What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 175 added, 170 removed, 463 unchanged (43% of the section changed)

1 unchanged sentence

LEGACY HOUSING CORPORATION

CONDENSED BALANCE SHEETS (in thousands, except share and per share data)

CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts

Accounts receivable, net

Current portion of consumer loans

3 unchanged sentences

Total current assets

Property, plant and equipment, net

Consumer loans, net of deferred financing fees and allowance for loan losses

Consumer loans, net

Notes receivable from mobile home parks (“MHP”)

Other notes receivable, net of allowance for loan losses

Inventory non ‑ current

Other notes receivable, net

Inventories, net

Property, plant and equipment, net

Liabilities and Stockholders' Equity

14 unchanged sentences

Preferred stock, $ .001 par value, 10,000,000 shares authorized:

no shares issued or outstanding

Common stock, $ .001 par value, 90,000,000 shares authorized;

24,647,696 and 24,639,125 issued and 24,202,631 and 24,194,060 outstanding at March 31, 2021 and December 31, 2020, respectively

Treasury stock at cost, 445,065 shares at March 31, 2021 and December 31, 2020

24,647,696 and 24,639,125 issued and 24,202,631 and 24,194,060 outstanding at June 30, 2021 and December 31, 2020, respectively

Treasury stock at cost, 445,065 shares at June 30, 2021 and December 31, 2020

Additional paid-in-capital

6 unchanged sentences

(in thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Product sales

3 unchanged sentences

Cost of product sales

Selling, general administrative expenses

Selling, general and administrative expenses

Dealer incentive

13 unchanged sentences

(unaudited, in thousands)

Three months ended March 31,

Six months ended June 30,

Operating activities:

Adjustments to reconcile net income to net cash used by operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation expense

1 unchanged sentence

Provision for loan loss—consumer loans

Deferred income taxes

Share based payment expense

9 unchanged sentences

Customer deposits

Escrow liability

Dealer incentive liability

4 unchanged sentences

Notes receivable collections

Purchases of consumer loans

Collections from purchased consumer loans

Purchases of loans

Collections from purchased loans

Net cash used in investing activities

1 unchanged sentence

Treasury stock purchase

Escrow liability, net

Proceeds from lines of credit, net

Proceeds from issuance of note payable

Principal payments on note payable

Proceeds from lines of credit

Payments on lines of credit

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

12 unchanged sentences

Balances, March 31, 2020

Share based compensation expense and stock units vested

Purchase of treasury stock

Balances, June 30, 2020

paid-in-capital

2 unchanged sentences

Balances, March 31, 2021

Share based compensation expense and stock units vested

Balances, June 30, 2021

See accompanying notes to condensed financial statements.

1 unchanged sentence

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

NATURE OF OPERATIONS

Legacy Housing Corporation (the “Company”) was formed on January 1, 2018 as a Delaware corporation through a corporate conversion of Legacy Housing, Ltd.

Legacy Housing Corporation (referred herein as”Legacy”, “we”, “our”, “us”, or the “Company”) was formed on January 1, 2018 as a Delaware corporation through a corporate conversion of Legacy Housing, Ltd.

(the “Partnership”), a Texas limited partnership formed in May 2005.

26 unchanged sentences

Basis of Presentation

The accompanying unaudited interim condensed financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

The accompanying unaudited interim condensed financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03.

In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented.

The results for the three

The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31,

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or any other period.

2021, or any other period.

The accompanying balance sheet as of December 31, 2020 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2020 (the "Form 10-K").

4 unchanged sentences

These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period.

Material estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans and notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities.

Material estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans, other notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities.

Actual results could differ from these estimates.

7 unchanged sentences

Retail Store Sales are homes sold through Company-owned retail locations.

Consignment Sales and Retail Sales of homes may be financed by the Company, by a third party, or in paid in cash.

Revenue from product sales is recognized at a point in time when the performance obligation under the terms of a contract with our customers is satisfied which typically occurs upon delivery and transfer of title of the home, as this depicts when control of the promised good is transferred to our customers.

Consignment Sales and Retail Sales of homes may be financed by the Company, by a third party, or paid in cash.

Revenue from product sales is recognized at a point in time when the performance obligation under the terms of a contract with our customer is satisfied, which typically occurs upon delivery and transfer of title of the home, as this depicts when control of the promised good is transferred to our customer.

