These unaudited pro forma consolidated financial statements are prepared for informational purposes only and are based on assumption and estimates considered appropriate by management. They are, however, not necessarily indicative of what the Company’s financial condition and results of operations would have been if the investment had been consummated as of the dates indicated, nor do they purport to represent the results of operations for future periods.

These unaudited pro forma consolidated financial statements should be read in conjunction with the Company’s respective audited consolidated financial statements and the related notes thereto as of andFinancial Statements HC Government Realty Trust, Inc. for the two year period ended December 31, ~~2019 included in the Annual Report on Form 10-K filed with the SEC on March 13, 2020, a copy of which is attached to this prospectus as Annex A.~~2019

~~Unless otherwise specified and except for per share data, all amounts referenced in the notes to these unaudited pro forma consolidated statements of operations are stated in thousands.~~

QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING

The following are examples of what we anticipate will be common questions about the rights offering. The answers are based on selected information from this prospectus. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the rights offering. This prospectus contains more detailed descriptions of the terms and conditions of the rights offering and provide additional information about us and our business, including potential risks related to the rights offering, our common stock, and our business.

Exercising the rights and investing in our common stock involves a high degree of risk. We urge you to carefully read the section entitled “Risk Factors” beginning on page 12 of this prospectus, and all other information included in this prospectus in its entirety before you decide whether to exercise your rights.

What is a rights offering?

A rights offering is a distribution of subscription rights on a pro rata basis to all stockholders of a company. We are distributing to holders of our common stock as of 5:00 p.m., New York time, on [ ], the “record date,” at no charge, non-transferable subscription rights to purchase shares of our common stock. You will receive one subscription right for every share of our common stock you owned as of 5:00 p.m., New York time, on the record date. The subscription rights will be evidenced by rights certificates.

What is a right?

Each whole right gives our stockholders the opportunity to purchase 1.30462367 shares of our common stock for $[ ] per share and carries with it a basic subscription privilege and an over-subscription privilege, as described below.

How many shares may I purchase if I exercise my rights?

Each right entitles you to purchase 1.30462367 shares of our common stock for $[ ] per share. We will not issue fractional shares of common stock in the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock, rounded down to the nearest whole number a holder would otherwise be entitled to purchase. For example, if you owned 100 shares of our common stock on the record date, you would be granted 100 subscription rights and you would have the right to purchase 130 shares of our common stock (130.462367 rounded down to the nearest whole number) for $[ ] per share (or a total payment of $[ ]). You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights.

If you hold your shares in street name through a broker, bank, or other nominee who uses the services of the Depository Trust Company, or “DTC,” then DTC will issue one subscription right to your nominee for every share of our common stock you own at the record date. The basic subscription right can then be used to purchase 1.30462367 shares of common stock for $[ ] per share. As in the example above, if you owned 100 shares of our common stock on the record date, you have the right to purchase 130 shares of common stock for $[ ] per share. For more information, see “What should I do if I want to participate in the rights offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominees?” in this section.

Will fractional subscription shares be issued?

No. We will not issue fractional shares of common stock in the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock, rounded down to the nearest whole number a holder would otherwise be entitled to purchase.

What is the basic subscription privilege?

The basic subscription privilege of each subscription right entitles you to purchase 1.30462367 shares of our common stock at the subscription price of $[ ] per share.

What is the over-subscription privilege?

If you purchase all of the shares of common stock available to you pursuant to your basic subscription privilege, you may also choose to purchase any portion of our shares of common stock that are not purchased by our other stockholders through the exercise of their respective basic subscription privileges. You should indicate on your rights certificate how many additional shares you would like to purchase pursuant to your over-subscription privilege.

If sufficient shares of common stock are available, we will seek to honor your over-subscription request in full. If, however, over-subscription requests exceed the number of shares of common stock available for sale in the rights offering, we will allocate the available shares of common stock pro rata among each person properly exercising the over-subscription privilege in proportion to the number of shares of common stock each person subscribed for under the basic subscription privilege. If this pro rata allocation results in any person receiving a greater number of shares of common stock than the person subscribed for pursuant to the exercise of the over-subscription privilege, then such person will be allocated only that number of shares for which the person over-subscribed, and the remaining shares of common stock will be allocated among all other persons exercising the over-subscription privilege on the same pro rata basis described above. The proration process will be repeated until all shares of common stock have been allocated or all over-subscription requests have been satisfied, whichever occurs earlier.

In order to properly exercise your over-subscription privilege, you must deliver the subscription payment related to your over-subscription privilege prior to the expiration of the rights offering. Because we will not know the total number of unsubscribed shares prior to the expiration of the rights offering, if you wish to maximize the number of shares you purchase pursuant to your over-subscription privilege, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock that may be available to you (i.e., for the maximum number of shares of our common stock available to you, assuming you exercise all of your basic subscription privilege and are allotted the full amount of your over-subscription as elected by you). For more information, see the section entitled “The Rights Offering — Over-Subscription Privilege.”

Fractional common shares resulting from the exercise of the over-subscription privilege will be eliminated by rounding down to the nearest whole share, with the total subscription payment being adjusted accordingly.

Am I required to exercise all of the rights I receive in the rights offering?

No. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. However, if you choose not to exercise your basic subscription privilege in full, the relative percentage of our shares of common stock that you own will decrease, and your voting and other rights will be diluted. In addition, if you do not exercise your basic subscription privilege in full, you will not be entitled to participate in the over-subscription privilege. For more information, see “How many shares of common stock will be outstanding after the rights offering?” in this section.

Will our officers, directors and significant stockholders be exercising their subscription rights?

Our officers, directors and greater than 5% beneficial stockholders may participate in this offering at the same subscription price per share as all other purchasers, but none of our officers, directors or greater than 5% beneficial stockholders are obligated to so participate.

Hale Partnership Fund, L.P. and related parties (the “Hale Funds”), which in the aggregate, as of the record date, owned approximately 23.8% of our outstanding shares, have indicated that they intend to participate in the rights offering and to fully subscribe for additional shares pursuant to the over-subscription privilege. However, there is no guarantee or commitment that the Hale Funds will ultimately decide to exercise any of their rights, including their basic or over-subscription privilege. Steven A. Hale II, our Chairman and Chief Executive Officer, is the manager of the investment advisor and general partner of each of the Hale Funds.

Has our board of directors made a recommendation to our stockholders regarding the exercise of rights under the rights offering?

No. Our board of directors is making no recommendation regarding your exercise of the subscription rights. Stockholders who exercise their subscription rights risk loss on their investment. We cannot assure you that the market price of our common stock will be above the subscription price or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price. You are urged to make your decision based on your own assessment of our business and the rights offering. Please see the section entitled “Risk Factors” for a discussion of some of the risks involved in investing in our common stock.

Why are we conducting the rights offering?

We are conducting the rights offering to provide for additional cash for acquisitions, including purchasing additional stock or debt of HC Government Realty Trust, Inc. A rights offering provides the eligible stockholders the opportunity to participate in a capital raise on a pro rata basis and minimizes the dilution of their ownership interest in our company. Assuming all the shares of common stock offered are sold, we expect that the gross proceeds from the rights offering will be approximately $[●] million.

How was the subscription price of $[ ] per share determined?

The subscription price was determined by our board of directors. Factors considered by the board of directors included our net asset value, the strategic alternatives to our Company for raising capital, the price at which our shareholders might be willing to participate in the rights offering, historical and current trading prices of our common stock, and the general condition of the securities market. We cannot assure you that the market price for our common stock during the rights offering will be equal to or above the subscription price or that a subscribing owner of rights will be able to sell the shares of common stock purchased in the rights offering at a price equal to or greater than the subscription price.

