were *not* limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, currency rates and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial information. The valuation models take into account, among other things, market observable information as of the measurement date, as described above, as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector and, where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience. The Company's fixed-income securities as of *December 31, 2024* were classified as Level *2* in the fair value hierarchy.

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.

The following tables present fair value, by valuation hierarchy, and carrying value of the financial instruments measured at fair value or for which fair value is disclosed as of *June 30, 2025* and *December 31, 2024 (*in thousands):

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | ***June 30, 2025*** | ***June 30, 2025*** | ***June 30, 2025*** | ***June 30, 2025*** | ***June 30, 2025*** |
|  |  |  |  | ***Total Fair*** | ***Carrying*** |
|  | ***Level 1*** | ***Level 2*** | ***Level 3*** | ***Value*** | ***Value*** |
| Investment in common stock | $- | $12469 | $- | $12469 | $12469 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | ***December 31, 2024*** | ***December 31, 2024*** | ***December 31, 2024*** | ***December 31, 2024*** | ***December 31, 2024*** |
|  |  |  |  | ***Total Fair*** | ***Carrying*** |
|  | ***Level 1*** | ***Level 2*** | ***Level 3*** | ***Value*** | ***Value*** |
| Investment in common stock | $- | $- | $- | $- | $- |
| U.S. government and agency securities, held-to-maturity | $- | $1000 | $- | $1000 | $1000 |

---

*Net investment income*

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***For the Three Months Ended*** | ***For the Three Months Ended*** | ***For the Six Months Ended*** | ***For the Six Months Ended*** |
|  | ***June 30, 2025*** | ***June 30, 2024*** | ***June 30, 2025*** | ***June 30, 2024*** |
| Interest on: |  |  |  |  |
| Cash equivalents | $90 | $100 | $183 | $203 |
| Fixed income securities |  | 24 | 1 | 53 |
| Dividends on investment in HC Series B Stock |  |  |  | 256 |
| Change in NAV of investment in limited partnership | 35 | 15 | (27) | 51 |
| Less: Investment expense | (1) | (1) | (1) | (2) |
| **Net investment income** | $**124** | $**138** | $**156** | $**561** |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *13*

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***6.*** **Reserve for Title Claims**

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 *June 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 *six*-month periods ended *June 30, 2025* and *2024* is as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | ***For the Six*** | *For the Six* |
|  | ***Months Ended*** | *Months Ended* |
|  | ***June 30, 2025*** | *June 30, 2024* |
| Beginning Reserves | $**637** | $313 |
| Provision for claims related to: |  |  |
| Current year | **117** | 54 |
| Prior years | **(15**) |  |
| Total provision for claim losses | **102** | 54 |
| Claims paid related to: |  |  |
| Current year | **-** |  |
| Prior years | **(32**) |  |
| Total title claims paid | **(32**) |  |
| **Ending Reserves** | $**707** | $367 |

---

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

For the *three* and *six* months ended *June 30, 2025,* the Company recognized an additional $47,000 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 *June 30, 2025* and *December 31, 2024* is as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | ***As of June 30, 2025*** | *As of December 31, 2024* |
| Known title claims | $**130** | $114 |
| IBNR title claims | **577** | 523 |
| Total title claims | **707** | 637 |
| Non-title claims | **-** |  |
| **Total title claims reserves** | $**707** | $637 |

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***7.*** **Reinsurance**

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 *six*-month periods ended *June 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 *June 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 *June 30, 2025*, there were no reinsurance recoverables on paid claims or unpaid reserves.

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

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| | | | | |
|:---|:---|:---|:---|:---|
|  | Three Months | Three Months | Six Months | Six Months |
|  | Ended | Ended | Ended | Ended |
|  | **June 30,** | June 30, | **June 30,** | June 30, |
|  | **2025** | 2024 | **2025** | 2024 |
| Direct title premiums | $**1405** | $816 | $**2347** | $2065 |
| Ceded title premiums | **(13)** | (10) | **(26)** | (20) |
| Net title premiums written <sup>(1)</sup> | $**1392** | $806 | $**2321** | $2045 |

---

(*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.

The Company did *not* have any written reinsurance contracts in-force during the *three*- and *six*-month periods ended *June 30, 2025* and *2024.*

***8.*** **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).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *15*

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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 *June 30, 2025*, NCTIC's statutory surplus is $8.0 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 *six* months ended *June 30, 2025* and *2024*, no dividends were paid from NCTIC to the Company.