For financed sales by the Company, the individual customer enters into a sales and financing contract and is required to make a down payment.

6 unchanged sentences

Contract costs, which include commissions incurred related to the sale of homes, are expensed at the point-in-time when the related revenue is recognized.

For the three months ended June 30, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 2,400 or 5.8 % and $ 14,320 or 36.6 % of our product sales, respectively.

For the six months ended June

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

For the three months ended March 31, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 2,664 or 8.3 % and $ 11,986 or 37.2 % of our product sales, respectively.

For the three months ended March 31, 2021 and 2020, total cost of product sales included $ 2,182 and $ 4,907 of costs, mainly relating to up front dealer commission and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales.

30, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 5,065 or 6.8 % and $ 26,306 or 37.4 % of our product sales, respectively.

For the three months ended June 30, 2021 and 2020, total cost of product sales included $ 3,007 and $ 7,849 of costs, mainly relating to subcontracted production for commercial sales and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales .

For the six months ended June 30, 2021 and 2020, total cost of product sales included $ 5,189 and $ 12,756 of costs, mainly relating to subcontracted production for commercial sales and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales .

Other revenue consists of consignment fees, commercial lease rents, service fees and other miscellaneous income.

6 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

Disaggregation of Revenue .

The following table summarizes customer contract revenues disaggregated by source of the revenue for the three months ended March 31, 2021 and 2020:

The following table summarizes customer contract revenues disaggregated by source of the revenue for the three and six months ended June 30, 2021 and 2020:

Three months ended

Six months ended

Product sales:

26 unchanged sentences

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

5 unchanged sentences

The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible.

At March 31, 2021 and December 31, 2020, the allowance for doubtful accounts totaled $ 111 and $ 97 , respectively.

At June 30, 2021 and December 31, 2020, the allowance for doubtful accounts totaled $ 287 and $ 97 , respectively.

Leased Property

8 unchanged sentences

The lessee may terminate the lease with 30 days written notice to the Company and pay a lease termination fee of either 10 % of the remaining lease payments or six month ’s rent, whichever is greater.

The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed upon determination of fair market value by both parties for example comparable sales, recent appraisal, or NADA official guidance.

The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed upon determination of fair market value by both parties using comparable sales, recent appraisal, or NADA official guidance.

The lessee must provide the Company with 30 days written notice prior to expiration of the lease of intent to purchase the property for fair market value.

3 unchanged sentences

Homes returned to the Company upon expiration of the lease or in the event of default will be sold by the Company through its standard sales and distribution channels.

Future minimum lease income under all non-cancelable operating leases for each of the next five years at March 31, 2021, are as follows:

Future minimum lease income under all operating leases for each of the next five years at June 30, 2021, are as follows:

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

1 unchanged sentence

The Company has elected to use longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act as an emerging growth company.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and an asset representing its right to use the underlying asset for the lease term.

The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous requirements.

The Company plans to use longer phase-in period for adoption and accordingly this ASU is effective for the Company’s fiscal year beginning January 1, 2022.

The Company plans to use the longer phase-in period for adoption, and accordingly this ASU is effective for the Company’s fiscal year beginning January 1, 2022.

Modified retrospective application and early adoption is permitted.

1 unchanged sentence

While the Company is continuing to assess all the effects of adoption, it currently believes the most significant effects relate to (i) the recognition of new right-of-use assets and lease liabilities on its balance sheet for its property and equipment operating leases and (ii) providing significant new disclosures about its leasing activities.

In June 2016, the FASB issued an accounting standards update ASU 2016-13 Financial Instruments—Credit Losses (Topic 326):

In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities.

3 unchanged sentences

The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

The Company plans to use longer phase-in period for adoption and accordingly this ASU is effective for the Company’s fiscal year beginning January 1, 2023.

The Company plans to use the longer phase-in period for adoption, and accordingly this ASU is effective for the Company’s fiscal year beginning January 1, 2023.

The Company is continuing to evaluate the impact of the adoption of this ASU and is uncertain of the impact on the financial statements and disclosures at this point in time.

1 unchanged sentence

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s Financial Statements upon adoption.

CONSUMER LOANS RECEIVABLE

Consumer loans receivable result from financing transactions entered into with retail consumers of mobile homes sold through independent retailers and company-owned retail locations.