How soon must I act to exercise my rights?

If you received a rights certificate and elect to exercise any or all of your subscription rights, the subscription agent must receive your completed and signed rights certificate and payment prior to the expiration of the rights offering, which is [ ], 2020, at 5:00 p.m., New York time. If you hold your shares in the name of a custodian bank, broker, dealer or other nominee, your custodian bank, broker, dealer or other nominee may establish a deadline prior to 5:00 p.m. New York time, on [ ], 2020 by which you must provide it with your instructions to exercise your subscription rights and pay for your shares.

Although we will make reasonable attempts to provide this prospectus to holders of subscription rights, the rights offering and all subscription rights will expire at 5:00 p.m., New York time on [ ], 2020 (unless extended), whether or not we have been able to locate each person entitled to subscription rights. Although we have the option of extending the expiration of the rights offering, we currently do not intend to do so.

May I transfer my rights?

No, you may not sell, transfer or assign your subscription rights to anyone. Subscription rights will not be traded on the OTC Market Group’s OTCQB. Subscription rights may only be exercised by the stockholder who receives them.

Are we requiring a minimum subscription to complete the rights offering?

There is no minimum subscription requirement in the rights offering. However, our board of directors reserves the right to cancel the rights offering for any reason, including if our board of directors believes that there is insufficient participation by our stockholders.

Can the board of directors cancel, terminate, amend or extend the rights offering?

Yes. We have the option to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our board of directors may cancel the rights offering at any time for any reason. If the rights offering is cancelled, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. Our board of directors reserves the right to amend or modify the terms of the rights offering at any time, for any reason.

When will I receive my subscription rights certificate?

Promptly after the date of this prospectus, the subscription agent will send a subscription rights certificate to each registered holder of our common stock as of the close of business on the record date, based on our stockholder registry maintained at the transfer agent for our common stock. If you hold your shares of common stock through a brokerage account, bank, or other nominee, you will not receive an actual subscription rights certificate. Instead, as described in this prospectus, you must instruct your broker, bank or nominee whether or not to exercise rights on your behalf. If you wish to obtain a separate subscription rights certificate, you should promptly contact your broker, bank or other nominee and request a separate subscription rights certificate. It is not necessary to have a physical subscription rights certificate, if you hold your shares of common stock through a brokerage account, bank, or other nominee, to elect to exercise your rights.

iii

What will happen if I choose not to exercise my subscription rights?

If you do not exercise any subscription rights, the number of our shares of common stock you own will not change. Due to the fact that shares may be purchased by other stockholders, your percentage ownership of our Company will be diluted after the completion of the rights offering, unless you exercise your basic subscription privilege. For more information, see “How many shares of common stock will be outstanding after the rights offering?” in this section.

How do I exercise my subscription rights?

If you wish to participate in the rights offering, you must take the following steps:

deliver payment to the subscription agent; and

deliver your properly completed and signed rights certificate, and any other subscription documents, to the subscription agent.

Please follow the payment and delivery instructions accompanying the rights certificate. Do not deliver documents to HG Holdings. You are solely responsible for completing delivery to the subscription agent of your subscription documents, rights certificate and payment. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent so that they are received by the subscription agent by 5:00 p.m., New York time, on [ ], 2020. We are not responsible for subscription materials sent directly to our offices.

If you cannot deliver your rights certificate to the subscription agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described under “The Rights Offering—Guaranteed Delivery Procedures.”

If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment received will be applied to exercise your subscription rights to the fullest extent possible based on the amount of the payment received, subject to the availability of shares under the over-subscription privilege and the elimination of fractional shares. Any excess subscription payments received by the subscription agent will be returned promptly, without interest or penalty, following the expiration of the rights offering.

What should I do if I want to participate in the rights offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominee?

If you hold your shares of common stock in the name of a broker, dealer, custodian bank or other nominee, then your broker, dealer, custodian bank or other nominee is the record holder of the shares you own. You will not receive a rights certificate. The record holder must exercise the subscription rights on your behalf for the shares of common stock you wish to purchase.

If you wish to purchase shares of our common stock through the rights offering, please promptly contact your broker, dealer, custodian bank or other nominee as record holder of your shares. We will ask your record holder to notify you of the rights offering. However, if you are not contacted by your broker, dealer, custodian bank or other nominee, you should promptly initiate contact with that intermediary. Your broker, dealer, custodian bank or other nominee may establish a deadline prior to the 5:00 p.m. New York time on [ ], 2020, which we established as the expiration date of the rights offering.

When will I receive my new shares?

If you purchase shares in the rights offering by submitting a rights certificate and payment, we will issue shares in book-entry form, or deliver certificates evidencing the new shares purchased as soon as practicable after the completion of the rights offering. If your shares as of the record date were held in “street name” and you participate in the rights offering, your custodian bank, broker, dealer or other nominee will be credited with the shares of common stock you purchase in the rights offering as soon as practicable after the completion of the rights offering.

After I send in my payment and rights certificate, may I change or cancel my exercise of rights?

No. All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights. You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common stock at a subscription price of $[ ] per share.

How many shares of common stock will be outstanding after the rights offering?

As of [ ], 2020, 14,946,839 of our shares of common stock were issued and outstanding. Assuming no other transactions by us involving shares of our common stock, and no options for shares of our common stock are exercised, prior to the expiration of the rights offering, if the rights offering is fully subscribed through the exercise of the subscription rights, then an additional 19,500,000 of our shares of common stock will be issued and outstanding after the closing of the rights offering, for a total of 34,446,839 shares of common stock outstanding. As a result of the rights offering, the ownership interests and voting interests of the existing stockholders that do not fully exercise their basic subscription privileges will be diluted.

Are there risks in exercising my subscription rights?

Yes. The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of additional shares of common stock and should be considered as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described in the section entitled “Risk Factors” in this prospectus.

If the rights offering is not completed, will my subscription payment be refunded to me?

Yes. The subscription agent will hold all funds it receives in a segregated bank account until completion of the rights offering. If the rights offering is not completed, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. If you own shares in “street name,” it may take longer for you to receive payment because the subscription agent will return payments through the record holder of your shares.

How do I exercise my rights if I live outside the United States?

We will not mail this prospectus or the rights certificates to stockholders whose addresses are outside the United States or who have an army post office or foreign post office address. The subscription agent will hold rights certificates for their account. To exercise subscription rights, our foreign stockholders must notify the subscription agent and timely follow other procedures described in the section entitled “The Rights Offering — Foreign Stockholders.”

What fees or charges apply if I purchase the shares of common stock?

We are not charging any fee or sales commission to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If you exercise your subscription rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your nominee may charge you.

What are the material U.S. federal income tax consequences of exercising my subscription rights?

For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of subscription rights. You should consult your tax advisor as to your particular tax consequences resulting from the rights offering. For a more detailed discussion, see the section entitled “Material U.S. Federal Income Tax Consequences.”

To whom should I send my forms and payment?

If your shares are held in the name of a broker, dealer or other nominee, then you should send your subscription documents, rights certificate, notices of guaranteed delivery and subscription payment to that record holder. If you are the record holder, then you should send your subscription documents, rights certificate, notices of guaranteed delivery and subscription payment (if payment is by check) by hand delivery, first class mail or courier service to:

Continental Stock Transfer & Trust Company

1 State Street Plaza – 30th Floor

New York, NY 10004

Attn: Reorganization Department

Phone Number: (212) 845-3287

Your payment of the subscription price must be made in United States dollars for the full number of shares of our common stock for which you are subscribing by (i) cashier’s or certified check drawn upon a United States bank payable to the subscription agent at the address set forth above, or (ii) wire transfer of immediately available funds to: JP Morgan Chase Bank, Account Name: Continental as agent for HG Holdings, Inc., Routing Number: 02000021, Swift Code : CHASUS33, Account Number: 475-481410.