***9.*** **Segment Information**

Effective *January 1, 2025,* the Company changed its reportable segments to two reportable segments: (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.

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

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| | | | |
|:---|:---|:---|:---|
|  | ***Title*** | ***Corporate*** |  |
|  | ***Insurance*** | ***and Other*** | ***Total*** |
| Insurance and other services revenue | $2810 | $1250 | $4060 |
| Cost of revenues: |  |  |  |
| Underwriting expenses | (43) |  | (43) |
| Provision for title claim losses | (85) |  | (85) |
| Search and other fees | (29) |  | (29) |
| Total cost of revenue | (157) |  | (157) |
| Gross profit | $2653 | $1250 | $3903 |
| Operating expenses: |  |  |  |
| Personnel costs | (1704) | (397) | (2101) |
| Other operating expense <sup>(1)</sup> | (850) | (345) | (1195) |
| Amortization and depreciation | (25) |  | (25) |
| Total operating expense | (2579) | (742) | (3321) |
| Other income, net | 76 | 290 | 366 |
| Income before income taxes | $**150** | $**798** | $**948** |
| Goodwill and intangible assets, net <sup>(2)</sup> | $**6647** | $**-** | $**6647** |

---

(*1*) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.

(*2*) The Company does *not* allocate its assets by segment, with the exception of Goodwill and Intangible assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *16*

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

---

| | | | |
|:---|:---|:---|:---|
|  | ***Title*** | ***Corporate*** |  |
|  | ***Insurance*** | ***and Other*** | ***Total*** |
| Insurance and other services revenue | $2374 | $750 | $3124 |
| Cost of revenues: |  |  |  |
| Underwriting expenses | (52) |  | (52) |
| Provision for title claim losses | (18) |  | (18) |
| Search and other fees | (24) |  | (24) |
| Total cost of revenue | (94) |  | (94) |
| Gross profit | $2280 | $750 | $3030 |
| Operating expenses: |  |  |  |
| Personnel costs | (1626) | (345) | (1971) |
| Other operating expense <sup>(1)</sup> | (846) | (293) | (1139) |
| Amortization and depreciation | (40) |  | (40) |
| Total operating expense | (2512) | (638) | (3150) |
| Other income (expense), net | 56 | (105) | (49) |
| (Loss) income before income taxes | $**(176)** | $**7** | $**(169)** |
| Goodwill and intangible assets, net <sup>(2)</sup> | $**6722** | $**-** | $**6722** |

---

(*1*) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.

(*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 *six* months ended *June 30, 2025* (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | ***Title*** | ***Corporate*** |  |
|  | ***Insurance*** | ***and Other*** | ***Total*** |
| Insurance and other services revenue | $4782 | $2000 | $6782 |
| Cost of revenues: |  |  |  |
| Underwriting expenses | (99) |  | (99) |
| Provision for title claim losses | (102) |  | (102) |
| Search and other fees | (56) |  | (56) |
| Total cost of revenue | (257) |  | (257) |
| Gross profit | $4525 | $2000 | $6525 |
| Operating expenses: |  |  |  |
| Personnel costs | (3339) | (755) | (4094) |
| Other operating expense <sup>(1)</sup> | (1668) | (680) | (2348) |
| Amortization and depreciation | (50) |  | (50) |
| Total operating expense | (5057) | (1435) | (6492) |
| Other income, net | 139 | 496 | 635 |
| (Loss) income before income taxes | $**(393)** | $**1061** | $**668** |
| Goodwill and intangible assets, net (2) | $**6647** | $**-** | $**6647** |

---

(*1*) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.

(*2*) The Company does *not* allocate its assets by segment, with the exception of Goodwill and Intangible assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *17*

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

---

| | | | |
|:---|:---|:---|:---|
|  | ***Title*** | ***Corporate*** |  |
|  | ***Insurance*** | ***and Other*** | ***Total*** |
| Insurance and other services revenue | $4320 | $1503 | $5823 |
| Cost of revenues: |  |  |  |
| Underwriting expenses | (123) |  | (123) |
| Provision for title claim losses | (54) |  | (54) |
| Search and other fees | (35) |  | (35) |
| Total cost of revenue | (212) |  | (212) |
| Gross profit | $4108 | $1503 | $5611 |
| Operating expenses: |  |  |  |
| Personnel costs | (3254) | (700) | (3954) |
| Other operating expense <sup>(1)</sup> | (1568) | (628) | (2196) |
| Amortization and depreciation | (81) |  | (81) |
| Total operating expense | (4903) | (1328) | (6231) |
| Other income, net | 124 | 387 | 511 |
| (Loss) income before income taxes | $**(671)** | $**562** | $**(109)** |
| Goodwill and intangible assets, net (2) | $**6722** | $**-** | $**6722** |

---

(*1*) Other operating expense primarily consists of rent and other occupancy expenses, software and equipment expense, corporate insurance and other regulatory and professional fees.

