For the three months ended June 30, 2019, net realized gain from sales of marketable securities was approximately $16,000 which consisted of $18,000 of gross gains and $2,000 of gross losses. For the six months ended June 30, 2019, net realized loss from sales of marketable securities was approximately $11,000 and consisted of approximately $32,000 of gross losses net of $21,000 of gross gains.

For the three months ended June 30, 2018, net realized gain from sales of marketable securities was approximately $4,000 which approximately all consisted of gross gains. For the six months ended June 30, 2018, net realized loss from sales of marketable securities was approximately $4,000 and consisted of approximately $29,000 of gross losses net of $25,000 of gross gains.

Investment gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company’s net earnings. However, the amount of investment gains or losses on marketable securities for any given period has no predictive value and variations in amount from period to period have no practical analytical value.

4.OTHER INVESTMENTS

As of June 30, 2019, the Company’s portfolio of other investments had an aggregate carrying value of approximately $6.2 million and we have committed to fund approximately $884,000 as required by agreements with the investees. The carrying value of these investments is equal to contributions less distributions and loss valuation adjustments, if any.

During the six months ended June 30, 2019, we made cash contributions to other investments of approximately $655,000. This consisted of $500,000 in two new investments. One for $200,000 which holds residential mortgages acquired from a bank at discount and the other for $300,000 in a partnership that is constructing residential apartments in Atlanta, GA. We also made follow on contributions to existing investments of approximately $155,000.

During the six months ended June 30, 2019, we received cash distributions from other investments of approximately $405,000. This consisted of distributions from existing investments (primarily real estate related). Also, in the first quarter of 2019 the Company’s $300,000 investments in a private insurance company publicly registered all shares and began trading on the NASDAQ on March 29, 2019. Accordingly, we have transferred this investment to marketable securities. As of June 30, 2019, this investment had an unrealized loss of approximately $94,000.

Net income from other investments for the three and six months ended June 30, 2019 and 2018, is summarized below:

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2019 and December 31, 2018, aggregated by investment category and the length of time that investments have been in a continuous loss position:

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis.

In accordance with ASC Topic 320-10-65, Recognition and Presentation of Other-Than-Temporary Impairments there were no impairment valuation adjustments for the three and six months ended June 30, 2019 and 2018.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

In accordance with ASC Topic 820, the Company measures cash and cash equivalents and marketable debt and equity securities at fair value on a recurring basis. Other investments are measured at fair value on a nonrecurring basis.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, using quoted prices in active markets for identical assets (Level 1) and significant other observable inputs (Level 2). For the periods presented, there were no major assets measured at fair value on a recurring basis where significant unobservable inputs were used (Level 3):

Assets and liabilities measured at fair value on a recurring basis are summarized below:

Carrying amount is the estimated fair value for corporate debt securities and time deposits based on a market-based approach using observable (Level 2) inputs such as prices of similar assets in active markets.

6.INCOME TAXES

The Company as a qualifying real estate investment trust (“REIT”) distributes its taxable ordinary income to stockholders in conformity with requirements of the Internal Revenue Code and is not required to report deferred items due to its ability to distribute all taxable income. In addition, net operating losses can be carried forward to reduce future taxable income but cannot be carried back.

The Company’s 95%-owned taxable REIT subsidiary, CII, files a separate income tax return and its operations are not included in the REIT’s income tax return.

Distributed capital gains on sales of real estate as they relate to REIT activities are not subject to taxes; however, undistributed capital gains may be subject to corporate tax.

On December 14, 2018 the Company declared a capital gain dividend of $0.50 per share which was payable on January 9, 2019 to all shareholders of record as of December 28, 2018.

On March 7, 2018 the Company declared a capital gain dividend of $2.50 per share which is payable on March 30, 2018 to all shareholders of record as of March 21, 2018.

The Company accounts for income taxes in accordance with ASC Topic 740, “Accounting for Income Taxes.” ASC Topic 740 requires a Company to use the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred taxes only pertain to CII. As of June 30, 2019, and December 31, 2018, the Company has recorded a net deferred tax liability of $51,000 and $48,000, respectively, primarily as a result of timing differences associated with the carrying value of the investment in affiliate (TGIF) and other investments. CII’s NOL carryover to 2019 is estimated at $854,000 and has been fully reserved due to CII historically having tax losses.