CONSUMER LOANS

Consumer loans result from financing transactions entered into with retail consumers of mobile homes sold through independent retailers and company-owned retail locations.

Consumer loans receivable generally consist of the sales price and any additional financing fees, less the buyer’s down payment.

Interest income is recognized monthly per the terms of the financing agreements.

The average contractual interest rate per loan was approximately 13.7 % as of March 31, 2021 and 13.8 % as of December 31, 2020.

The average contractual interest rate per loan was approximately 13.6 % as of June 30, 2021 and 13.8 % as of December 31, 2020.

Consumer loans receivable have maturities that range from 3 to 30 years .

Loan applications go through an underwriting process that considers credit history to evaluate credit risk of the consumer.

Interest rates on approved loans are determined based on consumer credit score, payment ability and down payment amount.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

Loan applications go through an underwriting process that considers credit history to evaluate credit risk of the consumer.

Interest rates on approved loans are determined based on consumer credit score, payment ability and down payment amount.

The Company uses payment history to monitor the credit quality of the consumer loans on an ongoing basis.

The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections.

The liabilities associated with these escrow collections totaled $ 8,015 and $ 7,729 as of March 31, 2021 and December 31, 2020, respectively, and are included in escrow liability in the balance sheets.

The liabilities associated with these escrow collections totaled $ 8,737 and $ 7,729 as of June 30, 2021 and December 31, 2020, respectively, and are included in escrow liability in the balance sheets.

Allowance for Loan Losses—Consumer Loans Receivable

26 unchanged sentences

At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information.

Repossessed homes totaled $ 724 and $ 1,395 as of June 30, 2021 and December 31, 2020, respectively, and are included in other assets in the balance sheets.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

Repossessed homes totaled $ 751 and $ 1,395 as of March 31, 2021 and December 31, 2020, respectively, and are included in other assets in the balance sheets.

Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consisted of the following:

As of March 31,

Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consists of the following:

As of June 30,

As of December 31,

4 unchanged sentences

The following table presents a detail of the activity in the allowance for loan losses:

Three Months Ended March 31,

Three months ended June 30,

Six Months Ended June 30,

Allowance for loan losses, beginning of period

1 unchanged sentence

Allowance for loan losses

The impaired and general reserve for allowance for loan losses consisted of the following:

As of March 31,

The impaired and general reserve for allowance for loan losses consists of the following:

As of June 30,

As of December 31,

Total consumer loans

Total allowance for loan losses

Allowance for loan losses

Impaired loans individually evaluated for impairment

2 unchanged sentences

General allowance for loan losses

As of March 31, 2021 and December 31, 2020, the total principal outstanding for consumer loans on nonaccrual status was $ 1,611 and $ 1,603 , respectively.

A detailed aging of consumer loans receivable that are past due as of March 31, 2021 and December 31, 2020 were as follows:

As of March 31,

As of June 30, 2021 and December 31, 2020, the total principal outstanding for consumer loans on nonaccrual status was $ 1,368 and $ 1,603 , respectively.

A detailed aging of consumer loans receivable that are past due as of June 30, 2021 and December 31, 2020 were as follows:

As of June 30,

As of December 31,

6 unchanged sentences

Total past due

NOTES RECEIVABLE FROM MOBILE HOME PARKS

The notes receivable from mobile home parks (“MHP Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable.

The MHP Notes have varying maturity dates and call for monthly principal and interest payments.

The interest rate on the MHP Notes can be fixed or variable.

Approximately $ 121 million of the

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

NOTES RECEIVABLE FROM MOBILE HOME PARKS (“MHP Notes”)

The notes receivable from mobile home parks (“MHP Notes” or “Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable.

The Notes have varying maturity dates and call for monthly principal and interest payments.

The interest rate on the MHP Notes can be fixed or variable.

Approximately $ 114 million of the Notes have a fixed interest rate ranging from 5.0 % to 9.5 %.

The remaining Notes have a variable rate typically set at 4.0 % above prime with a minimum of 8.0 %.

The average interest rate per loan was approximately 7.6 % and 7.7 % as of March 31, 2021 and December 31, 2020, respectively, with maturities that range from 1 to 20 years .

The collateral underlying the Notes are individual mobile homes which can be repossessed and resold.