(*2*) The Company does *not* allocate its assets by segment, with the exception of Goodwill and Intangible assets.

***10.*** **Income Taxes**

During the *six* months ended *June 30, 2025*, the Company recorded a non-cash debit to its valuation allowance of $170,000, decreasing its valuation allowance against deferred tax assets to $8.1 million as of *June 30, 2025*. The primary assets covered by this valuation allowance are federal net operating losses, which approximate $34.9 million at *June 30, 2025*. The Company did not make any cash payments for income tax in the *three*- and *six*-month periods ended *June 30, 2025* and *2024* due to its net operating loss carryforwards.

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 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 its reversal, resulting in *no* deferred tax asset balance being recognized.

As of *June 30, 2025*, the Company has a valuation allowance that covers all deferred tax assets, net of deferred tax liabilities. The Company's effective tax rates were 0.0% and (0.8%) for the *three*- and *six*-month periods ended *June 30, 2025,* respectively, and (29.0%) and (108.0%) for the *three*- and *six*-month periods ended *June 30, 2024,* respectively, and primarily related to a taxable loss at all jurisdictions and state income tax paid in jurisdictions without prior net operating loss carryforwards available to offset taxable income, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *18*

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***11.*** **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* | *Three Months* | *Six Months* | *Six Months* |
|  | *Ended* | *Ended* | *Ended* | *Ended* |
|  | ***June 30,*** | *June 30,* | ***June 30,*** | *June 30,* |
|  | ***2025*** | *2024* | ***2025*** | *2024* |
| Weighted average shares outstanding for basic calculation | **2517** | 2845 | **2665** | 2853 |
| Add: Effect of dilutive stock awards | **-** |  | **-** |  |
| Weighted average shares outstanding, adjusted for diluted calculation | **2517** | 2845 | **2665** | 2853 |

---

For the *three*- and *six*-month periods ended *June 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 *six* months ended *June 30, 2025,* the Company repurchased 491,626 shares of common stock, 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 *six* months ended *June 30, 2025* was $3.8 million or $7.80 per share.

During the *three* and *six* months ended *June 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 *three* and *six* months ended *June 30, 2024* was $0.2 million or $5.02 per share.

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

***12.*** **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.* The fair value of goodwill as of the date of these acquisitions was principally based on Level *3* inputs, such as values obtained from public and private market comparisons. In accordance with ASC Topic *350, Intangibles* – *Goodwill and Other,* the Company did *not* record any goodwill impairment losses during the *three* or *six* months ended *June 30, 2025* and *2024*. The Company's goodwill is allocated to the Title Insurance Segment. See *Note *9,* Segment Information* for allocation of goodwill and intangible assets to the Company's segments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *19*

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**Intangible Assets**

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

---

| | | |
|:---|:---|:---|
|  | ***June 30,*** | *December 31,* |
|  | ***2025*** | *2024* |
| Intangible assets subject to amortization | $**155** | $193 |
| Total | $**155** | $193 |

---

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Weighted-average*** |  |  |  |
|  | ***remaining*** |  |  |  |
|  | ***amortization period*** | ***Gross carrying*** | ***Accumulated*** | ***Net carrying*** |
|  | ***(in years)*** | ***amount*** | ***amortization*** | ***amount*** |
| Noncompetition agreement | 2.1 | $372 | $(217) | $155 |
| Total |  | $**372** | $**(217)** | $**155** |

---

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

Amortization expense of the intangible assets for the *three*- and *six*-month periods ended *June 30, 2025* was $18,000 and $37,000, respectively. Amortization expense of the intangible assets for the *three*- and *six*-month periods ended *June 30, 2024* was $19,000 and $37,000, 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 | $36 |
| 2026 | 74 |
| 2027 | 45 |
| **Total** | $**155** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *20*

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***13.*** **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 *6,* 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 *June 30, 2025*, management believed that the resolution of these matters would *not* materially affect our financial condition or results of operations.