The provision for income taxes in the consolidated statements of comprehensive income consists of the following:

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC Topic 740 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2018. The Company’s federal income tax returns since 2014 are subject to examination by the Internal Revenue Service, generally for a period of three years after the returns were filed.

We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the consolidated financial statements as selling, general and administrative expense.

7.STOCK OPTIONS

During the six months ended June 30, 2019 there were no options granted, expired or forfeited.

In January and March 2018 three directors and one officer exercised options to purchase a total of 10,900 shares at $9.31 per share (options to purchase 1,600 shares by one director were exchanged for new options via Stock Option Agreement re-load provision). Stock based compensation expense is recognized using the fair-value method for all awards.

The following table summarizes information concerning outstanding and exercisable options as of June 30, 2019:

As of June 30, 2019, the stock options outstanding and exercisable had no intrinsic value.

8.SUBSEQUENT EVENT

As previously reported on Form 8-K dated July 19, 2019, pursuant to the terms of a Construction and Mini Perm Loan Agreement (“("Loan Agreement”Agreement"), between Murano At Three Oaks Associates LLC, a Florida limited liability company formed in September 2018 (the “Borrower”) which is 25% owned by HMG, and PNC Bank, National Association (“Lender”("Lender"), Lender provided a construction loan to the Borrower for the principal sum of approximately $41.59 million (“Loan”). The proceeds of the Loan shall be used to finance the construction of multi-family residential apartments containing 318 units totaling approximately 312,000 net rentable square feet on a 17.5-acre site located in Fort Myers, Florida (“Project”("Project"). The Project site was purchased by the Borrower concurrently with the closing of the Loan. Total development costs for the Project are estimated at approximately $56.08 million and the Borrower’s equity totals approximately $14.49 million. HMG’s share of the equity is 25%, or approximately $3.62 million,million. As of which $2.70 million has been fundedMarch 31, 2020, the outstanding balance on the Loan was approximately $5.33 million. The Project is 38% complete and expected to date including $2.25 million funded on July 2, 2019.be fully completed by the first quarter of 2021.

HMG and the other members (or affiliates thereof) of the Borrower (“Guarantors”("Guarantors") entered into a Completion Guaranty (“("Completion Guaranty”Guaranty") and a Guaranty and Suretyship Agreement (“("Repayment Guaranty”Guaranty") (collectively, the “Guaranties”). Under the Completion Guaranty, each Guarantor shall unconditionally guaranty, as a primary obligor, and become surety for the prompt payment and performance by Borrower of the “Guaranteed Obligations” (as defined). Under the Repayment Guaranty, Guarantor unconditionally guarantees, as a primary obligor, and becomes surety for the prompt payment and performance of, as defined (i) all Interest Obligations, (ii) all Loan Document Obligations, (iii) all Expense Obligations, (iv) the Carrying Cost Obligations, (v) the Principal Amount, (vi) interest on each of the foregoing including, if applicable, interest at the Default Rate (as defined). At all times prior to the First Reduction Date (as defined below), the Guarantors are collectively responsible for 30% of the Principal Obligations, (ii) at all times after the First Reduction Date, the Guarantors are collectively responsible for15%for 15% of the Principal Obligations, and (iii) at all times after the Second Reduction Date, 0% of the Principal Obligations. First Reduction Conditions”Conditions" means satisfaction of the following conditions: (i) no Event of Default has occurred and is continuing; (ii) Completion of Construction has occurred; and (iii) the Project has achieved a DSCR of not less than 1.25 to 1.00 for two (2) consecutive fiscal quarters.

Each Guarantor is required to maintain compliance with the following financial covenants, as defined: (1) liquidity shall not be less than $2.5 million. Liquidity is defined as the sum of unencumbered, unrestricted cash and cash equivalents and marketable securities, and (2) net worth shall not be less than $10 million. As of March 31, 2020, HMG was in compliance with all covenants required by Guarantors in the Loan Agreement.

Investments in marketable securities consist primarily of large capital corporate equity and debt securities in varying industries or issued by government agencies with readily determinable fair values. These securities are stated at market value, as determined by the most recent traded price of each security at the balance sheet date. Consistent with the Company's overall current investment objectives and activities its entire marketable securities portfolio is classified as trading. Accordingly, all unrealized gains (losses) on this portfolio are recorded in income. Included in investments in marketable securities is approximately $1.51 million and $1.86 million in preferred stock of large capital real estate investment trusts (REITs) as of March 31, 2020 and December 31, 2019, respectively.

Net realized and unrealized gain from investments in marketable securities for the three months ended March 31, 2020 and 2019 is summarized below: 

For the three months ended March 31, 2020, net unrealized loss from marketable securities of approximately $843,000 was primarily the result of the large decline in the overall U.S. stock market experienced as a result of business closures from the on-going pandemic.

For the three months ended March 31, 2020, net realized losses from sales of marketable securities of approximately $27,000 consisted of approximately $39,000 of gross losses net of $12,000 of gross gains. For the three months ended March 31, 2019, net realized losses from sales of marketable securities of approximately $28,000 consisted of approximately $31,000 of gross losses net of $3,000 of gross gains.

Investment gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company's net earnings. However, the amount of investment gains or losses on marketable securities for any given period has no predictive value and variations in amount from period to period have no practical analytical value.

As of March 31, 2020, the Company’s portfolio of other investments had an aggregate carrying value of approximately $5.67 million and we have committed to fund approximately $715,000 as required by agreements with the investees. The carrying value of these investments is equal to contributions less distributions and impairment valuation adjustments, if any.

During the three months ended March 31, 2020, we made cash contributions to other investments of approximately $189,000. This consisted $100,000 as an addition to our existing investment in a private lending fund and approximately $89,000 in follow on commitments of existing investments.

During the three months ended March 31, 2020, we received cash distributions from other investments of approximately $185,000. This consisted of distributions from existing investments primarily in real estate and related entities. One investee sold its remaining rental apartment building located in Atlanta, Georgia and we received $121,000.

In the first quarter of 2019 the Company’s $300,000 investments in a private insurance company publicly registered all shares and began trading on the NASDAQ on March 29, 2019. Accordingly, this investment is included in marketable securities, and as of March 31, 2020, had an unrealized loss of approximately $190,000.

Net income from other investments for the three months ended March 31, 2020 and 2019, is summarized below:

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2020 and December 31, 2019, aggregated by investment category and the length of time that investments have been in a continuous loss position:

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis.

For the three months ended March 31, 2020, in accordance with ASC Topic 320-10-65, Recognition and Presentation of Other-Than-Temporary Impairments (“OTTI”), we have recognized $50,000 in an impairment valuation adjustment for an investment that has been in a continuous unrealized loss position for over 12 months. This investment is in a small business investment company licensed by the Small Business Administration in which we invested $300,000 in 2007. Distributions to date from this investment total $68,000. The carrying value of this investment is $182,000 after the OTTI adjustment.

There were no OTTI adjustments for the three months ended March 31, 2019.

In accordance with ASC Topic 820, the Company measures cash and cash equivalents, marketable debt and equity securities at fair value on a recurring basis. Other investments are measured at fair value on a nonrecurring basis.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, using quoted prices in active markets for identical assets (Level 1) and significant other observable inputs (Level 2). For the periods presented, there were no major assets measured at fair value on a recurring basis which uses significant unobservable inputs (Level 3):

Assets and liabilities measured at fair value on a recurring basis are summarized below:

Carrying amount is the estimated fair value for corporate debt securities and time deposits based on a market-based approach using observable (Level 2) inputs such as prices of similar assets in active markets.

The Company as a qualifying real estate investment trust (“REIT”) distributes its taxable ordinary income to stockholders in conformity with requirements of the Internal Revenue Code and is not required to report deferred items due to its ability to distribute all taxable income. In addition, net operating losses can be carried forward to reduce future taxable income but cannot be carried back.

The Company’s 95%-owned taxable REIT subsidiary, CII, files a separate income tax return and its operations are not included in the REIT’s income tax return.

Distributed capital gains on sales of real estate as they relate to REIT activities are not subject to taxes; however, undistributed capital gains may be subject to corporate tax.

On December 13, 2019, the Company declared a dividend of $0.50 per share which was payable on January 13, 2020 to all shareholders of record as of December 30, 2019. The dividend was 72% capital gain and 28% return of capital.

The Company accounts for income taxes in accordance with ASC Topic 740, “Accounting for Income Taxes.” ASC Topic 740 requires a Company to use the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred taxes only pertain to CII. As of March 31, 2020, the Company has recorded a net deferred tax asset of $23,000, and as December 31, 2019 recorded a net deferred tax liability of $77,000. Deferred taxes are primarily a result of timing differences associated with the carrying value of the investment in affiliate (TGIF), other investments and investments in marketable securities. CII’s NOL carryover to 2020 is estimated at $896,000 and has been fully reserved due to CII historically having tax losses.

The benefit from income taxes in the consolidated statements of income consists of the following:

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC Topic 740 and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2019. The Company’s federal income tax returns since 2016 are subject to examination by the Internal Revenue Service, generally for a period of three years after the returns were filed.

We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the consolidated financial statements as selling, general and administrative expense.

During the three months ended March 31, 2020 there were no options granted, expired or forfeited.

The following table summarizes information concerning outstanding and exercisable options as of March 31, 2020:

As of March 31, 2020, the stock options outstanding and exercisable had no intrinsic value.

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

RESULTS OF OPERATIONS

The Company reported net incomeloss of approximately $10,000 ($0.01$965,000 (or $0.95 per share) for the three months ended June 30, 2019, and a net loss of approximately $2,000 forMarch 31, 2020. For the sixthree months ended June 30, 2019. TheMarch 31, 2019 the Company reported a net loss of approximately $74,000 ($0.07$11,000 (or $0.01 per share) for the three months ended June 30, 2018, and net income of approximately $5.1 million ($5.06 per share) for the six months ended June 30, 2018..

REVENUES

Rentals and related revenues for the three and six months ended June 30,March 31, 2020 and 2019 were approximately $19,000$20,000 and $38,000,$19,000, respectively and primarily consists of rent from the Advisor to CII for its corporate office. For the three and six months ended June 30, 2018 rental and related revenues were $18,000 and $36,000, respectively.

Net realized and unrealized gains(loss) gain from investments in marketable securities:

Net realized gain from the sale of marketable securities for the three months ended June 30, 2019 was approximately $16,000. Net realizedand unrealized loss from the sale of marketable securities for the six months ended June 30, 2019 was approximately $11,000. Unrealized net gain from investments in marketable securities for the three and six months ended June 30, 2019March 31, 2020 was approximately $44,000 and $252,000, respectively. Net realized gain from the sale of marketable securities for$870,000. For the three months ended June 30, 2019March 31, 2020, net unrealized loss from marketable securities of approximately $843,000 was approximately $16,000. Net realized gainprimarily the result of the large decline in the overall U.S. stock market experienced as a result of business closures from the sale of marketable securities foron-going pandemic.

For the three months ended June 30, 2018March 31, 2019 net realized and unrealized gains from marketable securities was approximately $4,000. Net realized loss from the sale of marketable securities for the six months ended June 30, 2018 was approximately $4,000. Unrealized net gain from investments in marketable securities for the three and six months ended June 30, 2018 was approximately $41,000 and $29,000, respectively.$180,000. For further details, refer to Note 35 to Condensed Consolidated Financial Statements (unaudited).

Equity loss from operations in residential real estate partnership (Orlando, FL):

Equity loss from operations in residential real estate partnership for the six months ended June 30, 2018 was approximately $144,000. This property was sold in February 2018 and the Company recognized a gain on the sale of approximately $5.47 million, net of incentive fee in the first quarter of 2018.

Net incomeIncome from other investments:

Net incomeIncome from other investments for the three and six months ended June 30,March 31, 2020 and 2019 was approximately $97,000$113,000 and $175,000, respectively. Net income from other investments for the three and six months ended June 30, 2018 was approximately $73,000 and $291,000,$78,000, respectively. For further details, refer to Note 46 to Condensed Consolidated Financial Statements (unaudited).

