Note 1 - Significant Accounting Policies	12 Months Ended
Dec. 31, 2020
Notes to Financial Statements
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]	1. Significant Accounting Policies Organization and Basis of Presentation HG Holdings, Inc.'s (the “Company”) financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). On March 2, 2018, we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of November 20, 2017, as amended by the First Amendment thereto dated January 22, 2017 ( the “Asset Purchase Agreement”). As a result of the sale, on March 2, 2018, the Company's Board of Directors approved an amendment to the Company's Restated Certificate of Incorporation to change the name of the Company to HG Holdings, Inc. The amendment became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on March 2, 2018. As a result of the Asset Sale, the Company had and continues to have no revenue-generating operations. On March 19, 2019, we purchased 300,000 shares of HC Realty's Common Stock (the “HC Common Stock”) for an aggregate purchase price of $3,000,000 and 200,000 shares of HC Realty's 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of $2,000,000. On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000. As a result of these purchases, we currently own approximately 36.4% of the as-converted equity interest of HC Realty. Also on March 19, 2019, we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty's operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty's operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by us. On August 14, 2020, pursuant to the terms of the Loan Agreement, HC Realty's operating partnership repaid the loan in full, including all accrued interest and make whole interest. As a result of these investments, our sources of income include dividends on HC Realty Series B Stock and interest paid on cash and subordinated secured promissory notes. The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least 12 months from the date of these financial statements. On June 19, 2020, the Company raised $12,675,000, the maximum gross proceeds possible, through its rights offering (the “Rights Offering”) which concluded on June 19, 2020. Pursuant to the Rights Offering, the Company distributed non-transferable rights to purchase 19,500,000 shares of its common stock at a purchase price of $0.65 per share to stockholders of record as of May 18, 2020. As a result of the rights offering, the Company issued 19,500,000 new shares of common stock. On June 29, 2020, the Company used $4.75 million of the proceeds of the rights offering to purchase additional HC Realty Series B Stock. The Company intends to use the remaining proceeds of the Rights Offering to provide additional cash for acquisitions, which may include purchasing additional HC Series B Stock, HC Common Stock or debt of HC Realty. Cash We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Restricted Cash Restricted cash includes collateral deposits required under the Company's letter of credit agreement, which expires in June 2021, to guarantee the Company's workers compensation insurance policy. The restricted cash balance is expected to mature over the next six months. As of December 31, 2020, there was no outstanding balance on the letter of credit agreement. Concentration of Credit Risk The Company place its cash and restricted cash with financial institutions and, at times, cash held in depository accounts may exceed the Federal Deposit Insurance Corporation insured limit. Interest Income Interest income is recorded on an accrual basis based on the effective interest rate method and includes the accretion of fair value adjustments/discounts. Fair value adjustments to par value are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of fair value adjustments, if any. Other revenues are recognized when contractual obligations are fulfilled or as services are provided. Payment-in-Kind Interest The Company has subordinated secured notes receivables that may contain payment-in-kind (“PIK”) provisions. The PIK interest, computed at the contractual rate specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income. Variable Interest Entities As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in three entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are not the primary beneficiary of the three VIEs as we do not have the power to direct the activities that most significantly impact the VIEs' economic performance and therefore are not required to consolidate these entities. Subordinated Note s Receivable In accordance with ASC 810 - 40 - 5, upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on March 2, 2018. The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) – Creditors Accounting for Modification or Exchange of Debt Instruments. The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes. The determination of impairment involves management's judgment and the use of market and third -party estimates regarding collateral values. During 2020 management determined that S&L Note was other than temporarily impaired and recorded an impairment loss of $833,000. Property, Plant and Equipment Depreciation of property, plant and equipment is computed using the straight-line method based upon the estimated useful lives. Depreciation expense is charged to general and administrative expenses. Gains and losses related to dispositions and retirements are included in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of property, plant and equipment, which could result in impairment charges in future periods. Our depreciation policy reflects judgments on the estimated useful lives of assets. Our long-lived assets were tested for impairment at December 31, 2020 and determined that the long-lived assets were not impaired. Equity Investments Long-term investments consist of investments in equity securities where our ownership is less than 50% and the Company has the ability to exercise significant influence, but not control, over the investee. These investments are classified in “Investment in affiliate” on the balance sheets. Investments accounted for under the equity method of accounting are initially recorded at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee. For investments that do not have a readily determinable fair value, the Company made an accounting policy election for a measurement alternative. Upon adoption of ASU 2016 - 01, the Company carries these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transaction for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee's cash position, liquidity, earnings and revenue outlook, equity position, and ownership, among other factors, in its review. If management's assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. Income Taxes Deferred income taxes are determined based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax expense represents the change in the deferred tax asset/liability balance. Income tax credits are reported as a reduction of income tax expense in the year in which the credits are generated. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. Interest and penalties on uncertain tax positions are recorded as income tax expense. Fair Value of Financial Instruments Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1 ), significant other observable inputs (Level 2 ), and significant unobservable inputs (Level 3 ). The fair value of receivables and payables approximate the carrying amount because of the short maturity of these instruments. Earnings per Common Share Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share includes any dilutive effect of outstanding stock options and restricted stock calculated using the treasury stock method. Stock-Based Compensation We record share-based payment awards at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest, over the vesting period. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company's common stock on the date of the grant. For awards with performance conditions, we recognize compensation cost over the expected period to achieve the performance conditions, provided achievement of the performance conditions are deemed probable. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in such estimates may affect amounts reported in future periods. New Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments (“ASU 2016 - 13” ). The amendments in ASU 2016 - 13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016 - 13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for public entities for annual reporting periods beginning after December 15, 2022, however early application is permitted for reporting periods beginning after December 15, 2018. The Company does not anticipate the adoption of ASU 2016 - 13 to have a material impact to the financial statements.