Notes have a fixed interest rate ranging from 6.9 % to 9.5 %.

The remaining MHP Notes have a variable rate typically set at 4.0 % above prime with a minimum of 8.0 %.

The average interest rate per loan was approximately 7.6 % and 7.7 % as of June 30, 2021 and December 31, 2020, respectively, with maturities that range from 1 to 20 years .

The collateral underlying the MHP Notes are individual mobile homes which can be repossessed and resold.

The MHP Notes are generally personally guaranteed by the borrowers.

The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 52.1 % and 52.9 % of the principal balance outstanding, all of which was secured by the mobile homes, as of March 31, 2021 and December 31, 2020, respectively.

The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 49.5 % and 52.9 % of the principal balance outstanding, all of which was secured by the mobile homes, as of June 30, 2021 and December 31, 2020, respectively.

MHP Notes are stated at amounts due from customers, net of allowance for loan losses.

1 unchanged sentence

The Company establishes an allowance reserve composed of specific and general reserve amounts.

There were minimal past due balances on the MHP Notes as of March 31, 2021 and December 31, 2020 and no charge offs were recorded for MHP Notes during the three months ended March 31, 2021 and 2020, respectively.

Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of March 31, 2021 and December 31, 2020.

There were minimal past due balances on the MHP Notes as of June 30, 2021 and December 31, 2020 and no charge offs were recorded for MHP Notes during the three and six months ended June 30, 2021 and 2020, respectively.

Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of June 30, 2021 and December 31, 2020.

OTHER NOTES RECEIVABLE

Other notes receivable relate to various notes issued to mobile park owners and dealers, which are not directly tied to sale of mobile homes.

Other notes receivable relate to various notes issued to mobile home park owners and dealers, which are not directly tied to sales of mobile homes.

The other notes have varying maturity dates and call for monthly principal and interest payments.

3 unchanged sentences

The balance outstanding on the other notes receivable were as follows:

As of March 31,

As of June 30,

As of December 31,

1 unchanged sentence

Allowance for loan losses

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

Inventories consisted of the following:

As of March 31,

Inventories consists of the following:

As of June 30,

As of December 31,

2 unchanged sentences

Finished goods

Allowance for obsolescence

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

As of March 31,

Property, plant and equipment consists of the following:

As of June 30,

As of December 31,

4 unchanged sentences

Total property, plant and equipment

Depreciation expense was $ 264 with $ 104 included as a component of cost of product sales for the three months ended March 31, 2021 and $ 248 with $ 106 included as a component of cost of product sales for the three months ended March 31, 2020.

Other assets consisted of the following:

As of March 31,

Depreciation expense was $ 261 with $ 109 included as a component of cost of product sales for the three months ended June 30, 2021 and $ 252 with $ 98 included as a component of cost of product sales for the three months ended June 30, 2020.

Depreciation expense was $ 524 with $ 214 included as a component of cost of product sales for the six months ended June 30, 2021 and $ 501 with $ 203 included as a component of cost of product sales for the six months ended June 30, 2020.

Other assets consists of the following:

As of June 30,

As of December 31,

Leased property

Leased property, net of accumulated depreciation

Repossessed homes

Depreciation expense for the leased property was $ 98 and $ 33 for the three months ended March 31, 2021 and 2020, respectively.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

Depreciation expense for the leased property was $ 132 and $ 38 for the three months ended June 30, 2021 and 2020, respectively, and $ 230 and $ 71 for the six months ended June 30, 2021 and 2020, respectively.

ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

As of March 31,

Accrued liabilities consists of the following:

As of June 30,

As of December 31,

1 unchanged sentence

Litigation reserve

Federal and state taxes payable

Federal and state income taxes payable

Accrued expenses & other accrued liabilities

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Lines of Credit

5 unchanged sentences

For the period January 1, 2020 through March 30, 2020, Revolver 1 accrued interest at one-month LIBOR plus 2.40 %.

Amounts available under Revolver 1 were subject to a formula based on eligible consumer loans and MHP Notes and were secured by all accounts receivable and the consumer loans receivable and MHP Notes.

Amounts available under Revolver 1 were subject to a formula based on eligible consumer loans and MHP Notes and were secured by all accounts receivable, consumer loans and MHP Notes.

The New Revolver accrues interest at one-month LIBOR plus 2.00 %.

