Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the financial statements and accompanying notes and the information contained in other sections of this Form 10-Q. It contains forward-looking statements that involve risks and uncertainties, and is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those anticipated by our management in these forward-looking statements as a result of various factors, including those discussed in this Form 10-Q and in our Registration Statement on Form S-1, particularly under the heading “Risk Factors.”
Overview
Legacy Housing Corporation builds, sells and finances manufactured homes and “tiny houses” that are distributed through a network of independent retailers and company-owned stores and are sold directly to manufactured housing communities. We are the sixth largest producer of manufactured homes in the United States as ranked by number of homes manufactured based on information available from the Manufactured Housing Institute and IBTS for the twelve month period ending March 31, 2021. With current operations focused primarily in the southern United States, we offer our customers an array of quality homes ranging in size from approximately 390 to 2,667 square feet consisting of 1 to 5 bedrooms, with 1 to 3 1 / 2 bathrooms. Our homes range in price, at retail, from approximately $22,000 to $140,000. For the three and six months ended June 30, 2021, we sold 945 and 1,665 home sections, respectively (which are entire homes or single floors that are combined to create complete homes). For the three and six months ended June 30, 2020, we sold 1,056 and 1,905 home sections, respectively.
The Company has one reportable segment. All of our activities are interrelated, and each activity is dependent and assessed based on how each of the activities of Company supports the others. For example, the sale of manufactured homes includes providing transportation and consignment arrangements with dealers. We also provide financing options to the customers to facilitate such sale of homes. In addition, the sale of homes is directly related to financing provided by us. Accordingly, all significant operating and strategic decisions by the chief operating decision-maker, the Executive Chairman of the Board, are based upon analyses of our company as one segment or unit.
We believe our company is one of the most vertically integrated in the manufactured housing industry, allowing us to offer a complete solution to our customers, from manufacturing custom-made homes using quality materials and distributing those homes through our expansive network of independent retailers and company-owned distribution locations, to providing tailored financing solutions for our customers. Our homes are constructed in the United States at one of our three manufacturing facilities in accordance with the construction and safety standards of the U.S. Department of Housing and Urban Development (“HUD”). Our factories employ high-volume production techniques that allow us to produce, on average, approximately 75 home sections, or 62 fully-completed homes depending on product mix, in total per week. We use quality materials and operate our own component manufacturing facilities for many of the items used in the construction of our homes. Each home can be configured according to a variety of floor plans and equipped with such features as fireplaces, central air conditioning and state-of-the-art kitchens.
Our homes are marketed under our premier “Legacy” brand name and currently are sold primarily across 15 states through a network of 106 independent retail locations, 13 company-owned retail locations and through direct sales to owners of manufactured home communities. Our 13 company-owned retail locations, including 11 Heritage Housing stores and two Tiny House Outlet stores exclusively sell our homes. For the six months ended June 30, 2021, approximately 50% of our manufactured homes were sold in Texas, followed by 13% in Georgia, 9% in Louisiana and 4% in Alabama. For the six months ended June 30, 2020, approximately 46% of our manufactured homes were sold in Texas, followed by 9% in Michigan, 8% in Georgia, 7% in North Carolina, and 6% in Kentucky. We plan to deepen our distribution channel by using cash from operations and borrowings from our lines of credit to expand our company-owned retail locations in new and existing markets.
We offer three types of financing solutions to our customers. We provide floor plan financing for our independent retailers, which takes the form of a consignment arrangement between the retailer and us. We also provide consumer financing for our products which are sold to end-users through both independent and company-owned retail locations, and we provide financing solutions to manufactured housing community owners that buy our products for use in their manufactured housing communities. Our ability to offer competitive financing options at our retail locations
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provides us with several competitive advantages and allows us to capture sales which may not have otherwise occurred without our ability to offer consumer financing.
Corporate Conversion
Prior to January 1, 2018, we were a Texas limited partnership named Legacy Housing, Ltd. Effective January 1, 2018, we converted into a Delaware corporation pursuant to a statutory conversion, or the Corporate Conversion, and changed our name to Legacy Housing Corporation. All of our outstanding partnership interests were converted on a proportional basis into shares of common stock of Legacy Housing Corporation. Effective December 31, 2019, the Company reincorporated from a Delaware corporation to a Texas corporation. For more information, see “Corporate Conversion” in Note 1.
Following the Corporate Conversion, Legacy Housing Corporation continues to hold all of the property and assets of Legacy Housing, Ltd. and all of the debts and obligations of Legacy Housing, Ltd. continue as the debts and obligations of Legacy Housing Corporation. The purpose of the Corporate Conversion was to reorganize our corporate structure so that the top-tier entity in our corporate structure is a corporation rather than a limited partnership and so that our existing owners own shares of our common stock rather than partnership interests in a limited partnership. Except as otherwise noted, the financial statements included in this Form 10-Q are those of Legacy Housing Corporation.
Factors Affecting Our Performance
We believe that the growth of our business and our future success depend on various opportunities, challenges, trends and other factors, including the following:
● Consistent with our long-term strategy of conservatively deploying our capital to achieve above average rates of return, we intend to expand our retail presence in the geographic markets we now serve, particularly in the southern United States. Each retail center requires between $500,000 and $1,500,000 to acquire the location, situate an office, provide inventory, and provide the initial working capital.
● We have purchased several properties in our market area for the purpose of developing manufactured housing communities and subdivisions. As of June 30, 2021, these properties include the following (dollars in 000’s):
Location
Description
Date of Acquisition
Land
Improvements
Total
Bastrop County, Texas
400 Acres
April 2018
$
4,400
$
92
$
4,492
Bexar County, Texas
100 Acres
November 2018
1,300
114
1,414
Horseshoe Bay, Texas
133 Acres
Various 2018-2019
2,431
1,401
3,832
Johnson County, Texas
91.5 Acres
July 2019
445
15
460
Venus, Texas
50 Acres
August 2019
422
7
429
Wise County, Texas
81.5 Acres
September 2020
889
-
889
Bexar County, Texas
233 Acres
February 2021
1,550
55
1,605
$
11,437
$
1,684
$
13,121
● We also expect to provide financing solutions to a select group of our manufactured housing community-owner customers in a manner that includes developing new sites for products in or near urban locations where there is a shortage of sites to place our products. These solutions will be structured to give us an attractive return on investment when coupled with the gross margin we expect to make on products specifically targeted for sale to these new manufactured housing communities.
● Finally, our financial performance will be impacted by our ability to fulfill current orders for our manufactured homes from dealers and customers. Currently, our two Texas manufacturing facilities are operating at near peak capacity, with limited ability to increase the volume of homes produced at those plants. Our Georgia manufacturing facility has unutilized square footage available and with additional investment can add capacity to increase the number of homes that can be manufactured. We intend to
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increase production at the Georgia facility over time, particularly in response to orders increasingly being generated from new markets in Florida and the Carolinas. In order to maintain our growth, we will need to be able to continue to properly estimate anticipated future volumes when making commitments regarding the level of business that we will seek and accept, the mix of products that we intend to manufacture, the timing of production schedules and the levels and utilization of inventory, equipment and personnel.
● The coronavirus pandemic is an evolving threat to the economy and all businesses. At this time both the duration of the pandemic and the magnitude of the economic consequences are unknown. Risks to the Company include but are not limited to:
o increased loan losses or deferred loan payments as loan obligors suffer cash flow issues resulting from reduced employment, reduced rental income or unit sales, or other factors;
o reduced sales volume as potential customers are unable to shop for new homes or cannot qualify for a home purchase, retail dealers or company stores reduce or stop operations, or MHP owners reduce their future home purchases;
o reduced production resulting from factors such as the spread of the illness through the Company’s workforce or the impact of government interventions on labor force participation, reduced product demand, or government-mandated closures of our factories, company-owned stores, or retail lots of independent dealers who carry our products;
o delays in development projects as zoning, regulatory, and permitting decisions are likely to be postponed and the expected negative impact of the pandemic on the construction industry;
o reduced raw material availability related to global supply chain disruption from the pandemic, including possible border closures;
o decreased cash flow from operations which could negatively affect our liquidity;
o an outbreak of illness among our management and accounting staff could negatively affect our ability to maintain operations, operate our financial systems, delay our statutory reporting, and reduce our internal control of financial reporting.
We continue to monitor government responses to support the economy and evaluate how those actions might mitigate the risks noted above. At this time, we believe that the pandemic will have a negative effect on our financial results that could range from minor to material.
Results of Operations
The following discussion should be read in conjunction with the information set forth in the financial statements and the accompanying notes appearing elsewhere in this Form 10-Q.
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Comparison of Three Months ended June 30, 2021 and 2020 (in thousands)
Three months ended
June 30,
2021
2020
$ change
% change
Net revenue:
Product sales
$
41,115
$
39,179
$
1,936
4.9
%
Consumer and MHP loans interest
6,734
6,067
667
11.0
%
Other
740
760
(20)
(2.6)
%
Total net revenue
48,589
46,006
2,583
5.6
%
Operating expenses:
Cost of product sales
28,608
28,688
(80)
(0.3)
%
Selling, general administrative expenses
5,165
4,064
1,101
27.1
%
Dealer incentive
114
186
(72)
(38.7)
%
Income from operations
14,702
13,068
1,634
12.5
%
Other income (expense)
Non‑operating interest income
429
215
214
99.5
%
Miscellaneous, net
34
11
23
209.1
%
Interest expense
(283)
(239)
(44)
18.4
%
Total other
180
(13)
193
(1,484.6)
%
Income before income tax expense
14,882
13,055
1,827
14.0
%
Income tax expense
(2,454)
(3,015)
561
(18.6)
%
Net income
$
12,428
$
10,040
$
2,388
23.8
%
Product sales primarily consist of direct sales, commercial sales, consignment sales and retail store sales. Product sales increased $1.9 million, or 4.9%, during the three months ended June 30, 2021 as compared to the same period in 2020. This increase was driven by higher average sales price partially offset by lower unit volumes.
Net revenue attributable to our factory-built housing consisted of the following during the three months of 2021 and 2020:
Three months ended
June 30,
(in thousands)
2021
2020
$ Change
% Change
Net revenue:
Products sold
$
41,115
$
39,179
$
1,936
4.9
%
Total products sold
783
954
(171)
(17.9)
%
Net revenue per product sold
$
52.5
$
41.1
$
11
27.9
%
For the three months ended June 30, 2021, our net revenue per product sold increased because of increases to our product prices in the second quarter of 2021 due to rising material and labor costs, which resulted in higher home sales prices and more revenue generated per home sold. We had increases in consignment sales, direct sales, retail store sales and other product sales partially offset by a decline in commercial sales. Sales through our company-owned retail stores have higher margins than our direct sales and consignment sales.
Consumer and MHP loans interest income grew $0.7 million, or 11.0%, during the three months ended June 30, 2021 as compared to the same period in 2020 and is related to our increase in outstanding MHP Note portfolio and consumer loan portfolio. Between June 30, 2021 and June 30, 2020 our MHP Note portfolio increased by $25.7 million and the consumer loan portfolio increased by $8.8 million.
Other revenue primarily consists of consignment fees and commercial lease rents fees and was $0.7 million during the three months ended June 30, 2021 and 2020.
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The cost of product sales increased $0.1 million, or 0.3%, during the three months ended June 30, 2021 as compared to the same period in 2020. The increase in costs is primarily related to increases in the cost of materials and labor in 2021 and was materially passed along to our end-customer.
Selling, general and administrative expenses increased $1.1 million, or 27.1%, during the three months ended June 30, 2021 as compared to the same period in 2020. This increase was primarily due to a $0.7 million increase in salaries and incentive costs, a $0.3 million increase in warranty costs and a net $0.1 million increase in other miscellaneous costs. In addition, dealer incentive expense decreased $0.1 million in 2021 as compared to 2020.
Other income (expense), net increased $0.2 million during the three months ended June 30, 2021 as compared to the same period in 2020. This increase was primarily due to a $0.2 million increase in non-operating interest income.
Income tax expense was $2.5 million during the three months ended June 30, 2021 and 2020. The effective tax rate for the three months ended June 30, 2021 was 16.5% 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 three months ended June 30, 2020 was 23.1% and differs from the federal statutory rate of 21% primarily due to state income taxes.
Comparison of Six Months ended June 30, 2021 and 2020 (in thousands)
Six months ended
June 30,
2021
2020
$ change
% change
Net revenue:
Product sales
$
73,389
$
70,375
$
3,014
4.3
%
Consumer and MHP loans interest
13,372
12,491
881
7.1
%
Other
1,767
1,414
353
25.0
%
Total net revenue
88,528
84,280
4,248
5.0
%
Operating expenses:
Cost of product sales
52,632
50,547
2,085
4.1
%
Selling, general administrative expenses
9,958
9,676
282
2.9
%
Dealer incentive
576
380
196
51.6
%
Income from operations
25,362
23,677
1,685
7.1
%
Other income (expense)
Non‑operating interest income
677
451
226
50.1
%
Miscellaneous, net
238
48
190
395.8
%
Gain on settlement, net
—
1,075
(1,075)
%
Interest expense
(509)
(577)
68
(11.8)
%
Total other
406
997
(591)
(59.3)
%
Income before income tax expense
25,768
24,674
1,094
4.4
%
Income tax expense
(4,317)
(5,611)
1,294
(23.1)
%
Net income
$
21,451
$
19,063
$
2,388
12.5
%
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Product sales increased $3.0 million, or 4.3%, during the six months ended June 30, 2021 as compared to the same period in 2020. This increase was driven by higher average sales price partially offset by lower unit volumes.
Net revenue attributable to our factory-built housing consisted of the following during the six months of 2021 and 2020:
Six Months Ended
June 30,
(in thousands)
2021
2020
$ Change
% Change
Net revenue:
Products sold
$
73,389
$
70,375
$
3,014
4.3
%
Total products sold
1,410
1,709
(299)
(17.5)
%
Net revenue per product sold
$
52.0
$
41.2
$
10.9
26.4
%
For the six months ended June 30, 2021, our net revenue per product sold increased because of increases to our product prices in the second quarter of 2021 due to rising material and labor costs, which resulted in higher home sales prices and more revenue generated per home sold. We had increases in consignment sales, direct sales retail store sales and other product sales partially offset by a decline in commercial sales. Sales through our company-owned retail stores have higher margins than our direct sales and consignment sales.
Consumer and MHP loans interest income grew $0.9 million, or 7.1%, during the six months ended June 30, 2021 as compared to the same period in 2020 and is related to our increase in outstanding MHP Note portfolio and consumer loan portfolio. Between June 30, 2021 and June 30, 2020 our MHP Note portfolio increased by $25.7 million and the consumer loan portfolio increased by $8.8 million.
Other revenue primarily consists of commercial lease rents, consignment fees and servicer fee revenue. Other revenue increased $0.4 million or 25.0% during the six months ended June 30, 2021 as compared to the same period in 2020 due to a $0.7 million increase in commercial lease rents partially offset by a $0.3 million decrease in servicer fee revenue.
The cost of product sales increased $2.1 million, or 4.1%, during the six months ended June 30, 2021 as compared to the same period in 2020. The increase in costs is primarily related to increases in the cost of materials and labor in 2021 and was materially passed along to our end-customer.
Selling, general and administrative expenses increased $0.3 million, or 2.9%, during the six months ended June 30, 2021 as compared to the same period in 2020. This increase was primarily due to $1.0 million increase in salaries and incentive costs, a $0.3 million increase in consulting and professional fees, a $0.2 million increase in depreciation & amortization expense and a net $0.1 million increase in other miscellaneous costs. These increases were partially offset by a $0.6 million decrease in warranty costs, a $0.3 decrease in bad debt expense, a $0.2 million decrease in advertising and promotions and a $0.2 million decrease in legal expenses. In addition, dealer incentive expense increased $0.2 million, or 51.8% in 2021 as compared to 2020.
Other income (expense), net decreased $0.6 million, or 59.3%, during the six months ended June 30, 2021 as compared to the same period in 2020. This decrease was primarily due to a $1.1 million gain in the second quarter of 2020 due to the settlement of a lawsuit with a previous vendor for the Company, partially offset by an increase of $0.2 million in non-operating interest income, an increase of $0.2 million in miscellaneous income, net and a $0.1 million decrease in interest expense.
Income tax expense during the six months ended June 30, 2021 was $4.3 million compared to $5.6 million for the same period in 2020. 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% primarily due to state income taxes.
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Liquidity and Capital Resources
Cash and Cash Equivalents
We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents. We maintain cash balances in bank accounts that may, at times, exceed federally insured limits. We have not incurred any losses from such accounts and management considers the risk of loss to be minimal. We believe that cash flow from operations, cash and cash equivalents at June 30, 2021, and availability on our lines of credit will be sufficient to fund our operations and provide for growth for the next 12 to 18 months and into the foreseeable future. As of June 30, 2021, we had approximately $0.9 million in cash and cash equivalents, compared to $0.8 million as of December 31, 2020. In the first quarter of 2020, we negotiated a new credit agreement with our primary bank that expanded and extended our credit facility. The new credit agreement closed on March 30, 2020.
Cash Flow Activities
Six Months Ended
June 30,
(in thousands)
2021
2020
Net cash used in operating activities
$
(4,978)
$
(5,248)
Net cash used in investing activities
$
(8,482)
$
(414)
Net cash provided by financing activities
$
13,501
$
4,962
Net change in cash and cash equivalents
$
41
$
(700)
Cash and cash equivalents at beginning of period
$
768
$
1,724
Cash and cash equivalents at end of period
$
809
$
1,024
Comparison of Cash Flow Activities from June 30, 2021 to June 30, 2020
Net cash used in operating activities decreased $0.3 million during the six months ended June 30, 2021, compared to the comparable period in 2020, primarily as a result of decreased volume of loan originations supporting sales to MHPs net of principal collections, cash generated by operating income before non-cash adjustments and an increase in escrow deposits received by the company. The decrease in cash used in operating activities was partially offset by increased volume of consumer loan originations net of principal collections, increased inventories, increased accounts receivable and decreased payables.
Net cash used in investing activities of $8.5 million in 2021 was primarily attributable to $2.3 million used for the acquisition of property plant and equipment and $13.6 million used for loans to third parties for the development of manufactured housing parks. These were offset by collections of $5.9 million of loans we made to third parties for the development of manufactured housing parks and collections of $1.5 million from our purchased consumer loans.
Net cash provided by financing activities of $13.5 million in 2021 was attributable to net proceeds of $13.5 million on our lines of credit.
Indebtedness
Capital One Revolver. At December 31, 2019, we had a revolving line of credit (“Revolver 1”) with Capital One, N.A. with a maximum credit limit of $45,000,000 and a maturity date of May 11, 2020. On March 30, 2020, we entered into an agreement with Capital One, N.A. to replace Revolver 1 with a new revolving line of credit (“New Revolver”). The New Revolver has a maximum credit limit of $70,000,000 and a maturity date of March 30, 2024. 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, consumer loans and MHP Notes.
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The New Revolver accrues interest at one-month LIBOR plus 2.00%. The interest rate in effect as of June 30 , 2021 was 2.09%. 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 $20,325,000 as of June 30, 2021. In connection with the New Revolver, we paid certain arrangement fees and other fees of approximately $300,000, which were capitalized as unamortized debt issuance costs and will be amortized to interest expense over the life of the New Revolver.
For the six months ended June 30, 2021 and 2020, interest expense under the Capital One Revolvers was $509,000 and $545,000, respectively. The outstanding balance as of June 30, 2021 and December 31, 2020 was $49,675,000 and $36,174,000, respectively.
Veritex Community Bank Revolver. In April 2016, we entered into an agreement with Veritex Community Bank to secure an additional revolving line of credit of $15,000,000 (“Revolver 2”). On May 12, 2017, we entered into an agreement to increase the maximum borrowing availability under Revolver 2 to $20,000,000. 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 rates in effect as of March 31, 2020 was 4.17%. The amount of available credit under Revolver 2 was $12,028,000 at March 31, 2020. For the six months ended June 30, 2021 interest expense was $17,000. In April 2020, this note was paid in full and the facility was terminated.
PPP Loan. On April 10, 2020, we 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 1.000% 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 us at any time prior to maturity with no prepayment penalties. On May 1, 2020, this loan was paid in full.
PILOT Agreement. In December 2016, we entered into a Payment in Lieu of Taxes (“PILOT”) agreement commonly offered in Georgia by local community development programs to encourage industry development. The net effect of the PILOT agreement is to provide us with incentives through the abatement of local, city and county property taxes and to provide financing for improvements to our Georgia plant (the “Project”). In connection with the PILOT agreement, the Putman County Development Authority provides a credit facility for up to $10,000,000, which can be drawn upon to fund Project improvements and capital expenditures as defined in the agreement. If funds are drawn, we 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 1 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 June 30, 2021, we had not drawn down on this credit facility.
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Contractual Obligations
The following table is a summary of contractual cash obligations as of June 30, 2021:
Payments Due by Period
Contractual Obligations
Total
2021
2022 - 2023
2024 - 2025
After 2025
Lines of credit
$
49,675,000
—
—
49,675,000
—
Operating lease obligations
$
2,224,000
246,000
856,000
592,000
530,000
Off Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, results of operations, liquidity or capital expenditures. However, we do have a repurchase agreement with a financial institution providing inventory financing for independent retailers of our products. Under this agreement, we have agreed to repurchase homes at declining prices over the term of the agreement (24 months). Our obligation under this repurchase agreement ceases upon the purchase of the home by the retail customer. The maximum amount of our contingent obligations under such repurchase agreements was approximately $3,393,000 and $2,967,000 as of June 30, 2021 and December 31, 2020, respectively, without reduction for the resale value of the homes. We may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements. We consider our obligations on current contracts to be immaterial and accordingly we have not recorded any reserve for repurchase commitment as of June 30, 2021.
Critical Accounting Estimates
Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. Our critical accounting estimates are identified and described in our Annual Report on Form 10-K for the year ended December 31, 2020. Subsequent to the filing of our Annual Report, there have been no material changes to our critical accounting estimates.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 1 – Nature of Operations, Recent Accounting Pronouncements to our June 30, 2021 Condensed Financial Statements, included in Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable for smaller reporting companies
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