10-Q

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, 2022

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: 0-14938

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^th Street, Suite 101, Charlotte, NC 28204
(Address of principal executive offices, Zip Code)

252-355-4610

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	NA	NA

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 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, 2022, 2,873,031 shares of common stock of HG Holdings, Inc., par value $0.02 per share, were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

HG HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	June 30,			December 31,
	2022			2021
ASSETS	(unaudited)
Current assets:
Cash	$	8,867		$	11,806
Restricted cash		7,939			8,287
Investments		2,145			-
Accounts receivables		186			183
Interest and dividend receivables		300			298
Prepaid expenses and other current assets		326			192
Total current assets		19,763			20,766
Property, plant and equipment, net		171			204
Lease assets		401			447
Investment in affiliate		11,179			11,450
Subordinated notes receivable		846			992
Goodwill		4,451			4,451
Other assets		808			555
Total assets	$	37,619		$	38,865
LIABILITIES
Current liabilities:
Accounts payable	$	12		$	12
Accrued salaries, wages and benefits		34			104
Lease liabilities, current portion		234			278
Escrow liabilities		7,888			8,053
Other accrued expenses		331			346
Total current liabilities		8,499			8,793
Long-term liabilities:
Reserve for title claims		267			231
Lease liabilities		165			169
Other long-term liabilities		25			110
Total long-term liabilities		457			510
Total liabilities		8,956			9,303
STOCKHOLDERS’ EQUITY
Common stock, $0.02 par value, 35,000,000 shares authorized and 2,873,031 shares issued and outstanding on each respective date		54			54
Capital in excess of par value		30,491			30,450
Retained deficit		(1,882	)		(942	)
Total stockholders’ equity		28,663			29,562
Total liabilities and stockholders’ equity	$	37,619		$	38,865

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

2

HG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months						Six Months
	Ended						Ended
	June 30,			June 30,			June 30,			June 30,
	2022			2021			2022			2021
Revenues:
Net premiums written	$	1,344		$	-		$	2,306		$	-
Escrow and other title fees		578			-			1,097			-
Total revenues		1,922			-			3,403			-
Cost of revenues:
Underwriting expenses		73			-			109			-
Provision for title claim losses		63			-			76			-
Search and other fees		22			-			53			-
Total operating expenses		158			-			238			-
Gross underwriting profit		1,764			-			3,165			-
Operating expenses:
General and administrative expenses		(2,271	)		(256	)		(4,413	)		(596	)
Other income/expenses:
Interest income		3			1			3			13
Dividend income		257			256			513			513
Other income		3			-			4			-
Gain on sale of assets		123			-			123			-
Loss from affiliate		(96	)		(110	)		(189	)		(226	)
Loss on impairment		(146	)		-			(146	)		-
Loss from operations before income taxes		(363	)		(109	)		(940	)		(296	)
Income tax benefit		-			-			-			-
Net loss	$	(363	)	$	(109	)	$	(940	)	$	(296	)
Basic and diluted loss per share:
Net loss – basic	$	(.13	)	$	(.04	)	$	(.33	)	$	(.10	)
Net loss – diluted	$	(.13	)	$	(.04	)	$	(.33	)	$	(.10	)
Weighted average shares outstanding:
Basic		2,847			2,832			2,843			2,832
Diluted		2,847			2,832			2,843			2,832

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

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HG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the Six Months Ended June 30,
	2022			2021
Net loss from operations	$	(940	)	$	(296	)
Adjustments to reconcile net loss from operations to net cash flows from operating activities:
Depreciation expense		41			1
Stock compensation expense		41			42
Dividends on HC Realty common stock		83			82
Loss from affiliate		189			226
Gain on sale of assets		(123	)		-
Impairment loss on subordinated notes receivable		146			-
Changes in assets and liabilities:
Prepaid expenses and other current assets		(138	)		(23	)
Accounts receivable		(3	)		-
Income tax receivable		-			488
Deferred tax assets and other assets		(254	)		(34	)
Accounts payable		-			2
Accrued salaries, wages, and benefits		(70	)		-
Escrow liabilities		(165	)		-
Reserve for title claims		36			-
Other accrued expenses		(15	)		149
Other long-term liabilities		(85	)		(4	)
Net cash (used in) provided by operations		(1,257	)		633
Cash flows from investing activities:
Purchase of property, plant, and equipment		(89	)		-
Purchase of investments		(2,145	)		-
Proceeds from sale of assets		204
Principal payments received on subordinated secured notes receivable		-			170
Net cash (used in) provided by investing activities		(2,030	)		170
Net (decrease) increase in cash and restricted cash		(3,287	)		803
Cash and restricted cash at beginning of period		20,093			11,630
Cash and restricted cash at end of period	$	16,806		$	12,433
Cash	$	8,867		$	12,199
Restricted cash		7,939			234
Cash and restricted cash	$	16,806		$	12,433
Supplemental Non-Cash Disclosures:
Dividends on investment in affiliate	$	50		$	50

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

4

HG HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Preparation of Interim Unaudited Financial Statements

The consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, 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. Certain information and footnote disclosures prepared in accordance with generally accepted accounting principles in the United States have been either condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. 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 our latest Annual Report on Form 10-K filed with the SEC on March 29, 2022.

All prior period share numbers and per share data appearing in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the 1 for 12 reverse stock split of our outstanding shares of common stock, $0.02 par value per share (the “Common Stock”) effective July 15, 2021 (the “Reverse Split”), unless otherwise indicated or unless context suggests otherwise.  The Reverse Split did not affect the par value of our Common Stock, which remained $0.02 per share. As a result, upon effectiveness of the Reverse Split, the stated capital on our balance sheet attributable to the common stock was reduced in proportion to the fraction by which the number of shares of Common Stock was reduced, and the additional paid-in capital account was credited with the amount by which the stated capital was reduced. The per share net income or loss and net book value of our Common Stock will be increased because there will be fewer shares of our Common Stock outstanding.

HG Holdings, Inc, together with its consolidated subsidiaries (the “Company”), operates through its wholly owned subsidiaries National Consumer Title Insurance Company (“NCTIC”), National Consumer Title Group, LLC (“NCTG”), Title Agency Ventures, LLC (“TAV”), HG Managing Agency, LLC (“HGMA”), and Omega National Title Agency, LLC (“Omega”) and through an affiliated investment in HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”).

Description of the Business

Title Insurance

The Company engages in issuing title insurance through our subsidiary NCTIC and providing title agency services through our subsidiaries NCTG, TAV, and Omega. Through NCTIC, the Company underwrites land title insurance for owners and mortgagees as the primary insurer. The Company currently only 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 in Florida through its home office and through a network of affiliated and independent title agents.  Issuing agents, in the state of Florida, 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.

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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 rate 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.

Volume is a factor in the Company’s title insurance operation’s profitability due to fixed operating costs that are incurred regardless of title insurance premium volume.  The resulting operating leverage tends to amplify the impact of changes in volume on profitability.  The Company’s title insurance profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and to minimize risks such as interest rate changes, defaults and impairments of assets.

The Company’s volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity, which includes property sales, mortgage financing and mortgage refinancing.  Real estate activity, home sales and mortgage lending are cyclical in nature. Real estate activity is affected by a number of factors, including the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels, and general United States economic conditions.  Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.

The Company’s title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.

Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the spring and summer quarters tend to be more active. Mortgage refinance activity tends to be influenced less by seasonality and more by economic cycles, with activity levels increasing during times of falling interest rates.

Real Estate Related

The Company engages in rental real estate through our equity investment in HC Realty. HC Realty is an internally-managed REIT formed to grow the business of acquiring, developing, financing, owning and managing build-to-suit or improved-to-suit, single-tenant properties leased primarily to the United States of America and administered by the General Services Administration (“GSA”) or directly by the federal government agencies or departments occupying such properties (referred to as “GSA Properties”). HC Realty invests primarily in GSA Properties in sizes that range from 5,000 to 50,000 rentable square feet that are in their first lease term after original construction or renovation-to-suit date. HC Realty further emphasizes GSA Properties that fulfill mission critical or direct citizen service functions.  Leases associated with the GSA 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 acquisitions of single-tenanted, federal government-leased properties in such markets; although, at some point in the future HC Realty may elect to develop, or joint venture with others in the development of, competitively bid, built-to-suit, single-tenant, federal government-leased properties, or buy facilities that are leased to credit-worthy state or municipal tenants.

For information about our reportable segments refer to Note 9 Segment Information.

Developments Impacting Comparison of the Six Month Periods ended June 30, 2022 and 2021

The following previously disclosed events occurred subsequent to June 30, 2021 that impacted the comparison on the six-month periods ended June 30, 2022 and 2021. On July 20, 2021, the Company completed the acquisition (the “Acquisition”) pursuant to that certain Equity Purchase Agreement (the “First Purchase Agreement”) dated April 20, 2021 with NCTIC, a Florida corporation, NCTG, a Florida limited liability company, Southern Fidelity Insurance Company, a Florida corporation (“SFIC”), Southern Fidelity Managing Agency, LLC, a Florida limited liability company (“SFMA”), and Preferred Managing Agency, LLC, a Florida limited liability company (“PMA” and together with SFIC and SFMA, each, a “Seller” and collectively, the “Sellers”). On such date, pursuant to the First Purchase Agreement, the Company purchased 100% of the stock of NCTIC and 100% of the membership interest in NCTG for $5.463 million, adjusted for a customary post-closing working capital adjustment (the “Purchase Price”). Pursuant to the mechanics in the First Purchase Agreement, the Purchase Price was determined at closing by taking the $5.5 million purchase price originally agreed to under the First Purchase Agreement, subtracting the debt of NCTIC and NCTG, adding payment for $75,000 of the transaction expenses of the Sellers and, adding a closing related working capital adjustment. The Company funded the Purchase Price from cash on hand. Also at closing, the Company and Sellers agreed that the economic benefits and burdens of the ownership of the equity, including for accounting and tax purposes, be transferred as of 12:01 am on July 1, 2021. For all other purposes, the effective time of the transfer remained July 20, 2021.

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Pursuant to the Acquisition, the Company effectively purchased (i) 100% of the stock of NCTIC, a Florida title insurer formed in 2017, and (ii) a 100% membership interest in NCTG, which owns a 50% non-controlling membership interest in TAV, and by virtue thereof, owns 50% of the membership interest in Omega, also a Florida based title agency. NCTIC provides title insurance, closing and/or escrow services and similar or related services in the state of Florida in connection with residential real estate transactions. Omega operates 10 title agency locations in Florida providing title agency services for residential and commercial real estate transactions.

On September 1, 2021, the Company entered into a Membership Interests Purchase Agreement (the “Second Purchase Agreement”) with TAV and Fidelis US Holdings, Inc., a Delaware corporation (“Second Agreement Seller”). On such date, pursuant to the Second Purchase Agreement and in an immediate sign-and-close transaction, the Company purchased 50% of the membership interests of TAV from Second Agreement Seller (the “Second Acquisition”) for $2.2 million (the “Second Acquisition Purchase Price”).

Combined with the Acquisition by the Company in July 2021 of a 100% membership interest in NCTG, which owns a 50% membership interest in TAV, the Company now is the sole owner of TAV, and by virtue thereof, owns all of the membership interests in Omega.

As of June 30, 2022, HC Realty owned and operated a portfolio of 27 single-tenant properties leased entirely to the United States of America for occupancy by federal agencies including the Federal Bureau of Investigation, the Drug Enforcement Administration, the Social Security Administration and the Department of Transportation. The Company owns approximately 33.9% of the as converted equity interest of HC Realty as of June 30, 2022.

Recent Accounting Pronouncements

In June 2016, the 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. Early application is permitted for reporting periods beginning after December 15, 2018, although the Company has not opted to do so. The Company does not anticipate the adoption of ASU 2016-13 to have a material impact to the consolidated financial statements.

2. Subordinated Notes Receivable

The Company received a $7.4 million subordinated secured promissory note (the “Original Note”) from Stanley Furniture Company, LLC, formerly known as Churchill Downs, LLC (the “Buyer”) as partial consideration for the sale of substantially all of our assets during the first quarter of 2018 (the “Asset Sale”). On September 6, 2018, the Buyer sold certain of its assets (the “S&L Asset Sale”), including certain inventory and the Stone & Leigh tradename to Stone & Leigh, LLC (“S&L”), which is owned by a group which includes Matthew W. Smith, the Company’s former interim Chief Executive Officer. As a part of the S&L Asset Sale, the Buyer assigned to S&L certain of its rights and obligations under the Original Note. In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”). The A&R Note had a principal amount as of the assignment date of $3.3 million. The A&R Note was paid in full in 2020 pursuant to the terms of a forbearance agreement reached with the Buyer

S&L Note

The S&L Note had a principal amount of $4.4 million as of the assignment date. The S&L Note matures on March 2, 2023, at which time the total principal amount is due. Interest on the S&L Note accrues at a fixed rate of 10% per annum. No cash interest payments were accrued or received during the six months ending June 30, 2022 and 2021.

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As a result of the Company’s recording of impairment losses in prior quarters, based on current information and events, including the impact of COVID-19 on S&L’s business and its customers, the Company ceased accreting interest income on the fair value discount of the S&L Note on the date in the third quarter of 2020 it determined the note was other than temporarily impaired.  The Company did not receive any interest payments which were recognized as principal reductions during the three and six month periods ending June 30, 2022.  In the three and six month periods ending June 30, 2021, the Company recognized $63,000 and $170,000, of interest payments as reductions of the principal balance of the S&L Note, respectively.

As of June 30, 2022, the Company concluded that S&L would not have adequate cash required to repay the carrying value of the S&L Note. Given the facts and circumstances, the Company recorded an impairment loss of $146,000 in the three months ending June 30, 2022.  The Company’s estimated fair value of the S&L Note is based upon the estimated fair value of the collateral securing the note, namely cash, accounts receivables, and inventory.  The determination of fair value involves management’s judgment, including analysis of the impact of COVID-19 on S&L’s business and its customers, and the use of market and third-party estimates regarding collateral values.  These collateral value estimates are based on the three-level valuation hierarchy for fair value measurement and represent Level 1 and 2 inputs.  Level 1 inputs are quoted prices in active markets for identical assets or liabilities.  Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 

3. Investment in Affiliate

HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) is not deemed to be in-substance common stock and is accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Series B Stock will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by HC Realty.