*Omega Litigation*

During the *fourth* quarter of *2024, one* of the Company's subsidiaries*,* 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 "Defendants"). Two of the 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. The Company believes 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, one* of the Company's subsidiaries, 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *21*

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**Leases**

Right-of-use assets and lease liabilities related to operating leases under ASC Topic *842,* Leases ("ASC Topic *842"*), 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 under ASC Topic *842* 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 *June 30, 2025*, the weighted-average remaining lease term of our operating leases was 2.0 years.

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 *June 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 *June 30, 2025*, 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 $200,000 and $296,000 for the *three* months ended *June 30, 2025* and *2024*, respectively, and $419,000 and $550,000 for the *six* months ended *June 30, 2025* and *2024,* respectively .

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

---

| | |
|:---|:---|
| Remainder of 2025 | $179 |
| 2026 | 304 |
| 2027 | 133 |
| 2028 | 5 |
| Total lease payments, undiscounted | $621 |
| Less: present value discount | (34) |
| **Lease liabilities, at present value** | $**587** |

---

***14.*** **Subsequent Events**

As previously disclosed in the Company's Definitive Information Statement on Schedule *14C,* as filed with the SEC on *August 8, 2025,* on *July 25, 2025,* the Board approved, and unanimously recommended that the Company's stockholders approve, a Certificate of Amendment to the Company's Restated Certificate of Incorporation to decrease the total number of authorized shares of all classes of the Company's capital stock from 36,000,000 shares to 8,000,000 shares by decreasing the number of authorized shares of the Company's common stock from 35,000,000 to 7,000,000 shares (the "Certificate of Amendment"). In accordance with applicable law, the requisite stockholders of the Company approved the Certificate of Amendment by written consent on *July 26, 2025.* The Certificate of Amendment will become effective as of the date and time stated in the Certificate of Amendment upon its filing with the Secretary of State of the State of Delaware, which we expect to file on or about *September 2, 2025.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *22*

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**ITEM 2. <u>Management</u>**<u>'</u>**<u>s Discussion and Analysis of Financial Condition and Results of Operations</u>**

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 June 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. In the last four months of 2024, the Federal Reserve lowered the federal funds rate to a current range of 4.25% to 4.50%; 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 the 2024 and potential future Federal Reserve rate decreases may positively impact the title insurance market, mortgage rates continue to remain relatively high and will likely continue to contribute to decreased real estate activity in the upcoming year. Per the Mortgage Bankers Association's ("MBA") Mortgage Finance Forecast as of July 2025, interest rates on a Freddie Mac 30-year, fixed rate mortgage averaged 6.8% in the first quarter of 2025 and are projected to stay relatively stable at the current level through the end of 2025. However, despite continued elevated interest rates, per the MBA Mortgage Finance Forecast as of July 2025, mortgage origination volume is expected to increase by approximately 14% in 2025 as compared to 2024, to approximately $2.02 trillion in mortgage originations as compared to $1.78 trillion in 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 23

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A shortage in the supply of homes for sale, increasing home prices, high mortgage interest rates and inflation have created volatility in the residential real estate market in the last several years. Despite the Federal Reserve lowering the federal funds rate in 2024, current interest rates remain at elevated levels compared to pre-2021 interest rates. Additionally, recent geopolitical uncertainties and federal government efforts have created elevated volatility in domestic and global arenas.

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 | Three Months Ended |  | Six Months Ended | Six Months Ended |  |
|  | **June 30,** | June 30, |  | **June 30,** | June 30, |  |
|  | **2025** | 2024 | **Change** | **2025** | 2024 | **Change** |
| Net title premium written | $1998 | $1670 | $328 | $3386 | $3074 | $312 |
| Escrow and other title fees | 812 | 704 | 108 | 1396 | 1246 | 150 |
| Management fees | 1250 | 750 | 500 | 2000 | 1503 | 497 |
| Total revenue | 4060 | 3124 | 936 | 6782 | 5823 | 959 |
| Cost of revenues | (157) | (94) | (63) | (257) | (212) | (45) |
| Gross profit | $3903 | $3030 | $873 | $6525 | $5611 | $914 |
| Operating expenses | (3321) | (3150) | (171) | (6492) | (6231) | (261) |
| Other income, net | 366 | (49) | 415 | 635 | 511 | 124 |
| Income (loss) before income taxes | $**948** | $**(169**) | $**1117** | $**668** | $**(109)** | $**777** |

