Legacy Housing Corp 10-Q

Item 4. Controls and Procedures. Disclosure Controls and Procedures We are subject to the periodic reporting requirements of the Exchange Act that requires designing disclosure controls and procedures to provide reasonable assurance that information we disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosures. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer each concluded, as of the end of the period, our disclosure controls and procedures were not effective as of June 30, 2021, due to material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and as described below. Material Weaknesses in Internal Control Over Financial Reporting As previously disclosed in our Annual report on Form 10-K filed with the SEC on March 17, 2021, we identified material weaknesses in our internal control over financial reporting during the preparation of our financial statements for the year ended December 31, 2020. Under standards established by the PCAOB, a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis. The material weaknesses in financial reporting as of June 30, 2021, are summarized as follows: ● We determined that we did not have sufficient accounting processes and procedures in place, particularly in the areas of allowance for loan loss; inventory costing; revenue recognition; income taxes; and processing of accounts payable and treasury transactions. ● We determined that we did not have sufficient personnel to support preparation of financial statements for compliance with U.S. GAAP and SEC. ● We determined that we did not have sufficient policies and procedures to ensure the appropriate review and approval of user access rights to our accounting system; and lack of approval of journal entries and segregation of duties in our financial reporting process. ● We determined that our information technology infrastructure does not provide sufficient safeguards required by the COBIT framework. Remediation Efforts to Address Previously-Identified Material Weaknesses As previously described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2020, we began implementing remediation plans to address the material weaknesses. The weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed by the end of fiscal 2021. 32 Table of Contents Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the first quarter of fiscal 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. See Note 12 - Commitments and Contingencies in our June 30, 2021 Condensed Financial Statements, included in Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None Item 3. Defaults Upon Senior Securities. None Item 4. Mine Safety Disclosures. None