The following table summarizes the Company’s investment in HC Realty as of June 30, 2022 and December 31, 2021 (in thousands):

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Statements of Operations (b)
											For the Three Months Ended June 30,						For the Six Months Ended June 30,
	June 30, 2022			December 31, 2021			June 30, 2022		December 31, 2021		2022			2021			2022			2021
HC Realty Series B Stock (a)		26.8	%		26.8	%	$	10,250	$	10,250	$	-			-		$	-			-
HC Realty common stock		7.1	%		7.1	%		929		1,200		(96	)		(110	)		(189	)		(226	)
Total		33.9	%		33.9	%	$	11,179	$	11,450	$	(96	)	$	(110	)	$	(189	)	$	(226	)

(a) Represents investments in shares of HC Realty Series B Stock with a basis of $10.25 million. Each share of Series B Stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

(b) Loss from these investments is included in “Loss from affiliate” in the consolidated statement of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

The Company’s investment in HC Realty common stock is accounted for under the equity method of accounting.

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4. Investments

The following table details investments by major investment category, at June 30, 2022:

	Cost or Adjusted/ Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Total
U.S. government and agency securities, held-to-maturity	$	1,995	$	-	$	-	$	1,995
Common stock		150		-		-		150
Total investments	$	2,145	$	-	$	-	$	2,145

The table below summarizes our fixed maturities at June 30, 2022 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturities of those obligations.

	Cost or Amortized Cost		Percent of Total			Fair Value		Percent of Total
Due in one year or less	$	-		-	%	$	-		-	%
Due after one year through five years		1,995		100.0			1,995		100.0
Due after five years through ten years		-		-			-		-
Due after ten years		-		-			-		-
Total	$	1,995		100.0	%	$	1,995		100.0	%

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.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, Nasdaq and NYSE American. For securities for which quoted prices in active markets are unavailable, we use a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on June 30, 2022. Changes in interest rates subsequent to June 30, 2022 may affect the fair value of our investments.

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The fair value of our fixed maturities is initially 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 include, but are 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.

All fixed-income securities are classified as held-to-maturity and are reported at amortized cost as of June 30, 2022. The Company performs ongoing impairment evaluations and we did not record any other then temporary impairments during the three or six month period ended June 30, 2022

The following table presents the fair value of our financial instruments measured on a recurring basis by level at June 30, 2022:

	Total		Level 1		Level 2		Level 3
Common stock	$	150	$	-	$	-	$	150
Investments, at fair value		150						150
U.S. government and agency securities, held-to-maturity		1,950		-		-
Total investments	$	2,145	$	-	$	-	$	150

5. Paycheck Protection Program (“PPP”) Loan

On May 7, 2020, prior to the Company’s acquisitions of NCTIC, NCTG, TAV and Omega, Omega entered into a loan agreement with Wells Fargo, N.A. in the aggregate amount of $544,842 (the “Loan”), pursuant to the PPP under the CARES Act. The Loan was necessary to support ongoing operations due to the economic uncertainty resulting from the COVID-19 pandemic and lack of access to alternative sources of liquidity.

The Loan was scheduled to mature five years from the date on which Omega applies for loan forgiveness under the CARES Act, bears interest at a rate of 1% per annum and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration (“SBA”) under the CARES Act. The PPP provides that the use of the Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. Omega used all of the PPP proceeds toward qualifying expenses.

On September 16, 2021, Omega received notice from the SBA that the full amount of the loan was forgiven. The forgiveness of the loan was included as gain on extinguishment of debt on the Consolidated Statements of Operations during the three months ended September 30, 2021.

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, 2022. 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.

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A reconciliation of the activity in the reserves account for the six month period ending June 30, 2022 is as follows (in thousands):

Beginning Reserves	$	231
Provision for claims related to:
Current year		36
Prior years		-
Total provision for claim losses		36
Claims paid related to:
Current year		-
Prior years		-
Total title claims paid		-
Ending Reserves	$	267

At June 30, 2022, there were no reinsurance recoverables on paid claims or unpaid reserves.

For the six months ended June 30, 2022, there was no development of the net provision for claims attributable to insured events of the prior year as a result of estimation of the reserve for claims. Original estimates are decreased or increased as additional information becomes known regarding individual claims.

A summary of the Company’s loss reserves at June 30, 2022 is as follows (in thousands):

Known title claims	$	-	-
IBNR title claims		267	100	%
Total title claims		267	100	%
Non-title claims		-	-
Total title claims reserves	$	267	100	%

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 six month period ended June 30, 2022, NCTIC's reinsurance program consisted of excess of loss reinsurance treaties. The following is a summary of the reinsurance coverage.

Effective January 1, 2022, 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 at 100% additional premium as to time and pro rata as to amount. 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, 2022.

Effective January 1, 2022, NCTIC entered into a reinstatement premium protection reinsurance agreement to reinsure the reinstatement premium payment obligations of NCTIC under the shared per risk excess of loss agreement. The coverage is limited to 100% of the original contracted reinsurance placement. This agreement is shared with the other nonaffiliated companies. Each company pays its share of the reinsurance cost based on separate company earned premiums. The agreement expires December 31, 2022.

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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 the reinsuring companies do not meet their obligations under these reinsurance contracts. NCTIC uses a broker to place its reinsurance through Lloyd’s syndicates. Chaucer Ltd (“Chaucer”) 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, 2022, both reinsurers had an A-issuer credit rating from AM Best, an AA- from Fitch, and an A+ from S&P. The Company monitors both the financial condition of individual reinsurers and risk concentration arising from similar activities and 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. See Note 5 for recoveries due from reinsurers relating to paid and unpaid claims under these treaties.

The effects of reinsurance on premiums written and earned at NCTIC are as follows:

	For the Six Months Ended
	June 30, 2022
	Written			Earned
Direct premiums	$	1,145		$	1,145
Ceded premiums		(28	)		(28	)
Net premiums	$	1,117		$	1,117

8. Statutory Reporting

NCTIC's assets, liabilities, and results of operations have been reported in accordance with accounting principles generally accepted in the United States of America (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 (NAIC), state laws and regulations, as well as through general practices. The principal differences between SAP and 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 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).

9. Segment Information

The Company has two reportable segments, title insurance services and real estate. The remaining immaterial segments have been combined into a group called “Corporate and Other.” The title insurance segment issues title insurance policies, which insures titles to real estate, and provides title agency services for residential and commercial real estate transactions. The real estate segment, through an affiliate investment in HC Realty, owns and operates a portfolio of single-tenant properties leased entirely to the United States of America for occupancy by federal agencies.

Provided below is selected financial information about the Company’s operations by segment for the six months ending June 30, 2022 (in thousands):

	Title Insurance			Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	3,403		$	-	$	-		$	3,403
Cost of revenues		(238	)		-		-			(238	)
Gross profit	$	3,165		$	-	$	-		$	3,165
Operating expenses		(3,847	)		-		(566	)		(4,413	)
Other income and expenses		6			324		(22	)		308
Income (loss) before income taxes	$	(676	)	$	324	$	(588	)	$	(940	)
Total assets	$	19,771		$	11,179	$	6,669		$	37,619

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Provided below is selected financial information about the Company’s operations by segment for the six months ending June 30, 2021 (in thousands):

	Title Insurance		Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	-	$	-	$	-		$	-
Cost of revenues		-		-		-			-
Gross profit	$	-	$	-	$	-		$	-
Operating expenses		-		-		(596	)		(596	)
Other income and expenses		-		287		13			300
Income (loss) before income taxes	$	-	$	287	$	(583	)	$	(296	)
Total assets	$	-	$	11,764	$	15,154		$	26,918

Provided below is selected financial information about the Company’s operations by segment for the three months ending June 30, 2022 (in thousands):

	Title Insurance			Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	1,922		$	-	$	-		$	1,922
Cost of revenues		(158	)		-		-			(158	)
Gross profit	$	1,764		$	-	$	-		$	1,764
Operating expenses		(1,990	)		-		(281	)		(2,271	)
Other income and expenses		5			161		(22	)		144
Income (loss) before income taxes	$	(222	)	$	161	$	(303	)	$	(363	)
Total assets	$	19,771		$	11,179	$	6,669		$	37,619

Provided below is selected financial information about the Company’s operations by segment for the three months ending June 30, 2021 (in thousands):

	Title Insurance		Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	-	$	-	$	-		$	-
Cost of revenues		-		-		-			-
Gross profit	$	-	$	-	$	-		$	-
Operating expenses		-		-		(256	)		(256	)
Other income and expenses		-		146		1			147
Income (loss) before income taxes	$	-	$	146	$	(255	)	$	(109	)
Total assets	$	-	$	11,764	$	15,154		$	26,918

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10. Income taxes

During the six months ended June 30, 2022, the Company recorded a non-cash credit to its valuation allowance of $168,000 increasing its valuation allowance against deferred tax assets to $7.9 million as of June 30, 2022.  The primary assets covered by this valuation allowance are net operating losses, which are approximately $37.8 million at June 30, 2022.  The Company did not make any cash payments for income tax in the six month period ended June 30, 2022 and 2021 due to its net operating loss carryforwards.

The Company maintains a valuation allowance against deferred tax assets that currently exceed our deferred tax liabilities. The primary assets covered by this valuation allowance are net operating loss carry-forwards. 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 four-year period 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. Should the Company determine that it will not be able to realize all or part of its deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made.

As of June 30, 2022, the Company has no deferred tax assets not covered by a valuation allowance.

The Company’s effective tax rate for the current and prior year six month periods were effectively 0% due to the change in the valuation allowance.

11. Stockholders’ Equity

Basic earnings per share of Common Stock 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 per share. Basic and diluted earnings per share are calculated using the following share data (in thousands):

	Three Months				Six Months
	Ended				Ended
	June 30,		June 30,		June 30,		June 30,
	2022		2021		2022		2021
Weighted average shares outstanding for basic calculation		2,847		2,832		2,843		2,832
Add: Effect of dilutive stock awards		-		-		-		-
Weighted average shares outstanding, adjusted for diluted calculation		2,847		2,832		2,843		2,832

For the three and six month periods ended June 30, 2022 and 2021, the dilutive effect of stock options and restricted awards was not recognized since we had a net loss.  For the three and six month periods ended June 30, 2022, there were no stock options or restricted awards outstanding.  For the three and six month periods ended June 30, 2021, approximately 35,000 stock awards were excluded from the diluted per share calculation as they would be anti-dilutive. 

The Company will repurchase shares of Common Stock from time to time that are tendered by recipients of restricted stock awards to satisfy tax withholding obligations on vested restricted stock. There were no such repurchased shares during the current or prior year three month periods.

On the close of business on July 15, 2021, the Company effectuated Reverse Split. In connection with the Reverse Split, the amendment to the Company’s Restated Certificate of Incorporation approved by the Company’s stockholders was effective as of July 15, 2021.

No fractional shares of Common Stock were issued as a result of the Reverse Stock Split. Instead, in lieu of any fractional shares to which a stockholder of record would otherwise be entitled as a result of the Reverse Stock Split, the Company paid cash (without interest) equal to such fractional share multiplied by $0.70 which was the 90-day Volume Weighted Average Price (“VWAP”) of our Common Stock on the OTCQB for the period immediately preceding the Effective Time (with such average closing sales prices being adjusted to give effect to the Reverse Stock Split). After the Reverse Split, a stockholder otherwise entitled to a fractional interest will not have any voting, dividend or other rights with respect to such fractional interest except to receive payment as described above. Stockholders owning fractional shares were paid out in cash for such fractional shares.

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A reconciliation of the activity in Stockholders’ Equity accounts for the six months ended June 30, 2022 is as follows (in thousands):

	Common		Capital in Excess of		Retained
	Stock		Par Value		Deficit
Balance at January 1, 2022	$	54	$	30,450	$	(942	)
Net loss		-		-		(577	)
Stock-based compensation expense		-		21		-
Balance at March 31, 2022	$	54	$	30,471	$	(1,519	)
Net loss		-		-		(363	)
Stock-based compensation expense		-		20		-
Balance at June 30, 2022	$	54	$	30,491	$	(1,882	)

A reconciliation of the activity in Stockholders’ Equity accounts for the six  months ended June 30, 2021 is as follows (in thousands):

	Common		Capital in Excess of		Retained
	Stock		Par Value		Deficit
Balance at January 1, 2021	$	684	$	29,738	$	(3,702	)
Net loss		-		-		(188	)
Stock-based compensation expense		-		21		-
Balance at March 31, 2021	$	684	$	29,759	$	(3,890	)
Net loss		-		-		(109	)
Stock-based compensation expense		-		21		-
Balance at June 30, 2021	$	684	$	29,780	$	(3,999	)

12. Leases

Right-of-use assets and lease liabilities related to operating leases under 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. We generally are 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 Consolidated Balance Sheet.

Our operating leases range in term from one to three years. As of June 30, 2022, the weighted-average remaining lease term of our operating leases was 0.9 years.

Our lease agreements do not contain material variable lease payments, buyout options, residual value guarantees or restrictive covenants.

Most of our 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.

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The lease liability is determined by discounting future lease payments using a discount rate based on our incremental borrowing rate for similar collateralized borrowing. The discount rate is calculated using estimates of capitalization rates and borrowing rates. As of June 30, 2022 the weighted-average discount rate used to determine our operating lease liability was 6.0%.

Lease expense included in general and administrative expense on the Consolidated Statements of Operations was $172,000 and $7,000 for the three months ended June 30, 2022 and 2021, respectively and $326,000 and $15,000 for the six months ended June 30, 2022 and 2021, respectively.

Future payments under operating lease arrangements accounted for under ASC Topic 842 as of June 30, 2022 are as follows (in thousands):

2022	$	157
2023		156
2024		104
2025		6
Total lease payments, undiscounted	$	423
Less: present value discount		(24	)
Lease liabilities, at present value	$	399

13. Revenue from Contracts with Customers

ASC 606, Revenue from Contracts with Customers requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance does not apply to revenue associated with insurance contracts (including title insurance policies), financial instruments and lease contracts; and therefore is primarily applicable to the following Company revenue categories.

Escrow and other title-related fees – The Company’s title insurance segment recognizes commission revenue and fees related to items such as searches, settlements, commitments and other ancillary services. Escrow and other title-related fees are recognized as revenue at the time of the related transactions as the earnings process, or performance obligation, is then considered to be complete.

Non-title services –All non-title service fees, such as management fees, are recognized as revenue as performance obligations are completed.