---

*Comparison of three and six months ended June 30, 2025 and 2024*

The Company's net title premiums written for the three- and six-month periods ended June 30, 2025 were $2.0 million and $3.4 million, respectively, compared to net title premiums written for the three- and six-month periods ended June 30, 2024 of $1.7 million and $3.1 million, respectively. The increase in net title premiums written for the three- and six-month periods ended June 30, 2025 as compared to the same periods of last year was due to higher volume of affiliated title business written during the second quarter of 2025. Escrow and other title fees revenue also increased by $0.1 million for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, and increased $0.2 million for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, due to higher volume of affiliated title business written during the second quarter of 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 24

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Management fees increased to $1.3 million and $2.0 million for the three and six months ended June 30, 2025, respectively, as compared to $0.8 million and $1.5 million for the three and six months ended June 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 June 30, 2025 and June 30, 2024, respectively, and $6.8 million and $5.8 million for the six-month periods ended June 30, 2025 and June 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 the second quarter of 2025.

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 June 30, 2025 and June 30, 2024 was $0.2 million and $0.1 million, respectively. Cost of revenues for the six-month period ended June 30, 2025 was $0.3 million compared to $0.2 million for the six-month period ended June 30, 2024. The increase in cost of revenue for both the three and six months ended June 30, 2025, as compared to prior periods, was attributable to a $47,000 increase in the provision for title claims loss and loss adjustment expense attributable to one claim related to the prior insured year, 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.

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 $0.2 million for the three months ended June 30, 2025 as compared to three months ended June 30, 2024, and $0.3 million for the six months ended June 30, 2025, as compared to the six months ended June 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 $0.4 million for the three-month period ended June 30, 2025, compared to Other expense, net of ($0.05 million) for the three-month period ended June 30, 2024. The increase was primarily a result of higher distributions from related parties for the three-month period ended June 30, 2025 of $240,000, as compared to $39,000 distributed during the three-month period ended June 30, 2024. Additionally, Other expense, net during the three-month period ended June 30, 2024 was driven by the impairment of HC Common Stock of $241,000. Other income, net was $0.6 million for the six-month period ended June 30, 2025, compared to $0.5 million for the six-month period ended June 30, 2024. The increase was primarily driven by higher distributions from related parties for the six-month period ended June 30, 2025 of $485,000, as compared to $200,000 distributed during the six-month period ended June 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 six-month period ended June 30, 2025 as compared to impairment of $241,000 during the six month period ended June 2024. Additionally, HC Realty did not declare or pay dividends on HC Common Stock or HC Series B Stock during the six-month period ended June 30, 2025, compared to $0.3 million of dividends declared on the HC Series B Stock for the six-month period ended June 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 June 30, 2025, we had $9.5 million in cash and cash equivalents and an additional $11.1 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 3.8% 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)**

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended** | Six Months Ended |
|  | **June 30, 2025** | June 30, 2024 |
| Net cash provided by operating activities | $**2907** | $7754 |
| Net cash provided by (used in) investing activities | **1059** | (500) |
| Net cash used in financing activities | **(3851)** | (346) |
| Net increase in cash and cash equivalents and restricted cash | **115** | 6908 |
| **Cash and cash equivalents and restricted cash at beginning of period** | $**20409** | $17752 |
| **Cash and cash equivalents and restricted cash at end of period** | $**20524** | $24660 |

---

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 $2.9 million differs from operating results for the six-month period ended June 30, 2025, primarily due to an increase of $2.8 million in escrow liabilities on the title insurance subsidiaries. Net cash provided by operating activities of $7.8 million differs from operating results for the six-month period ended June 30, 2024, primarily due to an increase of $7.8 million in escrow liabilities on the title insurance subsidiaries.

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

Cash flows used in financing activities include share repurchases and effects of changes in noncontrolling interest. Cash flows used in financing activities for the six-month period ended June 30, 2025 of $3.9 million consisted of $3.8 million of repurchases of common stock and $17,000 of distributions to non-controlling interest shareholders. Cash flows used in financing activities for the six-month period ended June 30, 2024 of $0.3 million consisted of $0.2 million of repurchases of common stock and $0.1 million of distributions to non-controlling interest shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 26

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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 May 6, 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. No cash consideration was exchanged. Refer to *Note 5, 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 six months ended June 30, 2025.