Significant Accounting Policies

Organization and Basis of Presentation

HG Holdings, Inc.'s (the “Company”) financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

March 2, 2018,

we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of

November 20, 2017,

as amended by the First Amendment thereto dated

January 22, 2017 (

the “Asset Purchase Agreement”). As a result of the sale, on

March 2, 2018,

the Company's Board of Directors approved an amendment to the Company's Restated Certificate of Incorporation to change the name of the Company to HG Holdings, Inc. The amendment became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on

March 2, 2018.

As a result of the Asset Sale, the Company had and continues to have

revenue-generating operations. On

March 19, 2019,

we purchased

300,000

shares of HC Realty's Common Stock (the “HC Common Stock”) for an aggregate purchase price of

$3,000,000

and

200,000

shares of HC Realty's

10.00%

Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of

$2,000,000.

April 3,

April 9,

and

June 29, 2020,

the Company entered into subscription agreements with HC Realty, pursuant to which we purchased

100,000,

250,000,

and

475,000

shares of Series B Stock, respectively, for an aggregate purchase price of

$8,250,000.

As a result of these purchases, we currently own approximately

36.4%

of the as-converted equity interest of HC Realty.

Also on

March 19, 2019,

we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty's operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty's operating partnership with a

$10,500,000

senior secured term loan (the “Initial Term Loan”), of which

$2,000,000

was provided by us. On

August 14, 2020,

pursuant to the terms of the Loan Agreement, HC Realty's operating partnership repaid the loan in full, including all accrued interest and make whole interest.

As a result of these investments, our sources of income include dividends on HC Realty Series B Stock and interest paid on cash and subordinated secured promissory notes. The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least

months from the date of these financial statements. On

June 19, 2020,

the Company raised

$12,675,000,

the maximum gross proceeds possible, through its rights offering (the “Rights Offering”) which concluded on

June 19, 2020.

Pursuant to the Rights Offering, the Company distributed non-transferable rights to purchase

19,500,000

shares of its common stock at a purchase price of

$0.65

per share to stockholders of record as of

May 18, 2020.

As a result of the rights offering, the Company issued

19,500,000

new shares of common stock. On

June 29, 2020,

the Company used

$4.75

million of the proceeds of the rights offering to purchase additional HC Realty Series B Stock. The Company intends to use the remaining proceeds of the Rights Offering to provide additional cash for acquisitions, which

may

include purchasing additional HC Series B Stock, HC Common Stock or debt of HC Realty.

Cash

We consider all highly liquid investments with a maturity of

three

months or less when purchased to be cash equivalents.