The interest rate in effect as of March 31, 2021 was 2.11 %.

As with Revolver 1, amounts available under the New Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable and the consumer loans receivable and MHP Notes.

The amount of available credit under the New Revolver was $ 24,653 as of March 31, 2021.

In connection with the New Revolver, we paid certain arrangement fees and other fees of approximately $ 0.3 million, which were capitalized as deferred debt issuance costs and will be amortized to interest expense over the life of the New Revolver.

For the three months ended March 31, 2021 and 2020, interest expense under the Capital One Revolvers was $ 226 and $ 320 .

The outstanding balance as of March 31, 2021 and December 31, 2020 was $ 45,347 and $ 36,174 , respectively.

The Company was in compliance with all financial covenants as of March 31, 2021, including that it maintain a tangible net worth of at least $ 120,000 and that it maintain a ratio of debt to EBITDA of 4 to 1, or less.

The interest rate in effect as of June 30, 2021 and December 31, 2020 was 2.09 % and 2.15 %, respectively.

As with Revolver 1, amounts available under the New Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable, consumer loans and MHP Notes.

The New Revolver requires the Company to comply with certain quarterly financial and non-financial covenants.

The amount of available credit under the New Revolver was $ 20,325 and $ 33,826 as of June 30, 2021 and December 31, 2020, respectively.

In connection with the New Revolver, we paid certain arrangement fees and other fees of approximately $ 300 , which were capitalized as deferred debt issuance costs and will be amortized to interest expense over the life of the New Revolver.

For the three months ended June 30, 2021 and 2020, interest expense under the Capital One Revolvers was $ 283 and $ 226 , respectively.

For the six months ended June 30, 2021 and 2020, interest expense under the Capital One Revolvers was $ 509 and $ 545 , respectively.

The outstanding balance as of June 30, 2021 and December 31, 2020 was $ 49,675 and $ 36,174 , respectively.

In April 2016, the Company entered into an agreement with Veritex Community Bank to secure an additional revolving line of credit of $ 15,000 (“Revolver 2”).

On May 12, 2017, the Company entered into an agreement to increase the line of credit to $ 20,000 .

On October 15, 2018, Revolver 2 was amended to extend the maturity date from April 4, 2019 to April 4, 2021.

Revolver 2 accrues interest at one month LIBOR plus 2.50 % and all unpaid principal and interest is due at maturity on April 4, 2021.

Revolver 2 is secured by all finished goods inventory excluding repossessed homes.

Revolver 2 requires the Company to comply with certain quarterly financial and non-financial covenants.

Amounts available under Revolver 2 are subject to a formula based on eligible inventory.

The interest rate in effect as of March 31, 2020 was 4.17 %.

On May 12, 2017, the Company entered into an agreement to increase the line of credit to $ 20,000 .

On October 15, 2018, Revolver 2 was amended to extend the maturity date from April 4, 2019 to April 4, 2021.

The amount of available credit under Revolver 2 was $ 12,028 at March 31, 2020.

The Company was in compliance with all required covenants as of March 31, 2020.

For the three months ended March 31,

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

2020 interest expense was $ 21 .

The outstanding balance as of March 31, 2020 was $ 2,001 .

For the three and six months ended June 30, 2020 interest expense was $ 0 and $ 17 .

In April 2020, this note was paid in full and the facility was terminated.

On April 10, 2020, the Company entered into a loan with Peoples Bank as the lender in an aggregate principal amount of $ 6,545,700 (the “Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act.

The Loan was evidenced by a promissory note (the “Note”) dated April 10, 2020 and had a maturity date of April 10, 2022.

The Note had an interest rate of 1.00 % per annum, with the first six months of interest deferred.

On April 10, 2020, the Company entered into a loan with Peoples Bank as the lender in an aggregate principal amount of $ 6,545,700 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act.

The PPP Loan was evidenced by a promissory note dated April 10, 2020 and had a maturity date of April 10, 2022.

The PPP Loan had an interest rate of 1.00 % per annum, with the first six months of interest deferred.

Principal and interest were payable monthly commencing on November 10, 2020 and could be prepaid by the Company at any time prior to maturity with no prepayment penalties.

On May 1, 2020, this loan was paid in full.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

PILOT Agreement

2 unchanged sentences

In connection with the PILOT agreement, the Putman County Development Authority provides a credit facility for up to $ 10,000 , which can be drawn upon to fund Project improvements and capital expenditures as defined in the agreement.