14. Business Combinations

On July 20, 2021, the Company completed the Acquisition of NCTIC and NCTG by purchasing 100% of the stock of NCTIC and 100% of the membership interest in NCTG for the Purchase Price. NCTG owns a 50% non-controlling membership interest in TAV, and by virtue thereof, owns 50% of the membership interest in Omega. The 50% non-controlling membership interest in TAV was accounted for under the equity method of accounting.

The purchase price allocation for NCTIC and NCTG is as follows (in thousands):

Cash paid for NCTIC	$	4,453
Cash paid for NCTG		1,010
Total consideration paid.	$	5,463

	NCTIC			NCTG
Cash and cash equivalents	$	4,834		$	9
Accounts receivable		40			-
Deferred tax assets		14			-
Investment in TAV		-			593
Other assets		4			418
Total assets acquired		4,892			1,020
Accrued expenses		168			10
Reinsurance payable		41			-
Escrow liability		4			-
Reserve for claims		209			-
Total liabilities assumed		422			10
Net assets acquired	$	4,470		$	1,010
Bargain purchase gain	$	(17	)	$	-

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A bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred and any noncontrolling interest in the acquiree is less than the fair value of the identifiable net assets acquired.  The bargain purchase gain was primarily driven by differences in NCTIC’s statutory surplus and GAAP surplus at the date of acquisition.  The Company believes that the Sellers wanted to exit the business relatively quickly and there were a limited number of potential buyers due to factors inherent to the property and casualty market, which resulted in a bargain purchase gain.  The bargain purchase gain was recorded in other income on the Consolidated Statement of Operations during the three months ended September 30, 2021.

On September 1, 2021, the Company acquired the remaining 50% membership interests of TAV for $2.2 million. This acquisition, combined with the July 2021 Acquisition of a 100% membership interest in NCTG, which owns a 50% membership interest in TAV, the Company now is the sole owner of TAV.

The operating results of TAV are included in the title insurance segment.

The final purchase price allocation for TAV at fair value is as follows (in thousands):

Cash paid for remaining 50% of TAV	$	2,200
Fair value of existing equity interest		3,564
Total consideration	$	5,764
Cash and cash equivalents	$	12,044
Accounts receivable		166
Prepaid expenses		76
Fixed assets		216
Total assets acquired		12,502
Accrued expenses		32
Management fee payable		455
Escrow liability		9,293
Payable to affiliate		864
Note payable		545
Total liabilities assumed		11,189
Net assets acquired		1,313
Goodwill	$	4,451

The acquisition date fair value of the Company’s previously held equity interest in TAV was $3.6 million with a fair value primarily estimated through an income approach valuation. The Company recorded a gain of $3.3 million on the fair value remeasurement of our previously held equity interest in TAV on the unaudited consolidated statements of operations for the three and nine months ended September 30, 2021.

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The acquisition of the remaining equity interest was accounted for as a step-transaction in accordance with FASB Accounting Standards Codification Topic 805, Business Combinations ("Topic 805"). The Second Purchase Price has been allocated to TAV's assets acquired and liabilities assumed based on our best estimates of the fair values as of the acquisition date. The fair value of assets acquired and liabilities assumed represent a preliminary allocation as our evaluation of facts and circumstances available as of June 30, 2022 is ongoing. Goodwill has been recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired. Goodwill consists primarily of intangible assets that do not qualify for separate recognition.

Pursuant to Topic 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, we will recognize any provisional adjustments as we obtain information not available as of the completion of this preliminary fair value calculation as determined within the measurement period. We will also be required to record, in the same period as the financial statements, the effects to any income statement captions, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The following table presents unaudited pro forma financial information as if NCTIC, NCTG, and TAV had been included in the Company’s financial results as of January 1, 2021, through the date of acquisition:

	Three Months		Six Months
	Ended		Ended
	June 30,		June 30,
	2021		2021
Revenues	$	2,084	$	4,090
Net income	$	203	$	815

15. Goodwill

As of June 30, 2022, the Company recognized $4.5 million in goodwill as the result of the acquisition of 50% of TAV on September 1, 2021.  The fair value of goodwill as of the date of acquisition, a Level 3 input, was principally based on values obtained from public and private market comps. In accordance with ASC 350, management determined that no events or changes in circumstances occurred during the six months ending June 30, 2022 that would indicate the carrying amounts may not be recoverable, and therefore determined that there were no goodwill impairments.

16. Uncertainties

On  March 11, 2020, the World Health Organization declared the current coronavirus (“COVID-19”) outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy.

As a result of these measures, many non-essential retail commerce across the country experienced significant disruption causing severely reduced sales volume. S&L, who distributes its products through these potentially impacted retail channels, has experienced and may continue to experience a reduction in sales volume as a result of these measures. Whereas most state and local governments have begun to ease restrictions on commercial retail activity, it is possible that a resurgence in COVID-19 cases could prompt a return to tighter restrictions in certain areas of the country. Furthermore, the economic recession brought on by the pandemic  may have a continuing adverse impact on consumer demand for S&L’s products. Therefore, uncertainty remains regarding the ongoing impact of the COVID-19 outbreak upon the future results of operations of S&L and its corresponding impact to the collectability of the S&L Note.

Despite the restrictions and measures by federal, state, and local governments in response to COVID-19, many of the U.S. Government tenant agencies of HC Realty’s properties were deemed essential. All of HC Realty’s revenue is generated through the receipt of rental payments from U.S. Government tenant agencies. The extent, however, of future COVID-19 disruption is highly uncertain and cannot be predicted. It is possible that with a resurgence in COVID-19 cases resulting in tighter restriction that risks to HC Realty’s operations become heightened.

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The COVID-19 pandemic caused the Company’s title operations at NCTIC and Omega to modify its business practices (including employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences). The COVID-19 pandemic and any of its variants could continue to affect the Company in a number of ways including, but not limited to, the impact on employees becoming ill, quarantined, or otherwise unable to work or travel due to illness or governmental restriction, potential decreases in net premiums written in the future, and future fluctuations in the Company's investment portfolio due to the pandemic and the economic disruption it is causing. Because of the inherent uncertainty regarding the duration and severity of the COVID-19 pandemic (including any of its variants) and its effects on the economy, as well as uncertainty regarding the effects of government measures already taken, and which may be taken or continued in the future, to combat the spread of the virus and any of its variants, and/or provide additional economic stimulus, the Company is currently unable to predict the ultimate impact of the pandemic on the title operations.

The Company continues to evaluate the impact of these measures on our operational and financial performance, specifically the impact on S&L, HC Realty, and NCTIC and Omega’s operations. During the first six months of 2022, the Company did not receive its contractual payments on the S&L Note in part due to the impacts that COVID-19 had to S&L’s operations and its customers. Management used these facts in our analysis of the impairment of the S&L note during the period ended June 30, 2022.

As of June 30, 2022, the Company has not experienced any adverse impacts to the payment of HC Realty’s common stock and Series B Stock dividends.

17. Subsequent Events

On June 30, 2022, a wholly-owned subsidiary of HG Holdings, Inc. (the “Company”), HGMA entered into a Management Advisory Services Agreement dated and effective as of July 1, 2022 (the “Advisory Services Agreement”) with FedNat Underwriters, Inc. (“FNU”) pursuant to which HGMA will assist FNU and its parent, FedNat Holding Company (“FNHC”) in developing a restructuring plan for FNHC’s non-statutory entities, including identifying cost savings and other necessary or advisable steps in connection therewith and, upon approval of such plan by FNHC’s Board of Directors, oversee the implementation of such plan.  The term of the Advisory Services Agreement is until July 1, 2025 and HGMA’s fee for its services under the Advisory Services Agreement equals 1.5% of gross earned premium per annum of Monarch National Insurance Company (“Monarch”).

As background, the Florida Office of Insurance Regulation (OIR) authorized Monarch to assume approximately 78,000 policies effective June 1, 2022 from FedNat Insurance Company (FNIC), a wholly owned subsidiary of FNHC, resulting in Monarch’s total policy count totaling approximately 83,000 policies. FNU will continue as managing general agent for Monarch. As of June 30, 2022, after a $15 million investment by funds managed by Hale Partnership Capital Management LLC (“HPCM”) into Monarch, Monarch is 60% owned by various funds managed by HPCM, and 40% owned by FNHC. HPCM and its affiliates beneficially own in the aggregate 11.27% of the outstanding FNHC common stock (as to which they have filed a disclaimer of control affidavit with the Florida Office of Insurance Regulation). Mr. Hale is also serving as an advisor to the Strategic Review Committee of the FNHC’s Board of Directors. Mr. Hale and HPCM collectively also own approximately 34.9% of the outstanding shares of the Company’s common stock.

Simultaneous with entering into the Advisory Services Agreement, the Company formed White Rock USA Protected Cell 47 (the “Protected Cell”) effective July 1, 2022. The Protected Cell entered into an Excess Catastrophe Reinsurance Contract (the “Reinsurance Contract”) with Maison Insurance Company (“Maison”) effective July 1, 2022 to provide Maison catastrophic windstorm reinsurance protection on approximately 7,650 Texas insurance policies in-force at the inception of the Reinsurance Contract. The Reinsurance Contract provides $7.8 million of limit to Maison in excess of a $5 million retention. The Company’s capital at risk is $1.17 million. Maison will pay the Protected Cell $6.63 million in reinsurance premiums for the term of the contract. The Reinsurance Contract terminates on December 31, 2022.

Also on August 5, 2022, the Board authorized the repurchase of up to $1.5 million of shares of the Company’s common stock. The authorization does not obligate the Company to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended, or discontinued at any time at the discretion of the Board. Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to the Company’s cash requirements for other purposes, and other factors it deems relevant.

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

Overview

For a description of our business, including descriptions of segments and recent business developments, see the discussion in Note 1 Basis of Financial Statements in the accompanying unaudited Consolidated Financial Statements included in Item 1 of Part I of this Report, which is incorporated by reference into this Part I, Item 2.

As of June 30, 2022, our sources of income include earnings on our title insurance subsidiaries, dividends on HC Realty Series B Stock, and interest paid on our cash deposits and bond portfolio. The Company believes that the revenue generating from these sources, dividends paid on HC Realty Common Stock, and cash on hand is sufficient to fund operating expenses for at least 12 months from the date of these 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 shareholders.

Results from Operations

Three and Six Months Ended June 30, 2022

The Company generated dividend income of $257,000 and $513,000 for the three and six month periods ending June 30, 2022, respectively, compared to $256,000 and $513,000 for the three and six month periods ending June 30, 2021, respectively.

As a result of the Company’s acquisition of the title insurance operations, the Company generated title premium and other title fee revenue of $1.9 million and $3.4 million for the three and six month periods ended June 30, 2022, respectively.  The title insurance subsidiaries cost of revenue consists primarily of a provision for title claim losses and underwriting expenses, which is primarily commissions to title agencies.  The title insurance operating expenses consist primarily of personnel expenses, office and technology expenses and professional fees. Operating expenses for the three and six month periods ended June 30, 2022 was $2.0 million and $3.8 million, respectively, consisting primarily of $1.1 and $2.1 million in wages, $166,000 and $312,000 of rent expense, and $158,000 and $344,000 in professional and legal fees.  During the first quarter of 2022, the Company began operations of HGMA to provide management oversight of title operations.  The operating expenses incurred at HGMA are included in the operating results of our title insurance segment.

Corporate general and administrative expenses are not directly allocable to either of our reporting segments and consist primarily of wages and personnel costs, legal and professional fees, insurance expense, and stock based compensation. Corporate general and administrative expenses incurred were $281,000 and $566,000 for the three and six month periods ending June 30,2022, respectively, compared to $256,000 and $596,000 for the three and six month periods ending June 30, 2021. General and administrative expenses for the three and six month periods ending June 30, 2022 consisted of $63,000 and $188,000 of professional fees, $63,000 and $125,000 of wages and personnel costs, $20,000 and $41,000 of stock based compensation expense, and $135,000 and $212,000 of other operating expenses, respectively.

Our effective tax rate for the three and six month periods ended June 30, 2022 and 2021 was effectively 0% due to our net operating loss carryforwards.

Financial Condition, Liquidity and Capital Resources

Sources of liquidity include cash on hand, earnings from our title insurance subsidiaries, and dividends from our HC Realty common stock and Series B Stock. We expect cash on hand to be adequate for ongoing operational expenditures for at least 12 months from the date of these consolidated financial statements. At June 30, 2022, we had $8.8 million in cash and additional $8.0 million in restricted cash, of which $8.0 million is cash held in escrow for title insurance transactions. A portion of our unrestricted and restricted cash is currently held in savings accounts earning approximately 0.05%. We also received quarterly dividends on our HC Realty common stock and Series B Stock at annual rates of 5.5% and 10%.

20

Cash flows provided by operating activities differ from net loss due to adjustments for non-cash items, such as gains and losses on investments and affiliates, impairment losses on note receivables, the timing of disbursements for taxes, claims and other accrued liabilities, and collections or changes in receivables and other assets. Net cash used by operations for the six month period ended June 30, 2022 of $1.3 million consisted of primarily personnel costs of $2.2 million, title policy software, processing and printing costs of $466,000, office rent of $326,000 and legal and professional fees of $511,000; offset by revenue from our title operations, dividends on our HC Realty common stock of $83,000, dividends on our HC Realty Series B Stock of $512,000, and a decrease of $5.6 million in escrow liabilities on the title insurance subsidiaries offset.

Critical Accounting Policies

Our critical accounting policies and estimates are discussed in the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 2021 Annual Report on Form 10-K. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the six months ended June 30, 2022.

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,” 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 and/or the business or assets of HC Realty and the value of our investment in HC Realty. 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.

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

Not required to be provided by a smaller reporting company.

ITEM 4.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

(b) Changes in internal controls over financial reporting. There were no changes in our internal control over financial reporting that occurred during the second quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

21

Part II. OTHER INFORMATION

Item 1.  Legal Proceedings

Hollie Drive Litigation   

In November 2019, we received notice that the Company and the Buyer were defendants in a pending case in the Circuit Court for Henry County, Virginia.  The case, which had been instituted on September 18, 2019 by Hollie Drive Associates, LLC (“Hollie”), raises issues arising from the purported breach of a lease for warehouse space in Henry County, Virginia, which is owned by Hollie and was previously rented by the Company.  The relevant lease was assigned to the Buyer in connection with the previously disclosed asset sale.  The complaint asserts that the Buyer breached various provisions of the lease including failure to make certain rental payments and failure to pay for certain clean-up and reconstruction after the Buyer vacated the property. The complaint seeks damages in the amount of approximately $555,000 and attorney’s fees.  Hollie named the Company as a party because the Company was the original tenant under the lease.   Under the asset purchase agreement, SFC agreed to assume and indemnify the Company against post-closing liabilities arising under the lease including those asserted in the complaint.  The Buyer’s filings in the case do not dispute the obligation to indemnify the Company for any damages awarded in the case.  Based upon discussions with the Buyer and documents produced to date by Hollie, it appears Hollie has asserted damages greatly exceeding the likely recovery in the case.  Given the relatively low damages amount and the Buyer’s indemnity obligation, the Company believes it is not probable the case will result in a material adverse effect on its financial statements.                      