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**ITEM 3. <u>Quantitative and Qualitative Disclosures about Market Risk</u>**

Not required to be provided by a smaller reporting company.

**ITEM 4. <u>Controls and Procedures</u>**

*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 June 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 June 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 June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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<u>Part II. OTHER INFORMATION</u>

**ITEM 1. <u>Legal Proceedings</u>**

The information required for this Part II, Item 1 is incorporated by reference to the discussion under the heading "Litigation" in *Note 13, 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. <u>Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities</u>**

*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 June 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** |
| April 2025 | 402322 | $7.80 |  | $1258335 |
| May 2025 |  | $- |  | $1258335 |
| June 2025 | 89304 | $7.80 | 89304 | $561764 |
| Total | 491626 | $7.80 | 89304 | $561764 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 29

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**ITEM 3. <u>Defaults Upon Senior Securities</u>**

None.

**ITEM 4. <u>Mine Safety Disclosures</u>**

Not applicable.

**ITEM *5.* <u>Other Information</u>**

During the *three* months ended *June 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *30*

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ITEM 6. <u>Exhibits</u>

---

| | |
|:---|:---|
| 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).](http://www.sec.gov/Archives/edgar/data/797465/000143774921018947/ex_271155.htm) |
| 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).](http://www.sec.gov/Archives/edgar/data/797465/000143774917019624/ex_100767.htm) |
| 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).](http://www.sec.gov/Archives/edgar/data/797465/000151316216001091/exhibit3_1.htm) |
| 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).](http://www.sec.gov/Archives/edgar/data/0000797465/000143774925021525/ex_834644.htm) |
| 10.1 | [Stock Repurchase Agreement, dated April 21, 2025, by and among HG Holdings, Inc. and the Sellers named therein (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K (Commission File No. 001-34964) filed April 23, 2025).](http://www.sec.gov/Archives/edgar/data/797465/000143774925012804/ex_804581.htm) |
| 10.2 | [Assignment and Contribution Agreement, dated April 21, 2025, by and among HG Holdings, Inc. and the Assignors named therein (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K (Commission File No. 001-34964) filed April 23, 2025).](http://www.sec.gov/Archives/edgar/data/797465/000143774925012804/ex_804582.htm) |
| 10.3 | [Master Services Agreement, dated April 21, 2025, by and between HG Holdings, Inc. and HP Risk Solutions, LLC (incorporated by reference to Exhibit 10.3 to the Registrant's Form 8-K (Commission File No. 001-34964) filed April 23, 2025).](http://www.sec.gov/Archives/edgar/data/797465/000143774925012804/ex_804583.htm) |
| 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. <sup>(1)</sup>](ex_829088.htm) |
| 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. <sup>(1)</sup>](ex_829089.htm) |
| 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. <sup>(2)</sup>](ex_829090.htm) |
| 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. <sup>(2)</sup>](ex_829091.htm) |
| 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) |

---

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(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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**<u>SIGNATURE</u>**

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.

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; Date: August 13, 2025 | **HG HOLDINGS, INC.** |
|  | By: <u>/s/ Anna Lieb</u> |
|  | Name: Anna Lieb |
|  | Title: Principal Financial and Accounting Officer |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 32

## Exhibit 31.1

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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of HG Holdings, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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: August 13, 2025 | By:<u> </u><u>/s/ Steven A. Hale II</u>  |
|  | Name: Steven A. Hale II |
|  | Title: Chairman and Chief Executive Officer |

---

## Exhibit 31.2

Exhibit 31.2

**CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER**

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

I, Anna Lieb, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of HG Holdings, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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: August 13, 2025 | By: <u>/s/ Anna Lieb</u> |
|  | Name: Anna Lieb |
|  | Title: Principal Financial and Accounting Officer |

---

## Exhibit 32.1

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 June 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: August 13, 2025 | By: <u>/s/ Steven A. Hale II</u> |
|  | Name: Steven A. Hale II |
|  | Title: Chairman and Chief Executive Officer |

---

## Exhibit 32.2

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 June 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.

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|:---|:---|
| Date: August 13, 2025 | By: <u>/s/ Anna Lieb</u> |
|  | Name: Anna Lieb |
|  | Title: Principal Financial and Accounting Officer |

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