You are solely responsible for completing delivery to the subscription agent of your subscription materials. The subscription materials are to be received by the subscription agent on or prior to 5:00 p.m., New York time, on [ ], 2020. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent.

Whom should I contact if I have other questions?

If you have any questions about the rights offering or wish to request another copy of a document, please contact Morrow Sodali LLC, the information agent for the rights offering, at (800) 662-5200 for banks, brokers, or stockholders.

For a more complete description of the rights offering, see “The Rights Offering” beginning on page 19.

SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary is not complete and may not contain all of the information that you should consider before deciding whether or not you should exercise your rights. You should read the entire prospectus carefully, including the section entitled “Risk Factors” beginning on page 12 of this prospectus and all other information included in this prospectus in its entirety before you decide whether to exercise your rights.

HG Holdings, Inc.

General

We were incorporated in Delaware in 1984. Until March 2, 2018, we were a leading design, marketing and distribution resource in the upscale segment of the wood residential furniture market. On March 2, 2018, we sold substantially all our assets and changed our name to HG Holdings, Inc. On March 19, 2019, we acquired an equity interest in HC Government Realty Trust, Inc., a Maryland corporation (“HC Realty”). HC Realty currently owns and operates a portfolio of 20 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.

Asset Sale

In connection with the Asset Sale, we indicated our board of directors would evaluate alternatives for use of the cash consideration from the Asset Sale, including using a portion of the cash to either repurchase our common stock or pay a special dividend to stockholders and also using a portion of the cash to acquire non-furniture related assets that will allow us to potentially derive a benefit from our net operating loss carryforwards. Our board of directors determined not to pay a special dividend. Our board does not intend to repurchase additional shares of our common stock at this time and anticipates retaining the remaining cash for use in acquiring non-furniture related assets and to fund operating expenses until an acquisition. We are making this rights offering to raise additional cash for acquisitions which could provide us greater resources and flexibility in acquiring non-furniture assets, including purchasing additional stock or debt of HC Realty.

Stone & Leigh Asset Sale

On September 6, 2018, the Buyer sold certain of its assets, including certain inventory and the Stone & Leigh tradename (the “S&L Asset Sale”) 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 issued to the Company in March 2018 as partial consideration for the Asset Sale. In connection with the assignment, the Company entered into an Amended and Restated Subordinated Secured promissory note with the Buyer (the “A&R Note”) with a principal amount as of the assignment date of $3.3 million and a new Subordinated Secured Promissory Note with S&L (the “S&L Note”) with a principal amount of $4.4 million as of the assignment date. For further information on the A&R Note and S&L Note, see “Forbearance Agreement with respect to Second A&R Note and Prepayment” on page 2 and Note 4 of the Notes to Consolidated Financial Statements in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2019, which is attached hereto as Annex A.

Acquisition of Equity Interest in HC Government Realty Trust, Inc.

On March 19, 2019, we purchased 300,000 shares of HC Realty’s Common Stock (the “HC Realty Common Stock”) for an aggregate purchase price of $3,000,000 and 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Realty Series B Stock”) for an aggregate purchase price of $2,000,000. At December 31, 2019, we owned approximately 16.4% of the as-converted equity interest of HC Realty; however, we do not control HC Realty as a result of our current ownership interest. If the rights offering is fully subscribed, we anticipate using the proceeds of the rights offering to acquire a sufficient number of shares of HC Realty Series B Stock to control HC Realty as a result of our equity ownership of HC Realty. See “Recent Developments” on page 3 for information on additional purchases of HC Realty Series B Stock.

Certain other investors, including certain investors affiliated with Hale Partnership Capital Management, LLC (“HPCM”), purchased an additional 850,000 shares of HC Realty Series B Stock for an aggregate purchase price of $8,500,000 on March 19, 2019. While some of these investors have other investments with HPCM, each of these investors made a separate and direct investment in HC Realty and HPCM does not receive management fees, performance fees, or another economic benefit with respect to these investor’s investment in HC Realty Series B Stock. On March 21, 2019, HC Realty’s board of directors excepted the acquisitions of HC Realty Common Stock and/or HC Realty Series B Stock as discussed above from the ownership restrictions included in HC Realty’s articles of incorporation.

On March 19, 2019, we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty’s operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty’s operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by us. The Agent is affiliated with HPCM.

In connection with the transactions discussed above, Steven A. Hale II, our Chairman and Chief Executive Officer, was appointed to serve as HC Realty’s Chairman and Chief Executive Officer. In addition, Mr. Hale, Brad G. Garner, our Principal Financial and Accounting Officer, and Matthew A. Hultquist, one of our directors, were each appointed to serve as directors of HC Realty. HC Realty’s Board of Directors is composed of five directors. Initially Messrs. Hale, Garner and Hultquist received no compensation from HC Realty for serving in these roles; however, in October 2019, Mr. Hale began to receive a salary of $225,000 for serving as Chairman and Chief Executive Officer of HC Realty. In addition in October 2019, Mr. Hale received a share grant of 31,381 shares of HC Realty Common Stock in connection with his service as Chairman and Chief Executive Officer of HC Realty and Mr. Garner received a restricted stock award of 4,882 shares of HC Realty Common Stock for his service as a director of HC Realty which shares vest on the one year anniversary of the grant. In October 2019, Mr. Hultquist also became part-time employee of HC Realty providing advice identifying properties for acquisition as well as acquisition assistance. As a result, our board of directors has determined that Mr. Hultquist is no longer an independent director. Our board intends to add a least one additional independent director to the board during 2020.

See Annex C of this prospectus for additional information on HC Realty Common Stock, HC Realty Series B Stock and the Loan Agreement. See Annexes C, D and E of this prospectus for additional information on HC Realty.

Forbearance Agreement with respect to Second A&R Note and Prepayment

On February 7, 2019, the A&R Note was amended and Buyer delivered a Second Amended and Restated Subordinated Promissory Note (the “Second A&R Note”). On August 21, 2019, we delivered a notice of default (the “Notice of Default”) to the Buyer with respect to the Second A&R Note. On October 31, 2019, we entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Buyer and certain affiliates (the “Loan Parties) pursuant to which we agreed to forbear from exercising our rights and remedies under the Second A&R Note until February 24, 2020 or earlier in the event of (i) a default occurring under the Second A&R Note other than specified previous defaults acknowledged in the Forbearance Agreement or (ii) a breach of the Forbearance Agreement by the Buyer or affiliated parties.

The Forbearance Agreement became effective on November 1, 2019 (the “Effective Date”) when the Buyer paid us $220,000 and certain other conditions were satisfied. The Forbearance Agreement also required the Buyer to make additional payments (the “Forbearance Period Payments”) to us, which payments were made and applied to the outstanding principal balance of the Second A&R Note.

During the period the forbearance is in effect, the Buyer agreed to maintain a minimum collateral value of not less than $2 million. The Buyer had certain cure rights in the event the minimum collateral value was not met.

We agreed to accept the following discounted payments in satisfaction of the Second A&R Note if the forbearance period was not terminated: (i) on or before the 90th day after the Effective Date, $2,230,000 less the sum of all Forbearance Period Payments and payments made to cure a minimum collateral value shortfall and (ii) after the 90th day following the Effective Date, $2,530,000 less Forbearance Period Payments and payments made to cure a minimum collateral value shortfall.