Restricted Cash

Restricted cash includes collateral deposits required under the Company's letter of credit agreement, which expires in

June 2021,

to guarantee the Company's workers compensation insurance policy. The restricted cash balance is expected to mature over the next

six

months. As of

December 31, 2020,

there was

outstanding balance on the letter of credit agreement.

Concentration of Credit Risk

The Company place its cash and restricted cash with financial institutions and, at times, cash held in depository accounts

may

exceed the Federal Deposit Insurance Corporation insured limit.

Interest Income

Interest income is recorded on an accrual basis based on the effective interest rate method and includes the accretion of fair value adjustments/discounts. Fair value adjustments to par value are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of fair value adjustments, if any.

Other revenues are recognized when contractual obligations are fulfilled or as services are provided.

Payment-in-Kind Interest

The Company has subordinated secured notes receivables that

may

contain payment-in-kind (“PIK”) provisions. The PIK interest, computed at the contractual rate specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income.

Variable Interest Entities

As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in

three

entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are

not

the primary beneficiary of the

three

VIEs as we do

not

have the power to direct the activities that most significantly impact the VIEs' economic performance and therefore are

not

required to consolidate these entities.

Subordinated

Note

Receivable

In accordance with ASC

810

upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on

March 2, 2018.

The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) –

Creditors Accounting for Modification or Exchange of Debt Instruments.

The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes. The determination of impairment involves management's judgment and the use of market and

third

-party estimates regarding collateral values. During

2020

management determined that S&L Note was other than temporarily impaired and recorded an impairment loss of

$833,000.

Property, Plant and Equipment

Depreciation of property, plant and equipment is computed using the straight-line method based upon the estimated useful lives. Depreciation expense is charged to general and administrative expenses. Gains and losses related to dispositions and retirements are included in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset

may

not

be recoverable. Assumptions and estimates used in the evaluation of impairment

may

affect the carrying value of property, plant and equipment, which could result in impairment charges in future periods. Our depreciation policy reflects judgments on the estimated useful lives of assets. Our long-lived assets were tested for impairment at

December 31, 2020

and determined that the long-lived assets were

not

impaired.

Equity Investments

Long-term investments consist of investments in equity securities where our ownership is less than

50%

and the Company has the ability to exercise significant influence, but

not

control, over the investee. These investments are classified in “Investment in affiliate” on the balance sheets. Investments accounted for under the equity method of accounting are initially recorded at cost and subsequently increases or decreases the investment by its proportionate share of the net income or loss and other comprehensive income or loss of the investee. For investments that do

not

have a readily determinable fair value, the Company made an accounting policy election for a measurement alternative. Upon adoption of ASU

2016

01,

the Company carries these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transaction for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee's cash position, liquidity, earnings and revenue outlook, equity position, and ownership, among other factors, in its review. If management's assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount.

Income Taxes

Deferred income taxes are determined based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax expense represents the change in the deferred tax asset/liability balance. Income tax credits are reported as a reduction of income tax expense in the year in which the credits are generated. A valuation allowance is recorded when it is more likely than

not

that a deferred tax asset will

not

be realized. Interest and penalties on uncertain tax positions are recorded as income tax expense.

Fair Value of Financial Instruments

Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level

), significant other observable inputs (Level

), and significant unobservable inputs (Level

). The fair value of receivables and payables approximate the carrying amount because of the short maturity of these instruments.

Earnings per Common Share

Basic earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share includes any dilutive effect of outstanding stock options and restricted stock calculated using the treasury stock method.

Stock-Based Compensation

We record share-based payment awards at fair value on the grant date of the awards, based on the estimated number of awards that are expected to vest, over the vesting period. The fair value of stock options was determined using the Black-Scholes option-pricing model. The fair value of the restricted stock awards was based on the closing price of the Company's common stock on the date of the grant. For awards with performance conditions, we recognize compensation cost over the expected period to achieve the performance conditions, provided achievement of the performance conditions are deemed probable.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in such estimates

may

affect amounts reported in future periods.

New Accounting Pronouncements

June 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments

(“ASU

2016

13”

). The amendments in ASU

2016

require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU

2016

amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for public entities for annual reporting periods beginning after

December 15, 2022,

however early application is permitted for reporting periods beginning after

December 15, 2018.

The Company does

not

anticipate the adoption of ASU

2016

to have a material impact to the financial statements.