If funds are drawn, the Company would pay transactions costs and debt service payments.

If funds are drawn, the Company would pay transaction costs and debt service payments.

The PILOT agreement requires interest payments of 6.00 % per annum on outstanding balances, which are due each December 1st through maturity on December 1, 2021, at which time all unpaid principal and interest are due.

The PILOT agreement is collateralized by the assets of the Project.

As of March 31, 2021, the Company had not drawn on this credit facility.

As of June 30, 2021 and December 31, 2020, the Company had not drawn on this credit facility.

SHARE-BASED COMPENSATION

1 unchanged sentence

Stock options may be granted with a contractual life of up to ten years .

At March 31, 2021, the Company had 9.7 million shares available for grant under the Compensation Plan.

At June 30, 2021, the Company had 9.7 million shares available for grant under the Compensation Plan.

In February 2019, the Company granted 120,000 restricted shares of its common stock to members of senior management.

2 unchanged sentences

During the second quarter of 2020, 42,857 of these restricted shares were forfeited due to the departure of a member of senior managment.

The Company granted 2,936 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

The shares were granted on February 7, 2019 and become fully vested on December 13, 2019.

In February 2019, the Company granted 2,936 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

The shares were granted on February 7, 2019 and had a grant date fair value of $ 40 .

The shares became fully vested on December 13, 2019.

In August 2019, the Company granted 39,526 restricted shares of its common stock to a member of senior management.

2 unchanged sentences

This grant was canceled during the second quarter of 2020 due to the departure of the member of senior managment.

In March 2020, the Company granted 1,903 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

The shares were granted on March 27, 2020 and had a grant date fair value of $ 18 .

The shares became fully vested on December 13, 2020.

In December 2020, the Company granted 2,022 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

The shares were granted on December 2, 2020 and had a grant date fair value of $ 30 .

The shares become fully vested on October 4, 2021.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

The Company granted 1,903 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

The shares were granted on March 27, 2020 and become fully vested on December 13, 2020.

The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data):

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Nonvested, January 1, 2021

Nonvested, March 31, 2021

As of March 31, 2021, approximately 34,000 RSUs remained unvested.

Unrecognized compensation expense related to these RSUs at March 31, 2021 was $ 451 and is expected to be recognized over 3.86 years.

Nonvested, June 30, 2021

As of June 30, 2021, approximately 36,000 RSUs remained unvested.

Unrecognized compensation expense related to these RSUs at June 30, 2021 was $ 431 and is expected to be recognized over 3.54 years.

The Company granted 58,694 incentive stock options to a member of senior management.

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expected volatility of common stock of 65.0 % and expected life of options of 7.9 years.

During the second quarter of 2020, these options were forfeited due to the departure of a senior manager.

During the second quarter of 2020, these options were forfeited due to the departure of the senior manager.

The Company granted 34,626 incentive stock options to a member of senior management.

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Contractual Life

Outstanding, January 1, 2021

Outstanding, March 31, 2021

Exercisable, March 31, 2021

As of March 31, 2021, approximately 35,000 options remained unvested.

Unrecognized compensation expense related to these options at March 31, 2021 was $ 262 and is expected to be recognized over 4.36 years.

Outstanding, January 1, 2021, nonvested

Outstanding, June 30, 2021, nonvested

Exercisable, June 30, 2021

As of June 30, 2021, approximately 35,000 options remained nonvested.

Unrecognized compensation expense related to these options at June 30, 2021 was $ 247 and is expected to be recognized over 4.12 years.

On March 31, 2020, the Company filed a registration statement on Form S-8 to register with the SEC approximately 2.3 million shares of Legacy common stock available for issuance under the 2018 Incentive Compensation Plan.

The registration statement became effective upon filing.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

The registration statement became effective upon filing.

The provision for income tax expense for the three months ended March 31, 2021 and 2020 was $ 1.9 million and $ 2.6 million, respectively.

The effective tax rate for the three months ended March 31, 2021 was 17.1 % and differs from the federal statutory rate of 21 % primarily due to a federal tax credit for energy efficient construction partially offset by state income taxes.

The effective tax rate for the three months ended March 31, 2020 was 22.3 % and differs from the federal statutory rate of 21 % due to state income taxes.