On February 24, 2020, we and the Loan Parties entered into a letter agreement (the “Forbearance Extension Letter Agreement”) extending the original outside termination date for the forbearance period under the Forbearance Agreement from February 24, 2020 to February 26, 2020. The other terms and condition of the Forbearance Agreement remained the same. The forbearance period terminated on February 26, 2020 under the terms of the Forbearance Extension Letter Agreement and the Forbearance Agreement.

On February 28, 2002 and March 3, 2020, we received prepayments of $200,000 and $350,000, respectively, of the principal amount of the Second A&R Note from the Buyer.

On March 6, 2020, we and the Loan Parties entered into a letter agreement (the “Second Forbearance Extension Letter Agreement”) extending, subject to certain conditions, the outside termination date from February 26, 2020 to March 17, 2020. The extension of the outside termination and the effectiveness of the Second Forbearance Extension Letter Agreement was conditioned on Buyer making payments to be applied to the outstanding principal balance of the Second A&R Note of $250,000 on or before March 12, 2020 and $750,000 on or before March 13, 2020. The Second Forbearance Extension Letter Agreement also required the Buyer to make an additional $391,969.82 payment on or before March 17, 2020 to be applied to the outstanding principal balance of the Second A&R Note. The other terms and conditions of the Forbearance Agreement remained the same.

On March 12 and 13, 2020, we received payments from Buyer of $250,000 and $750,000, respectively, pursuant to the Second Forbearance Extension Letter Agreement which payments were applied to the outstanding principal amount of the Second A&R Note.

On March 16, 2020, we received payment of $392,000 from the Buyer resulting in satisfaction of the Second A&R Note pursuant to the terms of the Forbearance Agreement as amended.

We previously recorded an impairment loss of $0.9 million on the Second A&R Note in the second quarter of 2019. As of December 31, 2019, the outstanding principal amount of the Second A&R Note was $2.6 million and its carrying value was $0.7 million. As a result of the payments received form the Buyer in January, February, and March of 2020 on the Second A&R Note, we expect to record a gain of $1.3 million on the payoff of the Second A&R Note during the quarter ended March 31, 2020.

The Rights Offering

1. Significant Accounting Policies

Organization and Basis of Presentation

HG Holdings, Inc.’s the (“Company”) consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. All subsidiaries were sold to Stanley Furniture Company, LLC, formerly Churchill Downs, LLC, in the Asset Sale effective March 2, 2018. As of each balance sheet date, the Company did not have any subsidiaries which are consolidated.

On March 2, 2018, we sold substantially all of our assets (the “Asset Sale”) to Stanley Furniture Company LLC, formerly Churchill Downs LLC (“Buyer”), pursuant to the terms of the Asset Purchase Agreement, dated as of November 20, 2017, as amended by the First Amendment thereto dated January 22, 2017 (the “Asset Purchase Agreement”). Operations of the furniture business from January 1, 2018 through March 2, 2018 are reflected as discontinued operations pursuant to the provisions of Accounting Standards Codification 2015-20, Presentation of Financial Statements – Discontinued Operations for all periods presented. Results of discontinued operations are excluded from the accompanying notes to the consolidated financial statements for all periods presented, unless otherwise noted. As a result of the sale, on March 2, 2018, the Company’s Board of Directors approved an amendment to the Company’s Restated Certificate of Incorporation to change the name of the Company to HG Holdings, Inc. The amendment became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on March 2, 2018.

As a result of the Asset Sale, the Company had no revenue-generating operations. On March 19, 2019, we purchased 300,000 shares of HC Realty’s Common Stock (the “HC Common Stock”) for an aggregate purchase price of $3,000,000 and 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “HC Series B Stock”) for an aggregate purchase price of $2,000,000. As a result of these purchases, we currently own approximately 16.4% of the as-converted equity interest of HC Realty. Also on March 19, 2019, we, together with certain other lenders, including certain entities affiliated with HPCM (collectively, the “Lenders”), entered into a loan agreement (the “Loan Agreement”) with HC Realty’s operating partnership, and HCM Agency, LLC, as collateral agent (the “Agent”), pursuant to which the Lenders provided HC Realty’s operating partnership with a $10,500,000 senior secured term loan (the “Initial Term Loan”), of which $2,000,000 was provided by us. The Agent is affiliated with HPCM. As a result of these investments, our sources of income include dividends on HC Realty Series B Stock, interest earned on the loan we made to HC Realty’s operating partnership, and interest paid on cash and subordinated secured promissory notes. The Company believes that the revenue generating from these sources in addition to the cash on hand is sufficient to fund operating expenses for at least 12 months from the date of these consolidated financial statements. The Company previously disclosed its board was considering a rights offering of the Company’s common stock to existing stockholders to raise additional cash for acquisitions. On December 16, 2019, the Company filed a registration statement with respect to a proposed rights offering of up to 19.5 million shares of its Common Stock (the “Rights Offering”). The Rights Offering will be commenced only following effectiveness of the registration statement relating to the Rights Offering and will be made only by means of a prospectus. The Company anticipates using the proceeds of the Rights Offering for acquisitions, including purchasing additional HC Series B Stock, HC Common Stock or debt of HC Realty.

Certain amounts in the 2018 consolidated financial statements have been reclassified to conform to 2019 presentation. These reclassifications do not have an impact on the consolidated statements of operations or the consolidated statement of comprehensive income (loss).

Cash

We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Restricted Cash

Restricted cash includes collateral deposits required under the Company’s letter of credit agreement, which expires in June 2020, to guarantee the Company’s workers compensation insurance policy. The restricted cash balance is expected to mature over the next six months. As of December 31, 2019, there was no outstanding balance on the letter of credit agreement.

F-9

Concentration of Credit Risk

The Company place its cash and restricted cash with financial institutions and, at times, cash held in depository accounts may exceed the Federal Deposit Insurance Corporation insured limit.

Revenue Recognition

Revenue, prior to the Asset Sale, was recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To achieve this principle, the Company performed the following five steps: (i) identification of a contract with a customer; (ii) identification of any separate performance obligation; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligation in the contract, if any; and (v) recognition of revenue when the Company had satisfied the underlying performance obligation if any. The Company recognized substantially all of its revenue at a point in time when control of the Company’s goods was passed to the customer, which typically occurs upon shipment, with the exception of consigned goods. The Company considered its performance obligation satisfied at the time this control was transferred. Customer payment terms for these shipments typically ranged between 30- and 90-days. The Company elected to treat shipping and handling performed after control has transferred to customers as a fulfillment activity, and additionally, elected the practical expedient to report sales taxes on a net basis. The Company recorded shipping and handling expense related to product sales as cost of sales.

Interest Income

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

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

Payment-in-Kind Interest

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

Variable Interest Entities

As a result of both the Asset Sale and the S&L Asset Sale, we have a variable interest in three entities that have been determined to be variable interest entities ("VIE"). If we conclude that we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIE requires significant assumptions and judgments. We have concluded that we are not the primary beneficiary of the three VIEs as we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance and therefore are not required to consolidate these entities.

Subordinated Notes Receivable

In accordance with ASC 810-40-5, upon the sale of substantially all of the assets the Company recorded a gain on the deconsolidation of a group of assets based on the difference between the fair value of the consideration received and the carrying amount of the group of assets. As the Original Note was part of the consideration received, the Company recorded the Original Note at its fair value on March 2, 2018. The fair value of the Original Note was estimated using discounted cash flow analyses, using market rates at the acquisition date that reflect the credit and inherent rate-risk inherent in the Original Note. The discount resulting from the fair value adjustment was recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. As of the date of the assignment and transfer from the Buyer to S&L, it was determined that the Original Note was extinguished and therefore both the A&R Note and the S&L Note were measured based on their fair value in accordance with Emerging Issues Task Force (EITF) – Creditors Accounting for Modification or Exchange of Debt Instruments. The discounts resulting from the fair value adjustments for the A&R Note and the S&L Note were recorded as a direct reduction to the original principal balance and amortized to interest income using the effective interest method. When impairment is determined to be probable, the measurement will be based on the fair value of the collateral securing the notes. The determination of impairment involves management’s judgment and the use of market and third-party estimates regarding collateral values. During 2019 management determined that the Second A&R note was other than temporarily impaired and recorded an impairment loss of $897,000.

F-10

Property, Plant and Equipment

Depreciation of property, plant and equipment is computed using the straight-line method based upon the estimated useful lives. Depreciation expense is charged to general and administrative expenses. Gains and losses related to dispositions and retirements are included in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. Assets are reviewed for possible impairment when events indicate that the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of property, plant and equipment, which could result in impairment charges in future periods. Our depreciation policy reflects judgments on the estimated useful lives of assets. Our long-lived assets were tested for impairment at December 31, 2019 and determined that the long-lived assets were not impaired.

Cost Method Investments

The Company held, at December 31, 2018, a 1.4% equity interest in Churchill Downs Holdings, Ltd. (“Churchill”), a British Virgin Island business company which it received as a partial consideration for the sale of substantially all of our assets. As a result of additional equity capital contributions to Churchill during the fourth quarter 2018, HG Holdings equity interest was diluted from its original 5% ownership interest. Long-term investments consist of investments in equity securities of nonpublic entities without readily determinable fair values. These investments are classified in “Investment in closely held company” on the consolidated balance sheets. The company determines the appropriate classifications of its investment(s) at the acquisition date. Upon adoption of ASU 2016-01, the Company carries its long-term investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transaction for the identical or a similar investment of the same issuer. The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, liquidity, earnings and revenue outlook, equity position, and ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. During the year ended December 31, 2019, the Company sold its equity interest back to Churchill for $120,000 for which the Company had determined during the year ended December 31, 2018 the fair value to be zero. Accordingly, the Company recorded a gain on sale of $120,000.

Income Taxes

Deferred income taxes are determined based on the difference between the consolidated financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax expense represents the change in the deferred tax asset/liability balance. Income tax credits are reported as a reduction of income tax expense in the year in which the credits are generated. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. Interest and penalties on uncertain tax positions are recorded as income tax expense.

Fair Value of Financial Instruments

Accounting for fair value measurements requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). The fair value of receivables and payables approximate the carrying amount because of the short maturity of these instruments.

F-11

Earnings per Common Share

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

Stock-Based Compensation

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

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Changes in such estimates may affect amounts reported in future periods.

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for public entities for annual reporting periods beginning after December 15, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company does not anticipate the adoption of ASU 2016-13 to have a material impact to the consolidated financial statements.

In February 2016, the FASB issued its final lease accounting standard, ASC, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of -use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). The Company adopted the standard effective January 1, 2019. As of December 31, 2019, we do not have any long-term leases. We will evaluate the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures at such time a long-term lease is executed. Our only lease as of December 31, 2019 relates to a real estate lease for the corporate office space. The adoption did not have material impact to the consolidated financial statements.

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

Title of Each Class of Securities to be Registered ⁽¹⁾	Amount to be Registered	Proposed Maximum Offering Price per Share	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Common Stock, par value $0.02 per share	19,500,000	$0.57	$11,017,500.00 ⁽²⁾	$1,430.07⁽³⁾
Rights to purchase Common Stock	⁽³⁾	N/A	N/A	$0⁽⁴⁾

(1)	This registration statement relates to (a) the subscription rights to purchase our common stock, par value $0.02 per share and (b) shares of our common stock deliverable upon the exercise of the subscription rights.
(2)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended. The offering price per share and aggregate offering price are based upon the average of the high ($0.57) and low ($0.56) bid prices for the Registrant’s Common Stock as reported on the OTCQB on December 9, 2019, a date within five business days prior to the filing of this Registration Statement.
(3)	Previously paid on December 16, 2019.
(4)	Evidencing the rights to subscribe for 1.30462367 shares of common stock, par value $0.02 per share.
(5)	The rights are being issued for no consideration. Pursuant to Rule 457(g) under the Securities Act of 1933, as amended, no separate registration fee is payable.

	Per Share	Aggregate
Subscription Price	$	$	[●]	⁽¹⁾
Estimated Expenses	$	$
Net Proceeds to Us	$	$

Questions and Answers Relating to the Rights Offering	i
Summary	1
Risk Factors	9
Use of Proceeds	15
Capitalization	16
The Rights Offering	16
Material U.S. Federal Income Tax Consequences	23
Market Price of Common Stock and Dividend Policy	27
Description of Capital Stock	27
Plan of Distribution	30
Where You Can Find More Information	30
Incorporation of Certain Documents by Reference	30
Legal Matters	30
Experts	30

Annex A –	Company Annual Report on Form 10-K for the year ended December 31, 2019
Annex B –	Additional Information on Company Directors, Corporate Governance, Executive Compensation, Security Ownership, Related Transactions, and Change in Certifying Accountant
Annex C –	Information on HC Realty Common Stock, HC Realty Series B Stock and Loan Agreement with HC Realty
Annex D –	Information on HC Government Realty Trust, Inc.
Annex E –	Financial Statements HC Government Realty Trust, Inc. for the two year period ended December 31, 2019

	Years Ended December 31
	2019		2018
Net sales from discontinued operations	$	-	$	6,787
Net income (loss) from continuing operations		170		(1,571	)
Net income (loss)		170		(1,440	)
Total assets		14,3345		14,087
Long-term liabilities		255		287
Total stockholders’ equity		13,899		13,644
Net income (loss) per share, diluted		0.01		(0.10	)

	2019			Pro Forma Adjustments				Pro Forma
ASSETS
Current assets:
Cash	$	2,567			(1,465	)	(a)		1,102
Restricted cash		233			-				233
Interest and dividend receivables		91			-				91
Prepaid expenses and other current assets		176			-				176
Income tax receivable		735			-				735

Total current assets		3,802			(1,465	)			2,337

Property, plant and equipment, net		7			-				7
Investment in affiliate		4,405			3,500		(b)		7,905
Subordinated notes receivable		3,379			(709	)	(c)		2,670
Loan to affiliate		2,000			-				2,000
Other assets		494			-				494
Deferred tax assets		247			-				247

Total assets	$	14,334			1,326			$	15,660

LIABILITIES
Current liabilities:
Accounts payable	$	7			-			$	7
Accrued salaries, wages and benefits		5			-				5
Other accrued expenses		168			-				168
Total current liabilities		180							180

Other long-term liabilities		255			-				255
Total liabilities		435			-				435

STOCKHOLDERS’ EQUITY
Common stock, $0.02 par value, 35,000,000 shares authorized 14,946,839 shares issued and outstanding		294			-				294
Capital in excess of par value		17,370			-				17,370
Retained deficit		(3,765	)		1,326		(d)		(2,439	)
Accumulated other comprehensive loss		-			-				-
Total stockholders’ equity		13,899			1,326				15,225
Total liabilities and stockholders’ equity	$	14,334			1,326			$	15,660

				Pro Forma
	Historical			Adjustments			(e)	Pro Forma

Operating Expenses

General and administrative expenses	$	(1,133	)	$	-			$	(1,133	)

Other income/expenses

Interest income		1,039			(182	)	(f)		857
Dividend income		157			393		(g)		550
Gain on sale of closely held stock		120			-				120
Income from Continued Dumping and Subsidy Offset Act		1,230			-				1,230
Gain on settlement of subordinated note receivable		-			509		(h)		509
Loss from affiliate		(430	)		(215	)	(i)		(645	)
Impairment loss		(897	)		897		(j)		-

Income before income taxes		86			1,402				1,488

Income tax benefit		84			-				84

Net income	$	170		$	1,402			$	1,572

Basic and diluted income per share:
Net income	$	.01			n/a			$	.11

Weighted average shares outstanding:
Basic		14,507			n/a				14,507
Diluted		14,937			n/a				14,937

Total number of shares of common stock available for subscription	19,500,000


Securities offered	We are distributing to you, at no charge, one non-transferable subscription right for every share of our common stock that you own as of 5:00 p.m., New York time, on the record date, either as a holder of record or, in the case of shares held of record by brokers, dealers, custodian banks or other nominees on your behalf, as a beneficial owner of such shares.