Graham County Property Litigation

As previously disclosed, on November 26, 2019, Graham County (the “County”), North Carolina filed a complaint against the Company and the Buyer in the Superior Court for Graham County, North Carolina asserting claims arising out of a conveyance to the County of approximately 36 acres (the “Property”) in November 2014.   The Complaint sought, among other things, (i) rescission of the conveyance of the Property to the County, (ii) reimbursement of expenses incurred by the County in connection with the Property, (iii) to invalidate the indemnity agreements entered into in connection with the conveyance, (iv) and other damages, or (iv), in the alternative to rescinding the conveyance, expenses necessary to make the Property suitable and useable for a public park and outdoor recreation area. Pursuant to the Asset Purchase Agreement, the Buyer agreed to assume and indemnify the Company against certain pre-closing liabilities including those relating to the conveyance of the Property. After the filing of the complaint, the Company entered into an agreement with the Buyer providing that, if the Company reaches a settlement with the County resulting in transfer of the Property back to the Company, then the Company can retain the Property notwithstanding provisions of the Asset Purchase Agreement and will waive any right to indemnification from the Buyer with respect to the claims by the County with respect to the Property. In January 2021, representatives of the Company and the County reached an agreement to resolve all claims asserted by the County in the litigation.  Under the terms of the agreement, the County has agreed to transfer the Property back to the Company, lease a portion of the Property from the Company, and dismiss the litigation in exchange for Company making cash payments to the County in a total amount that is immaterial to the Company’s financial performance. The litigation has been dismissed and the other material terms of the settlement have now been completed. On June 27, 2022, the Company sold the Property for $206,000 and in connection with the sale, the Company received full indemnification from the buyer for any historical issues related to the property.

22

ITEM 6.  Exhibits

2.1	Equity Purchase Agreement, dated as of April 20, 2021, by and among the Company by and among National Consumer Title Insurance Company, a Florida corporation, National Consumer Title Group LLC, a Florida limited liability company, Southern Fidelity Insurance Company, a Florida corporation, Southern Fidelity Managing Agency, LLC, a Florida limited liability company, and Preferred Managing Agency, LLC, a Florida limited liability company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed April 26, 2021).
2.2	Letter Agreement, dated July 20, 2021, by and among the Company, Southern Fidelity Insurance Company, a Florida corporation, Southern Fidelity Managing Agency, LLC, a Florida limited liability company, and Preferred Managing Agency, LLC, a Florida limited liability company (incorporated by reference to Exhibit 2.2 to the Registrant’s Form 10-Q (Commission File No. 0-14938) filed August 6, 2021).
2.3	Membership Interest Purchase Agreement, dated as of September 1, 2021, by and among the Company and Title Agency Ventures LLC, a Delaware limited liability company, and Fidelis US Holdings, Inc., a Delaware Corporations (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed September 8, 2021).
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. 0-14938) filed August 6, 2021).
3.2	By-laws of the Registrant as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed November 20, 2017).
10.1	Management Advisory Services Agreement, entered into as of July 1, 2022 by and between HG Managing Agency, LLC and FedNat Underwriters, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed July 7, 2022).
10.2	Excess Catastrophe Reinsurance Contract, entered into as of July 1, 2022 by and between Maison Insurance Company and the Subscribing Reinsurer (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed July 7, 2022).
31.1	Certification by Steven A. Hale II, our Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
31.2	Certification by Justin H. Edenfield, our Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32.1	Certification of Steven A. Hale II, our Chief Executive Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. (2)
32.2	Certification of Justin H. Edenfield, our Principal Financial Officer, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. (2)
101	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline Xtensible Business Reporting Language (“XBRL”): (i) balance sheets, (ii) statements of operations, (iii) statements of cash flows, (iv) the notes to the financial statements, and (v) document and entity information. (1)
104	Cover Page Interactive Data File (formatted in Inline iXBRL and contained in Exhibit 101).

(1) Filed herewith

(2) Furnished herewith

23

SIGNATURE

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

Date: August 12, 2022	HG HOLDINGS, INC.
	By: /s/ Justin H. Edenfield
	Justin H. Edenfield
	Principal Financial and Accounting Officer

24

EX-31.1

Exhibit 31.1

I, Steven A. Hale II, certify that:

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

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2022	By: /s/ Steven A. Hale II
	Steven A. Hale II
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Justin H. Edenfield, certify that:

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

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2022	By: /s/ Justin H. Edenfield
	Justin H. Edenfield
	Principal Financial and Accounting Officer

EX-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, 2022 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 12, 2022	By: /s/ Steven A. Hale II
	Steven A. Hale II
	Chairman and Chief Executive Officer

EX-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, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Justin H. Edenfield, Principal Financial and Accounting Officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

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

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

Date: August 12, 2022	By: /s/ Justin H. Edenfield
	Justin H. Edenfield
	Principal Financial and Accounting Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Aug. 11, 2022
Document Information [Line Items]
Entity Central Index Key	0000797465
Entity Registrant Name	HG Holdings, Inc.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	0-14938
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	54-1272589
Entity Address, Address Line One	2115 E. 7th Street, Suite 101
Entity Address, City or Town	Charlotte
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	28204
City Area Code	252
Local Phone Number	355-4610
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		2,873,031

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash	$ 8,867	$ 11,806
Restricted cash	7,939	8,287
Investments	2,145	0
Accounts receivables	186	183
Interest and dividend receivables	300	298
Prepaid expenses and other current assets	326	192
Total current assets	19,763	20,766
Property, plant and equipment, net	171	204
Lease assets	401	447
Investment in affiliate	11,179	11,450
Subordinated notes receivable	846	992
Goodwill	4,451	4,451
Other assets	808	555
Total assets	37,619	38,865
LIABILITIES
Accounts payable	12	12
Accrued salaries, wages and benefits	34	104
Lease liabilities, current portion	234	278
Escrow liabilities	7,888	8,053
Other accrued expenses	331	346
Total current liabilities	8,499	8,793
Long-term liabilities:
Reserve for title claims	267	231
Lease liabilities	165	169
Other long-term liabilities	25	110
Total long-term liabilities	457	510
Total liabilities	8,956	9,303
STOCKHOLDERS’ EQUITY
Common stock, $0.02 par value, 35,000,000 shares authorized and 2,873,031 shares issued and outstanding on each respective date	54	54
Capital in excess of par value	30,491	30,450
Retained deficit	(1,882)	(942)
Total stockholders’ equity	28,663	29,562
Total liabilities and stockholders’ equity	$ 37,619	$ 38,865

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Common stock, par value (in dollars per share)	$ 0.02	$ 0.02
Common stock, shares authorized (in shares)	35,000,000	35,000,000
Common stock, shares issued (in shares)	2,873,031	2,873,031
Common stock, shares outstanding (in shares)	2,873,031	2,873,031

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenues:
Net premiums, written	$ 1,344	$ 0	$ 2,306	$ 0
Total revenues	1,922	0	3,403	0
Cost of revenues:
Underwriting expenses	73	0	109	0
Provision for title claim losses	63	0	76	0
Search and other fees	22	0	53	0
Total operating expenses	158	0	238	0
Gross underwriting profit	1,764	0	3,165	0
Operating expenses:
General and administrative expenses	(2,271)	(256)	(4,413)	(596)
Other income/expenses:
Interest income	3	1	3	13
Dividend income	257	256	513	513
Other income	3	0	4	0
Gain on sale of assets	123	0	123	0
Loss from affiliate	(96)	(110)	(189)	(226)
Loss on impairment	(146)	0	(146)	0
Loss from operations before income taxes	(363)	(109)	(940)	(296)
Income tax benefit	0	0	0	0
Net loss	$ (363)	$ (109)	$ (940)	$ (296)
Basic and diluted loss per share:
Net loss – basic (in dollars per share)	$ (13)	$ (4)	$ (33)	$ (10)
Net loss – diluted (in dollars per share)	$ (13)	$ (4)	$ (33)	$ (10)
Weighted average shares outstanding:
Basic (in shares)	2,847	2,832	2,843	2,832
Diluted (in shares)	2,847	2,832	2,843	2,832
Escrow and Other Title Fees [Member]
Revenues:
Revenue from contract with customer	$ 578	$ 0	$ 1,097	$ 0

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Net income (loss)	$ (363)	$ (109)	$ (940)	$ (296)
Adjustments to reconcile net loss from operations to net cash flows from operating activities:
Depreciation expense			41	1
Stock compensation expense			41	42
Dividends on HC Realty common stock			83	82
Loss from affiliate	96	110	189	226
Gain on sale of assets	(123)	0	(123)	0
Impairment loss on subordinated notes receivable			146	0
Changes in assets and liabilities:
Prepaid expenses and other current assets			(138)	(23)
Accounts receivable			(3)	0
Income tax receivable			0	488
Deferred tax assets and other assets			(254)	(34)
Accounts payable			0	2
Accrued salaries, wages, and benefits			(70)	0
Escrow liabilities			(165)	0
Reserve for title claims			36	0
Other accrued expenses			(15)	149
Other long-term liabilities			(85)	(4)
Net cash (used in) provided by operations			(1,257)	633
Cash flows from investing activities:
Purchase of property, plant, and equipment			(89)	0
Purchase of investments			(2,145)	0
Proceeds from sale of assets			204
Principal payments received on subordinated secured notes receivable			0	170
Net cash (used in) provided by investing activities			(2,030)	170
Net (decrease) increase in cash and restricted cash			(3,287)	803
Cash and restricted cash at beginning of period			20,093	11,630
Cash and restricted cash at end of period	16,806	12,433	16,806	12,433
Cash	8,867	12,199	8,867	12,199
Restricted cash	7,939	234	7,939	234
Cash and restricted cash	$ 16,806	$ 12,433	16,806	12,433
Supplemental Non-Cash Disclosures:
Dividends on investment in affiliate			$ 50	$ 50

XML

Note 1 - Preparation of Interim Unaudited Financial Statements

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1. Preparation of Interim Unaudited Financial Statements

The consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, 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. Certain information and footnote disclosures prepared in accordance with generally accepted accounting principles in the United States have been either condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. 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 our latest Annual Report on Form 10-K filed with the SEC on March 29, 2022.

All prior period share numbers and per share data appearing in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the 1 for 12 reverse stock split of our outstanding shares of common stock, $0.02 par value per share (the “Common Stock”) effective July 15, 2021 (the “Reverse Split”), unless otherwise indicated or unless context suggests otherwise.  The Reverse Split did not affect the par value of our Common Stock, which remained $0.02 per share. As a result, upon effectiveness of the Reverse Split, the stated capital on our balance sheet attributable to the common stock was reduced in proportion to the fraction by which the number of shares of Common Stock was reduced, and the additional paid-in capital account was credited with the amount by which the stated capital was reduced. The per share net income or loss and net book value of our Common Stock will be increased because there will be fewer shares of our Common Stock outstanding.

HG Holdings, Inc, together with its consolidated subsidiaries (the “Company”), operates through its wholly owned subsidiaries National Consumer Title Insurance Company (“NCTIC”), National Consumer Title Group, LLC (“NCTG”), Title Agency Ventures, LLC (“TAV”), HG Managing Agency, LLC (“HGMA”), and Omega National Title Agency, LLC (“Omega”) and through an affiliated investment in HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”).

Description of the Business

Title Insurance

The Company engages in issuing title insurance through our subsidiary NCTIC and providing title agency services through our subsidiaries NCTG, TAV, and Omega. Through NCTIC, the Company underwrites land title insurance for owners and mortgagees as the primary insurer. The Company currently only 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 in Florida through its home office and through a network of affiliated and independent title agents.  Issuing agents, in the state of Florida, 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 rate 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.

Volume is a factor in the Company’s title insurance operation’s profitability due to fixed operating costs that are incurred regardless of title insurance premium volume.  The resulting operating leverage tends to amplify the impact of changes in volume on profitability.  The Company’s title insurance profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and to minimize risks such as interest rate changes, defaults and impairments of assets.

The Company’s volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity, which includes property sales, mortgage financing and mortgage refinancing.  Real estate activity, home sales and mortgage lending are cyclical in nature. Real estate activity is affected by a number of factors, including the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels, and general United States economic conditions.  Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.

The Company’s title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.

Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the spring and summer quarters tend to be more active. Mortgage refinance activity tends to be influenced less by seasonality and more by economic cycles, with activity levels increasing during times of falling interest rates.

Real Estate Related

The Company engages in rental real estate through our equity investment in HC Realty. HC Realty is an internally-managed REIT formed to grow the business of acquiring, developing, financing, owning and managing build-to-suit or improved-to-suit, single-tenant properties leased primarily to the United States of America and administered by the General Services Administration (“GSA”) or directly by the federal government agencies or departments occupying such properties (referred to as “GSA Properties”). HC Realty invests primarily in GSA Properties in sizes that range from 5,000 to 50,000 rentable square feet that are in their first lease term after original construction or renovation-to-suit date. HC Realty further emphasizes GSA Properties that fulfill mission critical or direct citizen service functions.  Leases associated with the GSA 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 acquisitions of single-tenanted, federal government-leased properties in such markets; although, at some point in the future HC Realty may elect to develop, or joint venture with others in the development of, competitively bid, built-to-suit, single-tenant, federal government-leased properties, or buy facilities that are leased to credit-worthy state or municipal tenants.

For information about our reportable segments refer to Note 9 Segment Information.

Developments Impacting Comparison of the Six Month Periods ended June 30, 2022 and 2021

The following previously disclosed events occurred subsequent to June 30, 2021 that impacted the comparison on the six-month periods ended June 30, 2022 and 2021. On July 20, 2021, the Company completed the acquisition (the “Acquisition”) pursuant to that certain Equity Purchase Agreement (the “First Purchase Agreement”) dated April 20, 2021 with NCTIC, a Florida corporation, NCTG, a Florida limited liability company, Southern Fidelity Insurance Company, a Florida corporation (“SFIC”), Southern Fidelity Managing Agency, LLC, a Florida limited liability company (“SFMA”), and Preferred Managing Agency, LLC, a Florida limited liability company (“PMA” and together with SFIC and SFMA, each, a “Seller” and collectively, the “Sellers”). On such date, pursuant to the First Purchase Agreement, the Company purchased 100% of the stock of NCTIC and 100% of the membership interest in NCTG for $5.463 million, adjusted for a customary post-closing working capital adjustment (the “Purchase Price”). Pursuant to the mechanics in the First Purchase Agreement, the Purchase Price was determined at closing by taking the $5.5 million purchase price originally agreed to under the First Purchase Agreement, subtracting the debt of NCTIC and NCTG, adding payment for $75,000 of the transaction expenses of the Sellers and, adding a closing related working capital adjustment. The Company funded the Purchase Price from cash on hand. Also at closing, the Company and Sellers agreed that the economic benefits and burdens of the ownership of the equity, including for accounting and tax purposes, be transferred as of 12:01 am on July 1, 2021. For all other purposes, the effective time of the transfer remained July 20, 2021.

Pursuant to the Acquisition, the Company effectively purchased (i) 100% of the stock of NCTIC, a Florida title insurer formed in 2017, and (ii) a 100% membership interest in NCTG, which owns a 50% non-controlling membership interest in TAV, and by virtue thereof, owns 50% of the membership interest in Omega, also a Florida based title agency. NCTIC provides title insurance, closing and/or escrow services and similar or related services in the state of Florida in connection with residential real estate transactions. Omega operates 10 title agency locations in Florida providing title agency services for residential and commercial real estate transactions.

On September 1, 2021, the Company entered into a Membership Interests Purchase Agreement (the “Second Purchase Agreement”) with TAV and Fidelis US Holdings, Inc., a Delaware corporation (“Second Agreement Seller”). On such date, pursuant to the Second Purchase Agreement and in an immediate sign-and-close transaction, the Company purchased 50% of the membership interests of TAV from Second Agreement Seller (the “Second Acquisition”) for $2.2 million (the “Second Acquisition Purchase Price”).

Combined with the Acquisition by the Company in July 2021 of a 100% membership interest in NCTG, which owns a 50% membership interest in TAV, the Company now is the sole owner of TAV, and by virtue thereof, owns all of the membership interests in Omega.

As of June 30, 2022, HC Realty owned and operated a portfolio of 27 single-tenant properties leased entirely to the United States of America for occupancy by federal agencies including the Federal Bureau of Investigation, the Drug Enforcement Administration, the Social Security Administration and the Department of Transportation. The Company owns approximately 33.9% of the as converted equity interest of HC Realty as of June 30, 2022.

Recent Accounting Pronouncements

In June 2016, the 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. Early application is permitted for reporting periods beginning after December 15, 2018, although the Company has not opted to do so. The Company does not anticipate the adoption of ASU 2016-13 to have a material impact to the consolidated financial statements.

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Note 2 - Subordinated Notes Receivable

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

2. Subordinated Notes Receivable

The Company received a $7.4 million subordinated secured promissory note (the “Original Note”) from Stanley Furniture Company, LLC, formerly known as Churchill Downs, LLC (the “Buyer”) as partial consideration for the sale of substantially all of our assets during the first quarter of 2018 (the “Asset Sale”). On September 6, 2018, the Buyer sold certain of its assets (the “S&L Asset Sale”), including certain inventory and the Stone & Leigh tradename to Stone & Leigh, LLC (“S&L”), which is owned by a group which includes Matthew W. Smith, the Company’s former interim Chief Executive Officer. As a part of the S&L Asset Sale, the Buyer assigned to S&L certain of its rights and obligations under the Original Note. In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”). The A&R Note had a principal amount as of the assignment date of $3.3 million. The A&R Note was paid in full in 2020 pursuant to the terms of a forbearance agreement reached with the Buyer

S&L Note

The S&L Note had a principal amount of $4.4 million as of the assignment date. The S&L Note matures on March 2, 2023, at which time the total principal amount is due. Interest on the S&L Note accrues at a fixed rate of 10% per annum. No cash interest payments were accrued or received during the six months ending June 30, 2022 and 2021.

As a result of the Company’s recording of impairment losses in prior quarters, based on current information and events, including the impact of COVID-19 on S&L’s business and its customers, the Company ceased accreting interest income on the fair value discount of the S&L Note on the date in the third quarter of 2020 it determined the note was other than temporarily impaired.  The Company did not receive any interest payments which were recognized as principal reductions during the three and six month periods ending June 30, 2022.  In the three and six month periods ending June 30, 2021, the Company recognized $63,000 and $170,000, of interest payments as reductions of the principal balance of the S&L Note, respectively.

As of June 30, 2022, the Company concluded that S&L would not have adequate cash required to repay the carrying value of the S&L Note. Given the facts and circumstances, the Company recorded an impairment loss of $146,000 in the three months ending June 30, 2022.  The Company’s estimated fair value of the S&L Note is based upon the estimated fair value of the collateral securing the note, namely cash, accounts receivables, and inventory.  The determination of fair value involves management’s judgment, including analysis of the impact of COVID-19 on S&L’s business and its customers, and the use of market and third-party estimates regarding collateral values.  These collateral value estimates are based on the three-level valuation hierarchy for fair value measurement and represent Level 1 and 2 inputs.  Level 1 inputs are quoted prices in active markets for identical assets or liabilities.  Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 

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Note 3 - Investment in Affiliate

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

3. Investment in Affiliate

HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) is not deemed to be in-substance common stock and is accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Series B Stock will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by HC Realty.

The following table summarizes the Company’s investment in HC Realty as of June 30, 2022 and December 31, 2021 (in thousands):

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Statements of Operations (b)
											For the Three Months Ended June 30,						For the Six Months Ended June 30,
	June 30, 2022			December 31, 2021			June 30, 2022		December 31, 2021		2022			2021			2022			2021
HC Realty Series B Stock (a)		26.8	%		26.8	%	$	10,250	$	10,250	$	-			-		$	-			-
HC Realty common stock		7.1	%		7.1	%		929		1,200		(96	)		(110	)		(189	)		(226	)
Total		33.9	%		33.9	%	$	11,179	$	11,450	$	(96	)	$	(110	)	$	(189	)	$	(226	)

(a) Represents investments in shares of HC Realty Series B Stock with a basis of $10.25 million. Each share of Series B Stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

(b) Loss from these investments is included in “Loss from affiliate” in the consolidated statement of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

The Company’s investment in HC Realty common stock is accounted for under the equity method of accounting.

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Note 4 - Investments

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Investment [Text Block]

4. Investments

The following table details investments by major investment category, at June 30, 2022:

	Cost or Adjusted/ Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Total
U.S. government and agency securities, held-to-maturity	$	1,995	$	-	$	-	$	1,995
Common stock		150		-		-		150
Total investments	$	2,145	$	-	$	-	$	2,145

The table below summarizes our fixed maturities at June 30, 2022 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturities of those obligations.

	Cost or Amortized Cost		Percent of Total			Fair Value		Percent of Total
Due in one year or less	$	-		-	%	$	-		-	%
Due after one year through five years		1,995		100.0			1,995		100.0
Due after five years through ten years		-		-			-		-
Due after ten years		-		-			-		-
Total	$	1,995		100.0	%	$	1,995		100.0	%

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.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, Nasdaq and NYSE American. For securities for which quoted prices in active markets are unavailable, we use a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on June 30, 2022. Changes in interest rates subsequent to June 30, 2022 may affect the fair value of our investments.

The fair value of our fixed maturities is initially 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 include, but are 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.

All fixed-income securities are classified as held-to-maturity and are reported at amortized cost as of June 30, 2022. The Company performs ongoing impairment evaluations and we did not record any other then temporary impairments during the three or six month period ended June 30, 2022

The following table presents the fair value of our financial instruments measured on a recurring basis by level at June 30, 2022:

	Total		Level 1		Level 2		Level 3
Common stock	$	150	$	-	$	-	$	150
Investments, at fair value		150						150
U.S. government and agency securities, held-to-maturity		1,950		-		-
Total investments	$	2,145	$	-	$	-	$	150

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Note 5 - Paycheck Protection Program ("PPP") Loan

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

5. Paycheck Protection Program (“PPP”) Loan

On May 7, 2020, prior to the Company’s acquisitions of NCTIC, NCTG, TAV and Omega, Omega entered into a loan agreement with Wells Fargo, N.A. in the aggregate amount of $544,842 (the “Loan”), pursuant to the PPP under the CARES Act. The Loan was necessary to support ongoing operations due to the economic uncertainty resulting from the COVID-19 pandemic and lack of access to alternative sources of liquidity.

The Loan was scheduled to mature five years from the date on which Omega applies for loan forgiveness under the CARES Act, bears interest at a rate of 1% per annum and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration (“SBA”) under the CARES Act. The PPP provides that the use of the Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. Omega used all of the PPP proceeds toward qualifying expenses.

On September 16, 2021, Omega received notice from the SBA that the full amount of the loan was forgiven. The forgiveness of the loan was included as gain on extinguishment of debt on the Consolidated Statements of Operations during the three months ended September 30, 2021.

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Note 6 - Reserve for Title Claims

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Insurance Disclosure [Text Block]

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, 2022. 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 period ending June 30, 2022 is as follows (in thousands):

Beginning Reserves	$	231
Provision for claims related to:
Current year		36
Prior years		-
Total provision for claim losses		36
Claims paid related to:
Current year		-
Prior years		-
Total title claims paid		-
Ending Reserves	$	267

At June 30, 2022, there were no reinsurance recoverables on paid claims or unpaid reserves.

For the six months ended June 30, 2022, there was no development of the net provision for claims attributable to insured events of the prior year as a result of estimation of the reserve for claims. Original estimates are decreased or increased as additional information becomes known regarding individual claims.

A summary of the Company’s loss reserves at June 30, 2022 is as follows (in thousands):

Known title claims	$	-	-
IBNR title claims		267	100	%
Total title claims		267	100	%
Non-title claims		-	-
Total title claims reserves	$	267	100	%

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Note 7 - Reinsurance

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Reinsurance [Text Block]

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 six month period ended June 30, 2022, NCTIC's reinsurance program consisted of excess of loss reinsurance treaties. The following is a summary of the reinsurance coverage.

Effective January 1, 2022, 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 at 100% additional premium as to time and pro rata as to amount. 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, 2022.

Effective January 1, 2022, NCTIC entered into a reinstatement premium protection reinsurance agreement to reinsure the reinstatement premium payment obligations of NCTIC under the shared per risk excess of loss agreement. The coverage is limited to 100% of the original contracted reinsurance placement. This agreement is shared with the other nonaffiliated companies. Each company pays its share of the reinsurance cost based on separate company earned premiums. The agreement expires December 31, 2022.

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 the reinsuring companies do not meet their obligations under these reinsurance contracts. NCTIC uses a broker to place its reinsurance through Lloyd’s syndicates. Chaucer Ltd (“Chaucer”) 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, 2022, both reinsurers had an A-issuer credit rating from AM Best, an AA- from Fitch, and an A+ from S&P. The Company monitors both the financial condition of individual reinsurers and risk concentration arising from similar activities and 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. See Note 5 for recoveries due from reinsurers relating to paid and unpaid claims under these treaties.

The effects of reinsurance on premiums written and earned at NCTIC are as follows:

	For the Six Months Ended
	June 30, 2022
	Written			Earned
Direct premiums	$	1,145		$	1,145
Ceded premiums		(28	)		(28	)
Net premiums	$	1,117		$	1,117

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Note 8 - Statutory Reporting

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Statutory Accounting Practices [Text Block]

8. Statutory Reporting

NCTIC's assets, liabilities, and results of operations have been reported in accordance with accounting principles generally accepted in the United States of America (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 (NAIC), state laws and regulations, as well as through general practices. The principal differences between SAP and 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 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).

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Note 9 - Segment Information

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

9. Segment Information

The Company has two reportable segments, title insurance services and real estate. The remaining immaterial segments have been combined into a group called “Corporate and Other.” The title insurance segment issues title insurance policies, which insures titles to real estate, and provides title agency services for residential and commercial real estate transactions. The real estate segment, through an affiliate investment in HC Realty, owns and operates a portfolio of single-tenant properties leased entirely to the United States of America for occupancy by federal agencies.

Provided below is selected financial information about the Company’s operations by segment for the six months ending June 30, 2022 (in thousands):

	Title Insurance			Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	3,403		$	-	$	-		$	3,403
Cost of revenues		(238	)		-		-			(238	)
Gross profit	$	3,165		$	-	$	-		$	3,165
Operating expenses		(3,847	)		-		(566	)		(4,413	)
Other income and expenses		6			324		(22	)		308
Income (loss) before income taxes	$	(676	)	$	324	$	(588	)	$	(940	)
Total assets	$	19,771		$	11,179	$	6,669		$	37,619

Provided below is selected financial information about the Company’s operations by segment for the six months ending June 30, 2021 (in thousands):

	Title Insurance		Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	-	$	-	$	-		$	-
Cost of revenues		-		-		-			-
Gross profit	$	-	$	-	$	-		$	-
Operating expenses		-		-		(596	)		(596	)
Other income and expenses		-		287		13			300
Income (loss) before income taxes	$	-	$	287	$	(583	)	$	(296	)
Total assets	$	-	$	11,764	$	15,154		$	26,918

Provided below is selected financial information about the Company’s operations by segment for the three months ending June 30, 2022 (in thousands):

	Title Insurance			Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	1,922		$	-	$	-		$	1,922
Cost of revenues		(158	)		-		-			(158	)
Gross profit	$	1,764		$	-	$	-		$	1,764
Operating expenses		(1,990	)		-		(281	)		(2,271	)
Other income and expenses		5			161		(22	)		144
Income (loss) before income taxes	$	(222	)	$	161	$	(303	)	$	(363	)
Total assets	$	19,771		$	11,179	$	6,669		$	37,619

Provided below is selected financial information about the Company’s operations by segment for the three months ending June 30, 2021 (in thousands):

	Title Insurance		Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	-	$	-	$	-		$	-
Cost of revenues		-		-		-			-
Gross profit	$	-	$	-	$	-		$	-
Operating expenses		-		-		(256	)		(256	)
Other income and expenses		-		146		1			147
Income (loss) before income taxes	$	-	$	146	$	(255	)	$	(109	)
Total assets	$	-	$	11,764	$	15,154		$	26,918

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Note 10 - Income Taxes

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10. Income taxes

During the six months ended June 30, 2022, the Company recorded a non-cash credit to its valuation allowance of $168,000 increasing its valuation allowance against deferred tax assets to $7.9 million as of June 30, 2022.  The primary assets covered by this valuation allowance are net operating losses, which are approximately $37.8 million at June 30, 2022.  The Company did not make any cash payments for income tax in the six month period ended June 30, 2022 and 2021 due to its net operating loss carryforwards.

The Company maintains a valuation allowance against deferred tax assets that currently exceed our deferred tax liabilities. The primary assets covered by this valuation allowance are net operating loss carry-forwards. 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 four-year period 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. Should the Company determine that it will not be able to realize all or part of its deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made.

As of June 30, 2022, the Company has no deferred tax assets not covered by a valuation allowance.

The Company’s effective tax rate for the current and prior year six month periods were effectively 0% due to the change in the valuation allowance.

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Note 11 - Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

11. Stockholders’ Equity

Basic earnings per share of Common Stock 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 per share. Basic and diluted earnings per share are calculated using the following share data (in thousands):

	Three Months				Six Months
	Ended				Ended
	June 30,		June 30,		June 30,		June 30,
	2022		2021		2022		2021
Weighted average shares outstanding for basic calculation		2,847		2,832		2,843		2,832
Add: Effect of dilutive stock awards		-		-		-		-
Weighted average shares outstanding, adjusted for diluted calculation		2,847		2,832		2,843		2,832

For the three and six month periods ended June 30, 2022 and 2021, the dilutive effect of stock options and restricted awards was not recognized since we had a net loss.  For the three and six month periods ended June 30, 2022, there were no stock options or restricted awards outstanding.  For the three and six month periods ended June 30, 2021, approximately 35,000 stock awards were excluded from the diluted per share calculation as they would be anti-dilutive. 

The Company will repurchase shares of Common Stock from time to time that are tendered by recipients of restricted stock awards to satisfy tax withholding obligations on vested restricted stock. There were no such repurchased shares during the current or prior year three month periods.

On the close of business on July 15, 2021, the Company effectuated Reverse Split. In connection with the Reverse Split, the amendment to the Company’s Restated Certificate of Incorporation approved by the Company’s stockholders was effective as of July 15, 2021.

No fractional shares of Common Stock were issued as a result of the Reverse Stock Split. Instead, in lieu of any fractional shares to which a stockholder of record would otherwise be entitled as a result of the Reverse Stock Split, the Company paid cash (without interest) equal to such fractional share multiplied by $0.70 which was the 90-day Volume Weighted Average Price (“VWAP”) of our Common Stock on the OTCQB for the period immediately preceding the Effective Time (with such average closing sales prices being adjusted to give effect to the Reverse Stock Split). After the Reverse Split, a stockholder otherwise entitled to a fractional interest will not have any voting, dividend or other rights with respect to such fractional interest except to receive payment as described above. Stockholders owning fractional shares were paid out in cash for such fractional shares.

A reconciliation of the activity in Stockholders’ Equity accounts for the six months ended June 30, 2022 is as follows (in thousands):

	Common		Capital in Excess of		Retained
	Stock		Par Value		Deficit
Balance at January 1, 2022	$	54	$	30,450	$	(942	)
Net loss		-		-		(577	)
Stock-based compensation expense		-		21		-
Balance at March 31, 2022	$	54	$	30,471	$	(1,519	)
Net loss		-		-		(363	)
Stock-based compensation expense		-		20		-
Balance at June 30, 2022	$	54	$	30,491	$	(1,882	)

A reconciliation of the activity in Stockholders’ Equity accounts for the six  months ended June 30, 2021 is as follows (in thousands):

	Common		Capital in Excess of		Retained
	Stock		Par Value		Deficit
Balance at January 1, 2021	$	684	$	29,738	$	(3,702	)
Net loss		-		-		(188	)
Stock-based compensation expense		-		21		-
Balance at March 31, 2021	$	684	$	29,759	$	(3,890	)
Net loss		-		-		(109	)
Stock-based compensation expense		-		21		-
Balance at June 30, 2021	$	684	$	29,780	$	(3,999	)

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Note 12 - Leases

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

12. Leases

Right-of-use assets and lease liabilities related to operating leases under 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. We generally are 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 Consolidated Balance Sheet.

Our operating leases range in term from one to three years. As of June 30, 2022, the weighted-average remaining lease term of our operating leases was 0.9 years.

Our lease agreements do not contain material variable lease payments, buyout options, residual value guarantees or restrictive covenants.

Most of our 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.

The lease liability is determined by discounting future lease payments using a discount rate based on our incremental borrowing rate for similar collateralized borrowing. The discount rate is calculated using estimates of capitalization rates and borrowing rates. As of June 30, 2022 the weighted-average discount rate used to determine our operating lease liability was 6.0%.

Lease expense included in general and administrative expense on the Consolidated Statements of Operations was $172,000 and $7,000 for the three months ended June 30, 2022 and 2021, respectively and $326,000 and $15,000 for the six months ended June 30, 2022 and 2021, respectively.

Future payments under operating lease arrangements accounted for under ASC Topic 842 as of June 30, 2022 are as follows (in thousands):

2022	$	157
2023		156
2024		104
2025		6
Total lease payments, undiscounted	$	423
Less: present value discount		(24	)
Lease liabilities, at present value	$	399

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Note 13 - Revenue From Contracts With Customers

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

13. Revenue from Contracts with Customers

ASC 606, Revenue from Contracts with Customers requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance does not apply to revenue associated with insurance contracts (including title insurance policies), financial instruments and lease contracts; and therefore is primarily applicable to the following Company revenue categories.

Escrow and other title-related fees – The Company’s title insurance segment recognizes commission revenue and fees related to items such as searches, settlements, commitments and other ancillary services. Escrow and other title-related fees are recognized as revenue at the time of the related transactions as the earnings process, or performance obligation, is then considered to be complete.

Non-title services –All non-title service fees, such as management fees, are recognized as revenue as performance obligations are completed.

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Note 14 - Business Combinations

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

14. Business Combinations

On July 20, 2021, the Company completed the Acquisition of NCTIC and NCTG by purchasing 100% of the stock of NCTIC and 100% of the membership interest in NCTG for the Purchase Price. NCTG owns a 50% non-controlling membership interest in TAV, and by virtue thereof, owns 50% of the membership interest in Omega. The 50% non-controlling membership interest in TAV was accounted for under the equity method of accounting.

The purchase price allocation for NCTIC and NCTG is as follows (in thousands):

Cash paid for NCTIC	$	4,453
Cash paid for NCTG		1,010
Total consideration paid.	$	5,463

	NCTIC			NCTG
Cash and cash equivalents	$	4,834		$	9
Accounts receivable		40			-
Deferred tax assets		14			-
Investment in TAV		-			593
Other assets		4			418
Total assets acquired		4,892			1,020
Accrued expenses		168			10
Reinsurance payable		41			-
Escrow liability		4			-
Reserve for claims		209			-
Total liabilities assumed		422			10
Net assets acquired	$	4,470		$	1,010
Bargain purchase gain	$	(17	)	$	-

A bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred and any noncontrolling interest in the acquiree is less than the fair value of the identifiable net assets acquired.  The bargain purchase gain was primarily driven by differences in NCTIC’s statutory surplus and GAAP surplus at the date of acquisition.  The Company believes that the Sellers wanted to exit the business relatively quickly and there were a limited number of potential buyers due to factors inherent to the property and casualty market, which resulted in a bargain purchase gain.  The bargain purchase gain was recorded in other income on the Consolidated Statement of Operations during the three months ended September 30, 2021.

On September 1, 2021, the Company acquired the remaining 50% membership interests of TAV for $2.2 million. This acquisition, combined with the July 2021 Acquisition of a 100% membership interest in NCTG, which owns a 50% membership interest in TAV, the Company now is the sole owner of TAV.

The operating results of TAV are included in the title insurance segment.

The final purchase price allocation for TAV at fair value is as follows (in thousands):

Cash paid for remaining 50% of TAV	$	2,200
Fair value of existing equity interest		3,564
Total consideration	$	5,764
Cash and cash equivalents	$	12,044
Accounts receivable		166
Prepaid expenses		76
Fixed assets		216
Total assets acquired		12,502
Accrued expenses		32
Management fee payable		455
Escrow liability		9,293
Payable to affiliate		864
Note payable		545
Total liabilities assumed		11,189
Net assets acquired		1,313
Goodwill	$	4,451

The acquisition date fair value of the Company’s previously held equity interest in TAV was $3.6 million with a fair value primarily estimated through an income approach valuation. The Company recorded a gain of $3.3 million on the fair value remeasurement of our previously held equity interest in TAV on the unaudited consolidated statements of operations for the three and nine months ended September 30, 2021.

The acquisition of the remaining equity interest was accounted for as a step-transaction in accordance with FASB Accounting Standards Codification Topic 805, Business Combinations ("Topic 805"). The Second Purchase Price has been allocated to TAV's assets acquired and liabilities assumed based on our best estimates of the fair values as of the acquisition date. The fair value of assets acquired and liabilities assumed represent a preliminary allocation as our evaluation of facts and circumstances available as of June 30, 2022 is ongoing. Goodwill has been recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired. Goodwill consists primarily of intangible assets that do not qualify for separate recognition.

Pursuant to Topic 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, we will recognize any provisional adjustments as we obtain information not available as of the completion of this preliminary fair value calculation as determined within the measurement period. We will also be required to record, in the same period as the financial statements, the effects to any income statement captions, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The following table presents unaudited pro forma financial information as if NCTIC, NCTG, and TAV had been included in the Company’s financial results as of January 1, 2021, through the date of acquisition:

	Three Months		Six Months
	Ended		Ended
	June 30,		June 30,
	2021		2021
Revenues	$	2,084	$	4,090
Net income	$	203	$	815

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Note 15 - Goodwill

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Goodwill Disclosure [Text Block]

15. Goodwill

As of June 30, 2022, the Company recognized $4.5 million in goodwill as the result of the acquisition of 50% of TAV on September 1, 2021.  The fair value of goodwill as of the date of acquisition, a Level 3 input, was principally based on values obtained from public and private market comps. In accordance with ASC 350, management determined that no events or changes in circumstances occurred during the six months ending June 30, 2022 that would indicate the carrying amounts may not be recoverable, and therefore determined that there were no goodwill impairments.

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Note 16 - Uncertainties

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Uncertainties [Text Block]

16. Uncertainties

On  March 11, 2020, the World Health Organization declared the current coronavirus (“COVID-19”) outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy.

As a result of these measures, many non-essential retail commerce across the country experienced significant disruption causing severely reduced sales volume. S&L, who distributes its products through these potentially impacted retail channels, has experienced and may continue to experience a reduction in sales volume as a result of these measures. Whereas most state and local governments have begun to ease restrictions on commercial retail activity, it is possible that a resurgence in COVID-19 cases could prompt a return to tighter restrictions in certain areas of the country. Furthermore, the economic recession brought on by the pandemic  may have a continuing adverse impact on consumer demand for S&L’s products. Therefore, uncertainty remains regarding the ongoing impact of the COVID-19 outbreak upon the future results of operations of S&L and its corresponding impact to the collectability of the S&L Note.

Despite the restrictions and measures by federal, state, and local governments in response to COVID-19, many of the U.S. Government tenant agencies of HC Realty’s properties were deemed essential. All of HC Realty’s revenue is generated through the receipt of rental payments from U.S. Government tenant agencies. The extent, however, of future COVID-19 disruption is highly uncertain and cannot be predicted. It is possible that with a resurgence in COVID-19 cases resulting in tighter restriction that risks to HC Realty’s operations become heightened.

The COVID-19 pandemic caused the Company’s title operations at NCTIC and Omega to modify its business practices (including employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences). The COVID-19 pandemic and any of its variants could continue to affect the Company in a number of ways including, but not limited to, the impact on employees becoming ill, quarantined, or otherwise unable to work or travel due to illness or governmental restriction, potential decreases in net premiums written in the future, and future fluctuations in the Company's investment portfolio due to the pandemic and the economic disruption it is causing. Because of the inherent uncertainty regarding the duration and severity of the COVID-19 pandemic (including any of its variants) and its effects on the economy, as well as uncertainty regarding the effects of government measures already taken, and which may be taken or continued in the future, to combat the spread of the virus and any of its variants, and/or provide additional economic stimulus, the Company is currently unable to predict the ultimate impact of the pandemic on the title operations.

The Company continues to evaluate the impact of these measures on our operational and financial performance, specifically the impact on S&L, HC Realty, and NCTIC and Omega’s operations. During the first six months of 2022, the Company did not receive its contractual payments on the S&L Note in part due to the impacts that COVID-19 had to S&L’s operations and its customers. Management used these facts in our analysis of the impairment of the S&L note during the period ended June 30, 2022.

As of June 30, 2022, the Company has not experienced any adverse impacts to the payment of HC Realty’s common stock and Series B Stock dividends.

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Note 17 - Subsequent Events

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Subsequent Events [Text Block]

17. Subsequent Events

On June 30, 2022, a wholly-owned subsidiary of HG Holdings, Inc. (the “Company”), HGMA entered into a Management Advisory Services Agreement dated and effective as of July 1, 2022 (the “Advisory Services Agreement”) with FedNat Underwriters, Inc. (“FNU”) pursuant to which HGMA will assist FNU and its parent, FedNat Holding Company (“FNHC”) in developing a restructuring plan for FNHC’s non-statutory entities, including identifying cost savings and other necessary or advisable steps in connection therewith and, upon approval of such plan by FNHC’s Board of Directors, oversee the implementation of such plan.  The term of the Advisory Services Agreement is until July 1, 2025 and HGMA’s fee for its services under the Advisory Services Agreement equals 1.5% of gross earned premium per annum of Monarch National Insurance Company (“Monarch”).

As background, the Florida Office of Insurance Regulation (OIR) authorized Monarch to assume approximately 78,000 policies effective June 1, 2022 from FedNat Insurance Company (FNIC), a wholly owned subsidiary of FNHC, resulting in Monarch’s total policy count totaling approximately 83,000 policies. FNU will continue as managing general agent for Monarch. As of June 30, 2022, after a $15 million investment by funds managed by Hale Partnership Capital Management LLC (“HPCM”) into Monarch, Monarch is 60% owned by various funds managed by HPCM, and 40% owned by FNHC. HPCM and its affiliates beneficially own in the aggregate 11.27% of the outstanding FNHC common stock (as to which they have filed a disclaimer of control affidavit with the Florida Office of Insurance Regulation). Mr. Hale is also serving as an advisor to the Strategic Review Committee of the FNHC’s Board of Directors. Mr. Hale and HPCM collectively also own approximately 34.9% of the outstanding shares of the Company’s common stock.

Simultaneous with entering into the Advisory Services Agreement, the Company formed White Rock USA Protected Cell 47 (the “Protected Cell”) effective July 1, 2022. The Protected Cell entered into an Excess Catastrophe Reinsurance Contract (the “Reinsurance Contract”) with Maison Insurance Company (“Maison”) effective July 1, 2022 to provide Maison catastrophic windstorm reinsurance protection on approximately 7,650 Texas insurance policies in-force at the inception of the Reinsurance Contract. The Reinsurance Contract provides $7.8 million of limit to Maison in excess of a $5 million retention. The Company’s capital at risk is $1.17 million. Maison will pay the Protected Cell $6.63 million in reinsurance premiums for the term of the contract. The Reinsurance Contract terminates on December 31, 2022.

Also on August 5, 2022, the Board authorized the repurchase of up to $1.5 million of shares of the Company’s common stock. The authorization does not obligate the Company to acquire a specific number of shares during any period and does not have an expiration date, but it may be modified, suspended, or discontinued at any time at the discretion of the Board. Repurchases may be made from time to time in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, and subject to the Company’s cash requirements for other purposes, and other factors it deems relevant.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In June 2016, the 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. Early application is permitted for reporting periods beginning after December 15, 2018, although the Company has not opted to do so. The Company does not anticipate the adoption of ASU 2016-13 to have a material impact to the consolidated financial statements.

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Note 3 - Investment in Affiliate (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Equity Method Investments [Table Text Block]

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Statements of Operations (b)
											For the Three Months Ended June 30,						For the Six Months Ended June 30,
	June 30, 2022			December 31, 2021			June 30, 2022		December 31, 2021		2022			2021			2022			2021
HC Realty Series B Stock (a)		26.8	%		26.8	%	$	10,250	$	10,250	$	-			-		$	-			-
HC Realty common stock		7.1	%		7.1	%		929		1,200		(96	)		(110	)		(189	)		(226	)
Total		33.9	%		33.9	%	$	11,179	$	11,450	$	(96	)	$	(110	)	$	(189	)	$	(226	)

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Note 4 - Investments (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Investment [Table Text Block]

	Cost or Adjusted/ Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Total
U.S. government and agency securities, held-to-maturity	$	1,995	$	-	$	-	$	1,995
Common stock		150		-		-		150
Total investments	$	2,145	$	-	$	-	$	2,145

Investments Classified by Contractual Maturity Date [Table Text Block]

	Cost or Amortized Cost		Percent of Total			Fair Value		Percent of Total
Due in one year or less	$	-		-	%	$	-		-	%
Due after one year through five years		1,995		100.0			1,995		100.0
Due after five years through ten years		-		-			-		-
Due after ten years		-		-			-		-
Total	$	1,995		100.0	%	$	1,995		100.0	%

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

	Total		Level 1		Level 2		Level 3
Common stock	$	150	$	-	$	-	$	150
Investments, at fair value		150						150
U.S. government and agency securities, held-to-maturity		1,950		-		-
Total investments	$	2,145	$	-	$	-	$	150

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Note 6 - Reserve for Title Claims (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

Beginning Reserves	$	231
Provision for claims related to:
Current year		36
Prior years		-
Total provision for claim losses		36
Claims paid related to:
Current year		-
Prior years		-
Total title claims paid		-
Ending Reserves	$	267

Known title claims	$	-	-
IBNR title claims		267	100	%
Total title claims		267	100	%
Non-title claims		-	-
Total title claims reserves	$	267	100	%

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Note 7 - Reinsurance (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Effects of Reinsurance [Table Text Block]

	For the Six Months Ended
	June 30, 2022
	Written			Earned
Direct premiums	$	1,145		$	1,145
Ceded premiums		(28	)		(28	)
Net premiums	$	1,117		$	1,117

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Note 9 - Segment Information (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Title Insurance			Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	3,403		$	-	$	-		$	3,403
Cost of revenues		(238	)		-		-			(238	)
Gross profit	$	3,165		$	-	$	-		$	3,165
Operating expenses		(3,847	)		-		(566	)		(4,413	)
Other income and expenses		6			324		(22	)		308
Income (loss) before income taxes	$	(676	)	$	324	$	(588	)	$	(940	)
Total assets	$	19,771		$	11,179	$	6,669		$	37,619

	Title Insurance		Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	-	$	-	$	-		$	-
Cost of revenues		-		-		-			-
Gross profit	$	-	$	-	$	-		$	-
Operating expenses		-		-		(596	)		(596	)
Other income and expenses		-		287		13			300
Income (loss) before income taxes	$	-	$	287	$	(583	)	$	(296	)
Total assets	$	-	$	11,764	$	15,154		$	26,918

	Title Insurance			Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	1,922		$	-	$	-		$	1,922
Cost of revenues		(158	)		-		-			(158	)
Gross profit	$	1,764		$	-	$	-		$	1,764
Operating expenses		(1,990	)		-		(281	)		(2,271	)
Other income and expenses		5			161		(22	)		144
Income (loss) before income taxes	$	(222	)	$	161	$	(303	)	$	(363	)
Total assets	$	19,771		$	11,179	$	6,669		$	37,619

	Title Insurance		Real Estate Related		Corporate and Other			Total
Insurance and other services revenue	$	-	$	-	$	-		$	-
Cost of revenues		-		-		-			-
Gross profit	$	-	$	-	$	-		$	-
Operating expenses		-		-		(256	)		(256	)
Other income and expenses		-		146		1			147
Income (loss) before income taxes	$	-	$	146	$	(255	)	$	(109	)
Total assets	$	-	$	11,764	$	15,154		$	26,918

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Note 11 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months				Six Months
	Ended				Ended
	June 30,		June 30,		June 30,		June 30,
	2022		2021		2022		2021
Weighted average shares outstanding for basic calculation		2,847		2,832		2,843		2,832
Add: Effect of dilutive stock awards		-		-		-		-
Weighted average shares outstanding, adjusted for diluted calculation		2,847		2,832		2,843		2,832

Schedule of Stockholders Equity [Table Text Block]

	Common		Capital in Excess of		Retained
	Stock		Par Value		Deficit
Balance at January 1, 2022	$	54	$	30,450	$	(942	)
Net loss		-		-		(577	)
Stock-based compensation expense		-		21		-
Balance at March 31, 2022	$	54	$	30,471	$	(1,519	)
Net loss		-		-		(363	)
Stock-based compensation expense		-		20		-
Balance at June 30, 2022	$	54	$	30,491	$	(1,882	)

	Common		Capital in Excess of		Retained
	Stock		Par Value		Deficit
Balance at January 1, 2021	$	684	$	29,738	$	(3,702	)
Net loss		-		-		(188	)
Stock-based compensation expense		-		21		-
Balance at March 31, 2021	$	684	$	29,759	$	(3,890	)
Net loss		-		-		(109	)
Stock-based compensation expense		-		21		-
Balance at June 30, 2021	$	684	$	29,780	$	(3,999	)

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Note 12 - Leases (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2022	$	157
2023		156
2024		104
2025		6
Total lease payments, undiscounted	$	423
Less: present value discount		(24	)
Lease liabilities, at present value	$	399

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Note 14 - Business Combinations (Tables)

6 Months Ended

Jun. 30, 2022

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Cash paid for NCTIC	$	4,453
Cash paid for NCTG		1,010
Total consideration paid.	$	5,463

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	NCTIC			NCTG
Cash and cash equivalents	$	4,834		$	9
Accounts receivable		40			-
Deferred tax assets		14			-
Investment in TAV		-			593
Other assets		4			418
Total assets acquired		4,892			1,020
Accrued expenses		168			10
Reinsurance payable		41			-
Escrow liability		4			-
Reserve for claims		209			-
Total liabilities assumed		422			10
Net assets acquired	$	4,470		$	1,010
Bargain purchase gain	$	(17	)	$	-

Cash paid for remaining 50% of TAV	$	2,200
Fair value of existing equity interest		3,564
Total consideration	$	5,764
Cash and cash equivalents	$	12,044
Accounts receivable		166
Prepaid expenses		76
Fixed assets		216
Total assets acquired		12,502
Accrued expenses		32
Management fee payable		455
Escrow liability		9,293
Payable to affiliate		864
Note payable		545
Total liabilities assumed		11,189
Net assets acquired		1,313
Goodwill	$	4,451

Business Acquisition, Pro Forma Information [Table Text Block]

	Three Months		Six Months
	Ended		Ended
	June 30,		June 30,
	2021		2021
Revenues	$	2,084	$	4,090
Net income	$	203	$	815

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Note 1 - Preparation of Interim Unaudited Financial Statements (Details Textual) - USD ($)	Sep. 01, 2021	Jul. 20, 2021	Jun. 30, 2022	Dec. 31, 2021	Apr. 20, 2021
Common Stock, Par or Stated Value Per Share (in dollars per share)			$ 0.02	$ 0.02
Payments to Acquire Businesses, Gross		$ 5,463,000
HC Government Realty Trust, Inc [Member]
Ownership Percentage			33.90%
National Consumer Title Group LLC (NCTG) [Member] | Title Agency Ventures, LLC (TAV) [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		50.00%
National Consumer Title Group LLC (NCTG) [Member] | Omega National Title Agency (Omega) [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		50.00%
National Consumer Title Insurance Company (NCTIC) [Member]
Business Acquisition, Percentage of Voting Interests Acquired		100.00%
Payments to Acquire Businesses, Gross		$ 4,453,000
National Consumer Title Group LLC (NCTG) [Member]
Business Acquisition, Percentage of Voting Interests Acquired		100.00%
Payments to Acquire Businesses, Gross		$ 1,010,000
NCTIC and NCTG [Member]
Payments to Acquire Businesses, Gross		5,463,000
Business Combination, Purchase Price					$ 5,500,000
Business Combination, Acquisition Related Costs		$ 75,000
Title Agency Ventures, LLC (TAV) [Member]
Business Acquisition, Percentage of Voting Interests Acquired	50.00%
Payments to Acquire Businesses, Gross	$ 2,200,000

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Note 2 - Subordinated Notes Receivable (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Sep. 06, 2018	Mar. 31, 2018
Financing Receivable, after Allowance for Credit Loss, Total						$ 7,400,000
A&R Note [Member]
Financing Receivable, before Allowance for Credit Loss, Total					$ 3,300,000
S&L Note [Member]
Financing Receivable, before Allowance for Credit Loss, Total					$ 4,400,000
Notes Receivable, Interest Rate					10.00%
Proceeds from Interest Received			$ 0	$ 0
Proceeds from Collection of Finance Receivables		$ 63,000		$ 170,000
Financing Receivable, Credit Loss, Expense (Reversal)	$ 146,000

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Note 3 - Investment in Affiliate (Details Textual) - HC Government Realty Trust, Inc [Member] - Series B Cumulative Convertible Preferred Stock [Member] - USD ($) $ / shares in Units, $ in Thousands	Mar. 19, 2019	Jun. 30, 2022	Dec. 31, 2021
Preferred Stock, Dividend Rate, Percentage	10.00%
Equity Method Investment, Aggregate Cost		$ 10,250	$ 10,250
Convertible Preferred Stock of Investee, Shares Issued Upon Conversion (in shares)		1	1
Convertible Preferred Stock, Maximum Conversion Price (in dollars per share)		$ 9.10	$ 9.10

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Note 3 - Investment in Affiliate - Equity Method Investments (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Investment in affiliate, balance		$ 11,179		$ 11,179		$ 11,450
Loss recorded in the Consolidated Statements of Operations		$ (96)	$ (110)	$ (189)	$ (226)
HC Government Realty Trust, Inc [Member]
Ownership percentage		33.90%		33.90%		33.90%
Investment in affiliate, balance		$ 11,179		$ 11,179		$ 11,450
Loss recorded in the Consolidated Statements of Operations	[1]	$ (96)	(110)	$ (189)	(226)
HC Government Realty Trust, Inc [Member] | Series B Cumulative Convertible Preferred Stock [Member]
Ownership percentage	[2]	26.80%		26.80%		26.80%
Investment in affiliate, balance	[2]	$ 10,250		$ 10,250		$ 10,250
Loss recorded in the Consolidated Statements of Operations	[1],[2]	$ 0	0	$ 0	0
HC Government Realty Trust, Inc [Member] | Common Stock of Investee [Member]
Ownership percentage		7.10%		7.10%		7.10%
Investment in affiliate, balance		$ 929		$ 929		$ 1,200
Loss recorded in the Consolidated Statements of Operations	[1]	$ (96)	$ (110)	$ (189)	$ (226)

[1] Loss from these investments is included in "Loss from affiliate" in the consolidated statement of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

[2] Represents investments in shares of HC Realty Series B Stock with a basis of $10.25 million. Each share of Series B Stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

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Note 4 - Investments (Details Textual) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Other than Temporary Impairment Loss, Investments, Portion in Other Comprehensive Loss, Net of Tax, Attributable to Parent, Held-to-Maturity Securities	$ 0	$ 0

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Note 4 - Investments - Details Investments by Major Investment Category (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Amortized costs	$ 2,145
Gross unrealized gains	0
Gross unrealized losses	0
Total	2,145	$ 0
US Government Agencies Debt Securities [Member]
Amortized costs	1,995
Gross unrealized gains	0
Gross unrealized losses	0
Total	1,995
Common Stock [Member]
Amortized costs	150
Gross unrealized gains	0
Gross unrealized losses	0
Total	$ 150

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Note 4 - Investments - Fixed Maturity Securities by Contractual Maturities (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Due in one year or less, amortized cost	$ 0
Due in one year or less, amortized cost, percent	0.00%
Due in one year or less, fair value	$ 0
Due in one year or less, fair value, percent	0.00%
Due after one year through five years, amortized cost	$ 1,995
Due after one year through five years, amortized cost, percent	100.00%
Due after one year through five years, fair value	$ 1,995
Due after one year through five years, fair value, percent	100.00%
Due after five years through ten years, amortized cost	$ 0
Due after five years through ten years, amortized cost, percent	0.00%
Due after five years through ten years, fair value	$ 0
Due after five years through ten years, fair value, percent	0.00%
Due after ten years, amortized cost	$ 0
Due after ten years, amortized cost, percent	0.00%
Due after ten years, fair value	$ 0
Due after ten years, fair value, percent	0.00%
Total, amortized cost	$ 1,995
Total, amortized cost, percent	100.00%
Total, fair value	$ 1,995
Total, fair value, percent	100.00%

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Note 4 - Investments - Fair Value of Financial Instruments Measured on a Recurring Basis (Details) - Fair Value, Recurring [Member] $ in Thousands	Jun. 30, 2022 USD ($)
Total Investments	$ 2,145
Fair Value, Inputs, Level 1 [Member]
Total Investments	0
Fair Value, Inputs, Level 2 [Member]
Total Investments	0
Fair Value, Inputs, Level 3 [Member]
Total Investments	150
Common Stock [Member]
Total Investments	150
Common Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Total Investments	0
Common Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Total Investments	0
Common Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Total Investments	150
Investments, at Fair Value [Member]
Total Investments	150
Investments, at Fair Value [Member] | Fair Value, Inputs, Level 1 [Member]
Total Investments
Investments, at Fair Value [Member] | Fair Value, Inputs, Level 2 [Member]
Total Investments
Investments, at Fair Value [Member] | Fair Value, Inputs, Level 3 [Member]
Total Investments	150
US Government Agencies Debt Securities [Member]
Total Investments	1,950
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Total Investments	0
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Total Investments	0
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Total Investments

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Note 5 - Paycheck Protection Program ("PPP") Loan (Details Textual)	May 07, 2020 USD ($)
Paycheck Protection Program Loan [Member]
Proceeds from Issuance of Debt	$ 544,842

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Note 6 - Reserve for Title Claims (Details Textual) $ in Thousands	Jun. 30, 2022 USD ($)
Reinsurance Recoverables, Including Reinsurance Premium Paid, Total	$ 0

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Note 6 - Reserve for Title Claims - Reconciliation of Reserves Account Activity (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Total provision for claim losses	$ 63	$ 0	$ 76	$ 0
Title Insurance Product Line [Member]
Beginning Reserves			231
Current year			36
Prior years			0
Total provision for claim losses			36
Current year			0
Prior years			0
Total title claims paid			0
Ending Reserves	267		267
Claims reserves	267		267		$ 231
Claims reserves, percent					100.00%
Known Title Claims [Member]
Ending Reserves	0		0
Claims reserves	0		0
Claims reserves, percent					0.00%
IBNR Title Claims [Member]
Ending Reserves	267		267
Claims reserves	267		267
Claims reserves, percent					100.00%
Title Claims [Member]
Ending Reserves	267		267
Claims reserves	267		267
Claims reserves, percent					100.00%
Non-title Claims [Member]
Ending Reserves	0		0
Claims reserves	$ 0		$ 0
Claims reserves, percent					0.00%

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Note 7 - Reinsurance (Details Textual)	Jan. 01, 2022 USD ($)
National Consumer Title Insurance Company (NCTIC) [Member] | Reinstatement Premium Protection Reinsurance Agreement [Member]
Reinsurance Retention Policy, Reinsured Risk, Percentage	100.00%
National Consumer Title Insurance Company (NCTIC) [Member] | Non-affiliated Companies [Member] | The Loss Reinsurance Agreement [Member]
Reinsurance, Excess Retention, Amount Reinsured, Per Event	$ 4,000,000
Reinsurance, Amount Retained, Per Event	$ 1,000,000
Reinsurance Retention Policy, Reinsured Risk, Percentage	100.00%
Chaucer [Member] | Reinsurance Through Lloyd's Syndicates [Member]
Percent of Reinsurance Participation	50.00%
Beazley [Member] | Reinsurance Through Lloyd's Syndicates [Member]
Percent of Reinsurance Participation	50.00%

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Note 7 - Reinsurance - Reinsurance Premiums Written and Earned (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Net premiums, written	$ 1,344	$ 0	$ 2,306	$ 0
National Consumer Title Insurance Company (NCTIC) [Member]
Direct premiums, written			1,145
Direct premiums, earned			1,145
Ceded premiums, written			(28)
Ceded premiums, earned			(28)
Net premiums, written			1,117
Net premiums, earned			$ 1,117

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Note 9 - Segment Information (Details Textual)	6 Months Ended
	Jun. 30, 2022
Number of Reportable Segments	2

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Note 9 - Segment Information - Operations By Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Insurance and other services revenue	$ 1,922	$ 0	$ 3,403	$ 0
Cost of revenues	(158)	0	(238)	0
Gross profit	1,764	0	3,165	0
Operating expenses	(2,271)	(256)	(4,413)	(596)
Other income and expenses	144	147	308	300
Income (loss) before income taxes	(363)	(109)	(940)	(296)
Total assets	37,619	26,918	37,619	26,918	$ 38,865
The Title Insurance Segment [Member]
Insurance and other services revenue	1,922	0	3,403	0
Cost of revenues	(158)	0	(238)	0
Gross profit	1,764	0	3,165	0
Operating expenses	(1,990)	0	(3,847)	0
Other income and expenses	5	0	6	0
Income (loss) before income taxes	(222)	0	(676)	0
Total assets	19,771	0	19,771	0
Real Estate Segment [Member]
Insurance and other services revenue	0	0	0	0
Cost of revenues	0	0	0	0
Gross profit	0	0	0	0
Operating expenses	0	0	0	0
Other income and expenses	161	146	324	287
Income (loss) before income taxes	161	146	324	287
Total assets	11,179	11,764	11,179	11,764
Corporate and Other [Member]
Insurance and other services revenue	0	0	0	0
Cost of revenues	0	0	0	0
Gross profit	0	0	0	0
Operating expenses	(281)	(256)	(566)	(596)
Other income and expenses	(22)	1	(22)	13
Income (loss) before income taxes	(303)	(255)	(588)	(583)
Total assets	$ 6,669	$ 15,154	$ 6,669	$ 15,154

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Note 10 - Income Taxes (Details Textual) - USD ($) Pure in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	$ (168,000)
Deferred Tax Assets, Valuation Allowance	7,900,000
Operating Loss Carryforwards	37,800,000
Income Taxes Paid, Net, Total	0	$ 0
Deferred Tax Assets, Net of Valuation Allowance, Total	$ 0
Effective Income Tax Rate Reconciliation, Percent, Total	0.00%	0.00%

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Note 11 - Stockholders' Equity (Details Textual)		3 Months Ended		6 Months Ended
	Jul. 15, 2021 shares	Jun. 30, 2022 shares	Jun. 30, 2021 shares	Jun. 30, 2021 shares
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)			35,000	35,000
Stock Issued During Period, Fractional Shares, Stock Splits (in shares)	0
Reverse Stock Split, Fractional Shares, Cash, Multiplier	0.70
Restricted Stock [Member]
Stock Repurchased During Period, Shares (in shares)		0	0

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Note 11 - Stockholders' Equity - Basic and Diluted Earnings Per Share Calculation (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Weighted average shares outstanding for basic calculation (in shares)	2,847	2,832	2,843	2,832
Add: Effect of dilutive stock awards (in shares)	0	0	0	0
Weighted average shares outstanding, adjusted for diluted calculation (in shares)	2,847	2,832	2,843	2,832

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Note 11 - Stockholders' Equity - Reconciliation of Activity in Stockholders' Equity Accounts (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Balance		$ 29,562			$ 29,562
Net income (loss)	$ (363)		$ (109)		(940)	$ (296)
Net income (loss)	(363)		(109)		(940)	(296)
Balance	28,663				28,663
Common Stock [Member]
Balance	54	54	684	$ 684	54	684
Net income (loss)	0	0	0	0
Stock-based compensation expense	0	0	0	0
Net income (loss)	0	0	0	0
Balance	54	54	684	684	54	684
Additional Paid-in Capital [Member]
Balance	30,471	30,450	29,759	29,738	30,450	29,738
Net income (loss)	0	0	0	0
Stock-based compensation expense	20	21	21	21
Net income (loss)	0	0	0	0
Balance	30,491	30,471	29,780	29,759	30,491	29,780
Retained Earnings [Member]
Balance	(1,519)	(942)	(3,890)	(3,702)	(942)	(3,702)
Net income (loss)	(363)	(577)	(109)	(188)
Stock-based compensation expense	0	0	0	0
Net income (loss)	(363)	(577)	(109)	(188)
Balance	$ (1,882)	$ (1,519)	$ (3,999)	$ (3,890)	$ (1,882)	$ (3,999)

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Note 12 - Leases (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Operating Lease, Weighted Average Remaining Lease Term (Year)	10 months 24 days		10 months 24 days
Operating Lease, Weighted Average Discount Rate, Percent	6.00%		6.00%
Operating Lease, Expense	$ 172,000	$ 7,000	$ 326,000	$ 15,000
Minimum [Member]
Lessee, Operating Lease, Term of Contract (Year)	1 year		1 year
Maximum [Member]
Lessee, Operating Lease, Term of Contract (Year)	3 years		3 years

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Note 12 - Leases - Future Payments Under Operating Lease Arrangements (Details) $ in Thousands	Jun. 30, 2022 USD ($)
2022	$ 157
2023	156
2024	104
2025	6
Total lease payments, undiscounted	423
Less: present value discount	(24)
Lease liabilities, at present value	$ 399

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Note 14 - Business Combinations (Details Textual) - USD ($) $ in Thousands	Sep. 01, 2021	Jul. 20, 2021
Payments to Acquire Businesses, Gross		$ 5,463
National Consumer Title Group LLC (NCTG) [Member] | Title Agency Ventures, LLC (TAV) [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		50.00%
National Consumer Title Group LLC (NCTG) [Member] | Omega National Title Agency (Omega) [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		50.00%
National Consumer Title Insurance Company (NCTIC) [Member]
Business Acquisition, Percentage of Voting Interests Acquired		100.00%
Payments to Acquire Businesses, Gross		$ 4,453
National Consumer Title Group LLC (NCTG) [Member]
Business Acquisition, Percentage of Voting Interests Acquired		100.00%
Payments to Acquire Businesses, Gross		$ 1,010
Title Agency Ventures, LLC (TAV) [Member]
Business Acquisition, Percentage of Voting Interests Acquired	50.00%
Payments to Acquire Businesses, Gross	$ 2,200
Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value	3,564
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain	$ 3,300

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Note 14 - Business Combinations - Purchase Price Allocation (Details) $ in Thousands	Jul. 20, 2021 USD ($)
Consideration paid	$ 5,463
National Consumer Title Insurance Company (NCTIC) [Member]
Consideration paid	4,453
National Consumer Title Group LLC (NCTG) [Member]
Consideration paid	$ 1,010

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Note 14 - Business Combinations - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Sep. 01, 2021	Jul. 20, 2021	Jun. 30, 2022	Dec. 31, 2021
Consideration paid		$ 5,463
Goodwill			$ 4,451	$ 4,451
National Consumer Title Insurance Company (NCTIC) [Member]
Cash and cash equivalents		4,834
Accounts receivable		40
Deferred tax assets		14
Investment in TAV		0
Other assets		4
Total assets acquired		4,892
Accrued expenses		168
Reinsurance payable		41
Escrow liability		4
Reserve for claims		209
Total liabilities assumed		422
Net assets acquired		4,470
Bargain purchase gain		(17)
Consideration paid		4,453
National Consumer Title Group LLC (NCTG) [Member]
Cash and cash equivalents		9
Accounts receivable		0
Deferred tax assets		0
Investment in TAV		593
Other assets		418
Total assets acquired		1,020
Accrued expenses		10
Reinsurance payable		0
Escrow liability		0
Reserve for claims		0
Total liabilities assumed		10
Net assets acquired		1,010
Bargain purchase gain		0
Consideration paid		$ 1,010
Title Agency Ventures, LLC (TAV) [Member]
Cash and cash equivalents	$ 12,044
Accounts receivable	166
Total assets acquired	12,502
Accrued expenses	32
Escrow liability	9,293
Total liabilities assumed	11,189
Net assets acquired	1,313
Consideration paid	2,200
Fair value of existing equity interest	3,564
Total consideration	5,764
Prepaid expenses	76
Fixed assets	216
Management fee payable	455
Payable to affiliate	864
Note payable	545
Goodwill	$ 4,451		$ 4,500

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Note 14 - Business Combinations - Assets Acquired and Liabilities Assumed (Details) (Parentheticals)	Sep. 01, 2021
Title Agency Ventures, LLC (TAV) [Member]
Voting interests acquired	50.00%

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Note 14 - Business Combinations - Pro Forma Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Revenues	$ 2,084	$ 4,090
Net income	$ 203	$ 815

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Note 15 - Goodwill (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021	Sep. 01, 2021
Goodwill, Ending Balance	$ 4,451	$ 4,451
Goodwill, Impairment Loss	0
Title Agency Ventures, LLC (TAV) [Member]
Goodwill, Ending Balance	$ 4,500		$ 4,451
Business Acquisition, Percentage of Voting Interests Acquired			50.00%

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Note 17 - Subsequent Events (Details Textual) $ in Thousands	Jul. 01, 2022 USD ($)	Aug. 05, 2022 USD ($)	Jun. 30, 2022 USD ($)	Jun. 01, 2022
HG Holding Common Stock [Member] | Mr. Hale and HPCM [Member]
Percent of Outstanding Common Stock			34.90%
HPCM [Member]
Noncontrolling Interest, Ownership Percentage by Parent			60.00%
FNHC [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners			40.00%
Monarch [Member] | FNIC [Member]
Number of Insurance Policies Authorized to Assume				78,000
Number of Insurance Policies in Total			83,000
HPCM [Member] | FNHC Common Stock [Member]
Percent of Outstanding Common Stock			11.27%
HPCM [Member] | Funds in Monarch [Member]
Investments, Total			$ 15,000
Subsequent Event [Member]
Capital At Risk	$ 1,170
Stock Repurchase Program, Authorized Amount		$ 1,500
Subsequent Event [Member] | Protected Cell [Member] | Catastrophic Windstorm Reinsurance Protection [Member]
Reinsurance, Reinsurance Protection, Number of Insurance Policies In-force	7,650
Reinsurance, Excess Retention, Amount Reinsured, Per Event	$ 7,800
Reinsurance, Amount Retained, Per Event	5,000
Subsequent Event [Member] | Protected Cell [Member] | Maison [Member]
Direct Premiums Written	$ 6,630
Subsequent Event [Member] | HGMA [Member]
Service Fee, Percentage of Gross Earned Premium	1.50%