The provision for income tax expense for the six months ended June 30, 2021 and 2020 was $ 4,317 and $ 5,611 , respectively.

The effective tax rate for the six months ended June 30, 2021 was 16.8 % and differs from the federal statutory rate of 21 % primarily due to a federal tax credit for energy efficient construction and partially offset by state income taxes.

The effective tax rate for the six months ended June 30, 2020 was 22.7 % and differs from the federal statutory rate of 21 % due to state income taxes.

COMMITMENTS AND CONTINGENCIES

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The Company will adjust its self-insured medical benefits reserve based on actual experience, estimated costs and changes to assumptions.

At March 31, 2021, the Company accrued a $ 85 liability for incurred but not reported claims.

At June 30, 2021 and December 31, 2020, the Company accrued a $ 192 and $ 110 , respectively, liability for incurred but not reported claims.

The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent retailers of its products.

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The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

The maximum amount for which the Company was liable under such agreements approximated $ 3,073 and $ 2,967 at March 31, 2021 and December 31, 2020, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be insignificant and accordingly have not recorded any reserve for repurchase commitment as of March 31, 2021 or December 31, 2020.

The maximum amount for which the Company was liable under such agreements totalled $ 3,393 and $ 2,967 at June 30, 2021 and December 31, 2020, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be insignificant and accordingly have not recorded any reserve for repurchase commitment as of June 30, 2021 or December 31, 2020.

The Company leases facilities under operating leases that typically have 10-year terms.

These leases usually offer the Company a right of first refusal that affords the Company the option to purchase the leased premises under certain terms in the event the landlord attempts to sell the leased premises to a third party.

Rent expense was $ 151 and $ 144 for the three months ended March 31, 2021, and 2020, respectively.

Rent expense was $ 146 and $ 144 for the three months ended June 30, 2021, and 2020, respectively, and $ 402 and $ 308 for the six months ended June 30, 2021, and 2020, respectively.

The Company also subleases properties to third parties, ranging from 3-year to 11-year terms with various renewal options.

Rental income from the subleased property was approximately $ 91 and $ 85 for the three months ended March 31, 2021 and 2020.

Future minimum lease commitments under all non-cancelable operating leases for each of the next five years at March 31, 2021, are as follows:

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

Rental income from the subleased property was approximately $ 91 and $ 89 for the three months ended June 30, 2021 and 2020, respectively, and $ 182 and $ 182 for the six months ended June 30, 2021 and 2020, respectively.

Future minimum lease commitments under all non-cancelable operating leases for each of the next five years at June 30, 2021, are as follows:

Legal Matters

1 unchanged sentence

Certain of the claims pending against the Company in these proceedings allege, among other things, breach of contract and warranty, product liability and personal injury.

Although litigation is inherently uncertain, based on past experience and the information currently available, management does not believe that the currently pending and threatened litigation or claims will have a material adverse effect on the Company’s financial position, liquidity or results of operations.

Although litigation is inherently uncertain, based on past

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

experience and the information currently available, management does not believe that the currently pending and threatened litigation or claims will have a material adverse effect on the Company’s financial position, liquidity or results of operations.

However, future events or circumstances currently unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company’s financial position, liquidity or results of operations in any future reporting periods.

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The Company elected not to designate the interest rate swap agreements as cash flow hedges and, therefore, gains or losses on the agreements as well as the other offsetting gains or losses on the hedged items attributable to the hedged risk are recognized in current earnings.

ASC 815-10, Derivatives and Hedging , requires derivative instruments to be measured at fair value and recorded in the statements of financial position as either assets or liabilities.

Accounting Standards Codification (“ASC”) 815-10, Derivatives and Hedging , requires derivative instruments to be measured at fair value and recorded in the statements of financial position as either assets or liabilities.

The Company entered into interest rate swap agreement with Capital One Bank on June 12, 2017 to fix the variable rate portion for $ 8,000 of the line of credit.

This interest rate swap agreement matured on May 11, 2020.

The fair value of the interest rate swap agreement was an asset included in prepaid expenses and other current assets and was $ 7 at March 31, 2020.

Included in the statements of operations for the three months ended March 31, 2020 is a gain of $ 2 which was the result of the changes in the fair values of the interest rate swap agreement.