	We intend to use the proceeds of the rights offering to provide cash for acquisitions including purchasing additional HC Realty Series B Stock (so that we own at least 50% of the outstanding shares of HC Realty Series B Stock), HC Realty Common Stock or debt of HC Realty.

No Board Recommendation	Our board of directors makes no recommendation to you about whether you should exercise any rights. You are urged to make an independent investment decision about whether to exercise your rights based on your own assessment of our business and the rights offering. Please see the section of this prospectus entitled “Risk Factors” for a discussion of some of the risks involved in investing in our common stock.

No revocation	Any exercise of subscription rights is irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your rights. You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of common stock at a subscription price of $[ ] per share.

Material U.S. federal income tax considerations	For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of subscription rights. You should consult your own tax advisor as to your particular tax consequences resulting from the rights offering. For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

Extension, cancellation, and amendment	We have the option to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our board of directors may cancel the rights offering at any time for any reason. In the event that the rights offering is cancelled, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. We also reserve the right to amend or modify the terms of the rights offering.

Procedure for exercising rights	To exercise your subscription rights, you must take the following steps:

	•	If you are a registered holder of our shares of common stock, you may deliver payment and a properly completed rights certificate to the subscription agent before 5:00 p.m., New York time, on [ ], 2020. You may deliver the documents and payments by check using mail or commercial carrier. If regular mail is used for this purpose, we recommend using registered mail, properly insured, with return receipt requested.

	•	If you are a beneficial owner of shares that are registered in the name of a broker, dealer, custodian bank or other nominee, or if you would rather an institution conduct the transaction on your behalf, you should instruct your broker, dealer, custodian bank or other nominee or to exercise your subscription rights on your behalf and deliver all documents and payments before 5:00 p.m., New York time, on [ ], 2020.

~~Material U.S. federal income tax considerations~~	For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of subscription rights. You should consult your own tax advisor as to your particular tax consequences resulting from the rights offering. For a detailed discussion, see “Material U.S. Federal Income Tax Considerations.”

~~Extension, cancellation, and amendment~~	We have the option to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our board of directors may cancel the rights offering at any time for any reason. In the event that the rights offering is cancelled, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. We also reserve the right to amend or modify the terms of the rights offering.

~~Procedure for exercising rights~~	~~To exercise your subscription rights, you must take the following steps:~~

	•	If you are a registered holder of our shares of common stock, you may deliver payment and a properly completed rights certificate to the subscription agent before 5:00 p.m., New York time, on [ ], 2020. You may deliver the documents and payments by mail or commercial carrier. If regular mail is used for this purpose, we recommend using registered mail, properly insured, with return receipt requested.

	•	If you are a beneficial owner of shares that are registered in the name of a broker, dealer, custodian bank or other nominee, or if you would rather an institution conduct the transaction on your behalf, you should instruct your broker, dealer, custodian bank or other nominee or to exercise your subscription rights on your behalf and deliver all documents and payments before 5:00 p.m., New York time, on [ ], 2020.

	•	If you cannot deliver your rights certificate to the subscription agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described under “The Rights Offering—Guaranteed Delivery Procedures.”

~~Subscription agent~~	~~Continental Stock Transfer & Trust Company~~

~~Information agent~~	~~Morrow Sodali LLC~~

~~Questions~~	~~Questions regarding the rights offering should be directed to Morrow Sodali LLC at (800) 662-5200 for banks, brokers, or stockholders.~~

~~Shares outstanding before the rights offering~~	~~14,946,839 shares as of April 10,~~

Shares outstanding before the rights offering	14,946,839 shares as of May 4, 2020.

Shares outstanding after completion of the rights offering	Assuming no outstanding options for our common shares are exercised prior to the expiration of the rights offering and the full $[●] million is subscribed for, we expect [ ] shares of common stock will be outstanding immediately after completion of the rights offering.

Risk factors	Stockholders considering exercising their subscription rights should carefully consider the risk factors described in the section of this prospectus entitled “Risk Factors,” beginning on page 12.

Fees and expenses	We will pay the fees and expenses relating to the rights offering.

OTCQB trading symbol	Shares of our common stock are, and we expect that the shares of common stock to be issued in the rights offering will be, traded on the OTC Market Group’s OTCQB under the symbol “STLY.” The last reported sales price of our common stock on the OTCQB on [ ], the record date, was $[ ].

	As of December 31, 2019
(Dollars in thousands)	Actual (unaudited)			As Adjusted (unaudited)
Cash	$	2,567		$	[ ]
Total current liabilities	$	180		$	[ ]
Long-term liabilities		255			[ ]
Equity
Common stock, $.02 par value, 35,000,000 shares authorized and 14,946,839 issued and outstanding		294			[ ]
Capital in excess of par value		17,370			[ ]
Retained deficit		(3,765	)		[ ]
Total stockholders’ equity		13,899			[ ]
Total capitalization	$	13,899		$	[ ]

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, North Carolina 28204
(Address of principal executive offices, Zip Code)

	Common Stock, par value $.02 per share		14,946,839
	(Class of Common Stock)		Number of Shares

Part I		Page
Item 1	Business	3
Item 1A	Risk Factors	5
Item 1B	Unresolved Staff Comments	9
Item 2	Properties	9
Item 3	Legal Proceedings	9
Item 4	Mine Safety Disclosures	10


Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6	Selected Financial Data	11
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	17
Item 8	Financial Statements and Supplementary Data	17
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	17
Item 9A	Controls and Procedures	17
Item 9B	Other Information	17


Part III
Item 10	Directors, Executive Officers and Corporate Governance	18
Item 11	Executive Compensation	18
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	18
Item 13	Certain Relationships and Related Transactions, and Director Independence	18
Item 14	Principal Accounting Fees and Services	18


Part IV
Item 15	Exhibits, Financial Statement Schedules	19
Item 16	10-K Summary	21
	Signatures	22

Index to Consolidated Financial Statements and Schedule		F-1

Name	Age	Position
Steven A. Hale II	36	Chairman, Chief Executive Officer and Director

Brad G. Garner	37	Principal Financial and Accounting Officer

	Number of shares	Weighted-average	Number of shares
	to be issued upon	exercise price	remaining available
	exercise of	of outstanding	for future issuance
	outstanding options,	options, warrants	under equity
	warrants and rights	and rights	compensation plans
Equity compensation plans approved by stockholders	42,283	$6.20	1,186,429

	Twelve Months
	Ended
	Dec. 31,		Dec. 31,
	2019		2018
Net sales	$	-	$	6,787
Cost of sales		-		(6,485	)
Selling, general and administrative expenses		-		(2,448	)
Other income, net		-		-
Loss on sale of assets		-		(865	)
Loss from discontinued operations before income taxes		-		(3,011	)
Income tax benefit		-		-
Loss from discontinued operations, net of taxes	$	-	$	(3,011	)

	(1)	The following consolidated financial statements are included in this report on Form 10-K:
		Report of Independent Registered Public Accounting Firm
		Consolidated Balance Sheets as of December 31, 2019 and 2018
		Consolidated Statements of Operations for each of the two years in the period ended December 31, 2019
		Consolidated Statements of Comprehensive Income for each of the two years ended in the period ended December 31, 2019
		Consolidated Statements of Changes in Stockholders’ Equity for each of the two years in the period ended December 31, 2019
		Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2019
		Notes to Consolidated Financial Statements

	(2)	Financial Statement Schedule:
		Schedule II – Valuation and Qualifying Accounts for each of the two years in the period ended December 31, 2019

(b)	Exhibits:

2.1	Asset Purchase Agreement, dated as of November 20, 2017, by and between Churchill Downs, LLC and Stanley Furniture Company, Inc. (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed on November 20, 2017). (1)

2.2	First Amendment to Asset Purchase Agreement, dated as of January 22, 2018, by and between Churchill Downs, LLC and Stanley Furniture Company, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed on January 23, 2018). (1)

3.1	Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2017).

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).

3.3	Certificate of Designation of Series A Participating Preferred Stock of Stanley Furniture Company, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed December 6, 2016).

4.1	The Certificate of Incorporation, By-laws and Certificate of Designation of Series A Participating Preferred Stock of the Registrant as currently in effect (incorporated by reference to Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3 hereto).

4.2	Rights Agreement, dated as of December 5, 2016, between Stanley Furniture Company, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed December 6, 2016).

4.3	Amendment No. 1, dated as of January 30, 2017, to the Rights Agreement, dated as of December 5, 2016, between Stanley Furniture Company, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission Rule No. 0-14938) filed January 30, 2017).

4.4	Amendment No. 2, dated as of December 5, 2019, to the Rights Agreement, dated as of December 5, 2016, between HG Holdings, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K (Commission Rule No. 0-14938) filed December 5, 2019).

4.5	Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (3)

10.1	Form of Indemnification Agreement between the Registrant and each of its Directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (Commission File No. 0-14938) filed on September 25, 2008).

10.2	2008 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Proxy Statement (Commission File No. 0-14938) for the annual meeting of stockholders held on April 15, 2008). (2)

10.3	Form of Stock Option Award under 2008 Incentive Plan (Directors) (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2008). (2)

10.4	2012 Incentive Compensation Plan (incorporated by reference to Exhibit A to the Registrant’s Proxy Statement (Commission File No. 0-14938) for the annual meeting of stockholders held on April 18, 2012). (2)

10.5	Form of Stock Option Award under 2012 Incentive Plan (Officers) (incorporated by reference to Exhibit 10.19 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2012). (1)

10.6	Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (time vesting) (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K (Commission File No. 0-14938) for the year ended December 31, 2012). (2)

10.7	Form of Restricted Stock Award under 2012 Incentive Plan (Directors) (incorporated by reference to Exhibit 10.21 to the Registrant’s Form 10-K (Commission File No. 0-14938) for year ended December 31, 2014). (2)

10.8	Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (time and performance vesting) (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K (Commission File No. 0-14938) for year ended December 31, 2014). (2)

10.9	Form of Restricted Stock Award under 2012 Incentive Plan (Officers) (performance vesting) (incorporated by reference to Exhibit 10.23 to the Registrant’s Form 10-K (Commission File No. 0-14938) for year ended December 31, 2014). (2)

10.10	Agreement, dated as of January 30, 2017, by and among Stanley Furniture Company, Inc. and the entities and natural persons listed on Exhibit A thereto (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K (Commission File No. 0-14938) filed January 30, 2017).

10.11	Subordinated Promissory Note, dated March 2, 2018, of Churchill Downs LLC in favor of Stanley Furniture Company, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on March 8, 2018).

10.12	Amended and Restated Subordinated Secured Promissory Note, dated September 6, 2018, issued by Stanley Furniture Company LLC in favor of HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed September 12, 2018).

10.13	Subordinated Secured Promissory Note, dated September 6, 2018, issued by Stone & Leigh, LLC in favor of HG Holdings, Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed September 12, 2018).

10.14	Intercreditor and Debt Subordination Agreement, dated September 6, 2018, between HG Holdings, Inc. and Hale Partnership Fund, L.P., as agent (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed September 12, 2018).

10.15	Second Amended and Restated Subordinated Secured Promissory Note, dated February 7, 2019, issued by Stanley Furniture Company LLC in favor of HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed February 13, 2019).

10.16	Consent, Reaffirmation and Joinder, dated February 7, 2019, among Stanley Furniture Company LLC, Stanley Intermediate Holdings LLC, Churchill Downs Holdings Ltd., Stanley Furniture Company 2.0, LLC and HG Holdings, Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed February 13, 2019).

10.17	Agreement, dated February 7, 2019, between HG Holdings, Inc. and Churchill Downs Holdings Ltd. (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed February 13, 2019).

10.18	Intercreditor and Subordination Agreement, dated February 25, 2019, among HG Holdings, Inc. and Alterna Capital Solutions, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed March 1, 2019).

10.19	Subscription Agreement, dated as of March 19, 2019, by and between HC Government Realty Trust, Inc. and HG Holdings, Inc., with respect to the purchase of shares of Common Stock (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed March 25, 2019).

10.20	Subscription Agreement, dated as of March 19, 2019, by and between HC Government Realty Trust, Inc., and HG Holdings, Inc., with respect to the purchase of shares of Series B Stock (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed March 25, 2019).

10.21	Loan Agreement, dated as of March 19, 2019, by and between HC Government Realty Holdings, L.P., as borrower, the Lenders party thereto and HCM Agency, LLC, as collateral agent (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed March 25, 2019).

10.22	Forbearance Agreement, dated as of October 31, 2019, by and among Stanley Furniture Company LLC, Stanley Intermediate Holdings LLC, Stanley Furniture Company 2.0, LLC and Churchill Downs Holdings Ltd., and HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed November 1, 2019).

10.23	Forbearance Extension Letter Agreement, dated as of February 24, 2020, by and among Stanley Furniture Company LLC, Stanley Intermediate Holdings LLC, Stanley Furniture Company 2.0, LLC and Churchill Downs Holdings Ltd., and HG Holdings, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed February 25, 2020).

10.24	Second Forbearance Extension Letter Agreement, dated as of March 6, 2020, by and among Stanley Furniture Company LLC, Stanley Intermediate Holdings LLC, Stanley Furniture Company 2.0, LLC and Churchill Downs Holdings Ltd., and HG Holdings Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (Commission File No. 0-14938) filed March 12, 2020).

21	List of Subsidiaries. (3)

23.1	Consent of Cherry Bekaert LLP. (3)

23.2	Consent of BDO USA, LLP. (3)

31.1	Certification by Steven A. Hale II, our Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. (3)

31.2	Certification by Brad G. Garner, our Principal Financial and Accounting Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. (3)

32.1	Certification by Steven A. Hale II, our Chairman and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4)

32.2	Certification by Brad G. Garner, our Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4)

99.1	Annex D excerpted and incorporated by reference from the Registrant’s Form S-1/A Registration Statement (Registration No. 333-235539) filed on February 14, 2020. (3)

101	The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Extensible Business Reporting Language (“XBRL”): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) condensed consolidated statements of comprehensive (loss) income, (iv) condensed consolidated statements of cash flows, (v) the notes to the consolidated financial statements, and (vi) document and entity information. (3)

	HG HOLDINGS, INC.

March 13, 2020	By:	/s/Steven A. Hale II
		Steven A. Hale II
		Chairman, Chief Executive Officer and Director

Signature	Title	Date

/s/Steven A. Hale II (Steven A. Hale II)	Chairman, Chief Executive Officer and Director	March 13, 2020

/s/Brad G. Garner (Brad G. Garner)	Principal Financial and Accounting Officer	March 13, 2020

/s/Matthew A. Hultquist (Matthew A. Hultquist)	Director	March 13, 2020

/s/Jeffrey S. Gilliam (Jeffrey S. Gilliam)	Director	March 13, 2020

	Page

Reports of Independent Registered Public Accounting Firm	F-2

Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2019 and 2018	F-4

Consolidated Statements of Operations for each of the two years in the period ended December 31, 2019	F-5

Consolidated Statements of Comprehensive Income for each of the two years in the period ended December 31, 2019	F-6

Consolidated Statements of Changes in Stockholders’ Equity for each of the two years in the period ended December 31, 2019	F-7

Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2019	F-8

Notes to Consolidated Financial Statements	F-9


Financial Statement Schedule

Schedule II – Valuation and Qualifying Accounts for each of the two years in The period ended December 31, 2019	S-1

	For the Years Ended
	December 31,
	2019			2018

Operating Expenses

General and administrative expenses	$	(1,133	)	$	(1,005	)

Total operating expenses		(1,133	)		(1,005	)

Interest income		1,039			943
Dividend income		157			-
Product financing interest income		-			125
Gain on sale of closely held stock		120			-
Gain on extinguishment of subordinated note receivable		-			448
Loss from affiliate		(430	)		-
Income from Continued Dumping and Subsidy Offset Act, net		1,230			26
Impairment loss		(897	)		(168	)

Income from continuing operations before income taxes		86			369

Income tax benefit		84			1,202

Income from continuing operations		170			1,571

Discontinued operations

Loss from discontinued operations (including loss on sale of assets of $865)	$	-		$	(3,011	)

Net income (loss)	$	170		$	(1,440	)

Basic and diluted income (loss) per share:
Income (loss) from continuing operations	$	.01		$	.11
Loss from discontinued operations		-			(.21	)
Net income (loss)	$	.01		$	(.10	)

Weighted average shares outstanding:
Basic		14,507			14,531
Diluted		14,937			14,574

	For the Years Ended December 31,
	2019		2018

Net income (loss)	$	170	$	(1,440	)
Settlement of employee benefit obligations directly related to the disposal transaction		-		2,422
Comprehensive income	$	170	$	982

							Capital			Retained			Accumulated Other
	Common Stock						Excess of			Earnings			Comprehensive
	Shares			Amount			Par Value			(Deficit)			(Loss) Income			Total
Balance at December 31, 2017		14,920		$	298		$	17,104		$	(2,495	)	$	(2,422	)	$	12,485

Net loss		-			-			-			(1,440	)		-			(1,440	)
Other comprehensive loss		-			-			-			-			2,422			2,422
Dividends		-			-			(139	)		-			-			(139	)
Restricted stock forfeited or expired		(101	)		-			-			-			-			-
Stock purchase and retirement for tax withholdings on vesting of restricted awards		(268	)		(4	)		(129	)		-			-			(133	)
Stock-based compensation		161			-			449			-			-			449

Balance at December 31, 2018		14,712		$	294		$	17,285		$	(3,935	)	$	-		$	13,644

Net income		-			-			-			170			-			170
Restricted stock forfeited or expired		(182	)		-			-			-			-			-
Stock-based compensation		417			-			85			-			-			85

Balance at December 31, 2019		14,947		$	294		$	17,370		$	(3,765	)	$	-		$	13, 899

	For the Years Ended December 31,
	2019			2018

Income from continuing operations	$	170		$	1,571
Adjustments to reconcile net income from operations to net cash flows from operating activities:
Depreciation expense		2			1
Accretion income on notes receivable		(217	)		(327	)
Stock compensation expense		85			58
Paid in kind interest on subordinated note receivable		-			(337	)
Gain on extinguishment of subordinated note receivable		-			(448	)
Gain on sale of closely held stock		(120	)		-
Impairment loss on subordinated note receivable		897			-
Dividends on HC Realty common stock		124			-
Loss from affiliate		430			-
Changes in assets and liabilities:
Prepaid expenses and other current assets		47			(208	)
Income tax receivables		(247	)		(488	)
Deferred tax assets and other assets		232			(509	)
Accounts payable		(22	)		29
Accrued salaries and other accrued expenses		46			34
Other long-term liabilities		(32	)		(280	)
Net cash provided (used) by continuing operations		1,395			(904	)

Cash flows from investing activities:
Purchase of property, plant and equipment		-			(10	)
Investment in affiliate		(5,000	)		-
New advances on loan receivable from affiliate		(2,000	)		-
Principal payments received on subordinated secured notes Receivable		1,824			-
New borrowings on subordinated secured notes receivable		-			(29	)
Proceeds from sale of closely held stock		120			-
Net cash used by investing activities		(5,056	)		(39	)

Cash flows from financing activities:
Repurchase and retirement of common stock		-			(133	)
Stock purchase and retirement for tax withholdings on vesting of restricted award		-			(30	)
Net cash used by financing activities		-			(163	)

Cash flows from discontinued operations:
Cash used by discontinued operation		-			(3,501	)
Cash provided by investing activities		-			9,228
Cash provided by financing activities		-			1,209
Net cash provided by discontinued operations		-			6,936

Net increase (decrease) in cash and restricted cash		(3,661	)		5,830
Cash and restricted cash at beginning of period		6,461			631
Cash and restricted cash at end of period	$	2,800		$	6,461

Cash	$	2,567		$	6,057
Restricted cash		233			404
Cash and restricted cash	$	2,800		$	6,461

Supplemental Non-Cash Disclosures:
Payments made on line of credit from proceeds of the sale	$	-	$	(1,348	)
Principal reduction on subordinated secured promissory note	$	-	$	60
Dividends on investment in affiliate	$	150	$	-

	~~Twelve Months~~
	~~Ended~~
	~~Dec.~~ 31,		~~Dec.~~ 31,
	~~201~~9		~~2018~~
~~Net sales~~	$	-	$	~~6,787~~
~~Cost of sales~~		-		~~(6,485~~	)
~~Selling, general and administrative expenses~~		-		~~(2,448~~	)
~~Loss on sale of assets~~		-		~~(865~~	)
~~Loss from discontinued operations before income taxes~~		-		~~(3,011~~	)
~~Income tax benefit~~		-		-
~~Loss from discontinued operations, net of taxes~~	$	-	$	~~(3,011~~	)

~~We intend to use the proceeds of the rights offering to provide cash for acquisitions including purchasing additional HC Realty Series B Stock, HC Realty Common Stock or debt of HC Realty.~~

~~No Board Recommendation~~

Our board of directors makes no recommendation to you about whether you should exercise any rights. You are urged to make an independent investment decision about whether to exercise your rights based on your own assessment of our business and the rights offering. Please see the section of this prospectus entitled “Risk Factors” for a discussion of some of the risks involved in investing in our common stock.

~~No revocation~~

Any exercise of subscription rights is irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your rights. You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of common stock at a subscription price of $[ ] per share.

Morrow Sodali LLC