Interest, dividend andOther than temporary impairment losses from other income:investments (“OTTI”):

Interest, dividend and other income forFor the three and six months ended June 30,March 31, 2019 OTTI valuation adjustment was approximately $153,000 and $238,000, respectively. Interest, dividend and other income for the three and six months ended June 30, 2018 was approximately $98,000 and $188,000, respectively. The increases in the three and six-month comparable periods was primarily due$50,000 from one investment. For further details, refer to increased interest income from investments in US T-bills.Note 6 to Condensed Consolidated Financial Statements (unaudited).

EXPENSES

Interest expenseProfessional fees and expenses for the three and six months ended June 30, 2019March 31, 2020 as compared with the same periodsperiod in 2018 decreased2019 increased by approximately $14,000 (49%$15,000 (or 18%) and $20,000 (41%), respectively. The decreases in the three and six- month comparable periods were primarily due to decrease margin borrowings and decreased Note Payable to Affiliate.increased tax preparation fees.

EFFECT OF INFLATION:

Inflation affects the costs of holding the Company’sCompany's investments. Increased inflation would decrease the purchasing power of our mainly liquid investments.

LIQUIDITY, CAPITAL EXPENDITURE REQUIREMENTS AND CAPITAL RESOURCES

The Company’sCompany's material commitments primarily consist of a note payable to the Company’s 49% owned affiliate, T.G.I.F. Texas, Inc. (“TGIF”) of approximately $1.0 million$650,000 due on demand, contributions committed to other investments of approximately $884,000$715,000 due upon demand. The $9.96$9.98 million in margin is primarily related to the purchase of US T-bills at quarter end. The T-bills were sold in July 2019April 2020 and the related margin was repaid. The purchase of T-bills at each fiscal quarter end is for the purposes of qualifying for the REIT asset test. The funds necessary to meet these obligations are expected from the proceeds from the sales of investments, distributions from investments and available cash.

MATERIAL COMPONENTS OF CASH FLOWS

For the sixthree months ended June 30, 2019,March 31, 2020, net cash used in operating activities was approximately $371,000,$353,000, primarily consisting of operating expenses less interest, dividend and other income.expenses.

For the sixthree months ended June 30, 2019,March 31, 2020, net cash used inprovided by investing activities was approximately $219,000.$1.2 million. This consisted primarily of purchases$1 million collection of marketable securitiesloan due from purchaser of $780,000, contribution to other investmentsGrove Isle, $200,000 collection of $655,000 and contribution to investment in residential partnership (Fort Myers, FL) of $250,000. These uses of funds were partially offset by sources of cash consisting primarily of $836,000 ofloan participation, net proceeds from sales and redemptions of marketable securities of $373,000, distributions from other investments of $405,000$185,000 and distribution from affiliate of $221,000. These sources of funds were partially offset by uses of cash consisting primarily of $570,000 in purchases of marketable securities and $189,000 of contributions to other investments.

For the sixthree months ended June 30, 2019,March 31, 2020, net cash provided byused in financing activities was approximately $746,000,$792,000, consisting of $506,000 dividends$507,000 dividend paid and $340,000$350,000 principal payment on note due to affiliate. These uses of funds were partially offset by increased margin borrowings (net of repayments) of $100,000.$64,000.

Not applicable

(a)  Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q have concluded that, based on such evaluation, our disclosure controls and procedures were effective and designed to ensure that material information relating to us and our consolidated subsidiaries, which we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934, was made known to them by others within those entities and reported within the time periods specified in the SEC’sSEC's rules and forms.

(b)  Changes in Internal Control Over Financial Reporting.

There were no changes in the Company’sCompany's internal controls over financial reporting identified in connection with the evaluation of such internal control over financial reporting that occurred during our last fiscal quarter which have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

As previously reported on December 14, 2018, HMG announced that its Board of Directors has authorized the purchase of up to $500,000 of HMG common stock on the open market or through privately negotiated transactions. The program will be in place through December 31, 2021. During the sixthree months ended June 30, 2019,March 31, 2020, there were no shares purchased as part of this publicly announced program.

(a) Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002. Filed herewith.

SIGNATURES

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