Included in the statements of operations for the six months ended June 30, 2020 is a loss of $ 15 which was the result of the change in the fair value of the interest rate swap agreement.

Fair Value Measurements

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The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

The Company has used derivatives to manage risks related to interest rate movements.

3 unchanged sentences

Management reviewed the fair values for the instruments as provided by the lender and determined the related asset and liability to be an accurate estimate of future gains and losses to the Company.

The fair value of the interest rate swap was an asset valued at $ 7 at March 31, 2020.

The Company is not a party to any interest rate swaps as of June 30, 2021.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, consumer loans, MHP Notes, other notes, accounts payable, lines of credit, notes payable, and dealer portion of consumer loans.

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, consumer loans, MHP Notes, other note recievables, accounts payable, lines of credit, notes payable, and dealer portion of consumer loans.

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments.

This is considered a Level I valuation technique.

The lines of credit, notes payable, part of the MHP Notes and part of the other notes have variable interest rates that reflect market rates and their fair value approximates their carrying value.

The lines of credit, notes payable, part of the MHP Notes and part of the other note recievables have variable interest rates that reflect market rates and their fair value approximates their carrying value.

This is considered a Level II valuation technique.

The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other notes with fixed rates based on the discounted value of the remaining principal and interest cash flows.

The Company determined that the fair value of the consumer loan portfolio was approximately $ 115,000 compared to the book value of $ 113,680 as of March 31, 2021, and a fair value of approximately $ 115,000 compared to the book value of $ 111,742 as of December 31, 2020.

The Company determined that the fair value of the fixed rate MHP Notes was approximately $ 114,000 compared to the book value of $ 116,161 as of March 31, 2021, and a fair value of approximately $ 108,000 compared to the book value of $ 109,806 as of December 31, 2020.

The Company determined that the fair value of the other notes was approximately $ 15,500 compared to the book value of $ 15,797 as of March 31, 2021, and a fair value of approximately $ 15,000 compared to the book value of $ 15,104 as of December 31, 2020.

The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note recievables with fixed rates based on the discounted value of the remaining principal and interest cash flows.

The Company determined that the fair value of the consumer loan portfolio was approximately $ 117,000 compared to the book value of $ 116,025 as of June 30, 2021, and a fair value of approximately $ 115,000 compared to the book value of $ 111,742 as of December 31, 2020.

The Company determined that the fair value of the fixed rate MHP Notes was approximately $ 119,000 compared to the book value of $ 120,598 as of June 30, 2021, and a fair value of approximately $ 108,000 compared to the book value of $ 109,806 as of December 31, 2020.

The Company determined that the fair value of the other notes was approximately $ 17,600 compared to the book value of $ 17,731 as of June 30, 2021, and a fair value of approximately $ 15,000 compared to the book value of $ 15,104 as of December 31, 2020.

This is a Level III valuation technique.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(dollars in thousands)

EARNINGS PER SHARE

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Three months ended

Six months ended

Net income (in 000's)

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Earnings per share attributable to Legacy Housing Corporation

The diluted earnings per share calculation excludes 144,082 potential shares for the three months ended March 31, 2020, because the effect of including theses potential shares would be antidilutive.

The diluted earnings per share calculation excludes 79,459 and 90,783 potential shares for the three and six months ended June 30, 2020, respectively because the effect of including theses potential shares would be antidilutive.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

RELATED PARTY TRANSACTIONS

Bell Mobile Homes, a retailer owned by one of the Company’s significant owners, purchases manufactured homes from the Company.

Accounts receivable balances due from Bell Mobile Homes were $ 298 and $ 1 as of March 31, 2021 and December 31, 2020, respectively.

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $ 86 and $ 61 as of March 31, 2021 and December 31, 2020, respectively.

Home sales to Bell Mobile Homes were $ 699 and $ 883 for the three months ended March 31, 2021 and 2020, respectively.

Accounts receivable balances due from Bell Mobile Homes were $ 27 and $ 1 as of June 30, 2021 and December 31, 2020, respectively.

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $ 76 and $ 61 as of June 30, 2021 and December 31, 2020, respectively.

Home sales to Bell Mobile Homes were $ 695 and $ 533 for the three months ended June 30, 2021 and 2020, respectively and $ 1,393 and $ 1,416 for the six months ended June 30, 2021 and 2020, respectively.

SUBSEQUENT EVENTS

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements