Legacy Housing Corp 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures We are subject to the periodic reporting requirements of the Exchange Act which 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. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Report. Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance of the reliability of financial reporting and of the preparation of financial statements for external reporting purposes, in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and disposition of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorization of its management and directors; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on its financial statements. Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. Management’s assessment included extensive documentation, evaluating and testing the design and operating effectiveness of its internal controls over financial reporting. Based on management’s processes and assessment, as described above, management has concluded that, as of December 31, 2021, our internal control over financial reporting was not effective. 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 internal control over financial reporting have not been fully remediated as of December 31, 2021. 60 Table of Contents The material weaknesses in financial reporting as of December 31, 2021 are summarized as follows: ● We determined that we did not have sufficient accounting systems and procedures in place, particularly in the areas of revenue recognition; processing of accounts payable; prepaid expenses; and inventory costing and management . ● We determined that we did not have sufficient systems and processes to support timely 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 In connection with these material weaknesses, we are in the process of taking remediation action, including the evaluation and implementation of appropriate processes and procedures with respect to key areas, including inventory costing and revenue recognition. We are also in the process of implementing remediation measures, including designing internal controls over financial reporting, defining user access rights and journal entry processes and approvals, and implementing more robust financial reporting databases and systems. 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 fourth quarter of fiscal 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations in Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or fraud. Additionally, controls can be circumvented by individuals or groups of persons or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not be detected. Exemption from Auditor Attestation on Internal Controls This Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies and emerging growth companies . 61 Table of Contents ITEM 9B. OTHER INFORMATION. Restatement of Previously Issued Condensed Financial Statements (unaudited) The Company has restated these financial statements to correct; (i) an overstatement of costs errantly assigned to accounts payable for inventory received but not invoiced for the period ended March 31, 2021 and for the period ended June 30, 2021, (ii) an understatement of costs errantly assigned to accounts payable for inventory received but not invoiced for the period ended September 30, 2021, (iii) an overstatement of prepaid inventory and an understatement of cost of product sales and property, plant & equipment for the period ended September 30, 2021, (iv) an overstatement in finished goods inventory and an understatement of cost of product sales for the period ending September 30, 2021, (v) a reclassification between prepaid expenses and other current assets and other assets for the period ended March 31, 2021, for the period ended June 30, 2021 and for the period ended September 30, 2021, (vi) a reclassification between prepaid expenses and other current assets and lines of credit for the period ended March 31, 2021, for the period ended June 30, 2021 and for the period ended September 30, 2021, (vii) change in accrued liabilities and income tax expense for the period ended March 31, 2021, for the period ended June 30, 2021 and for the period ended September 30, 2021. The decision to restate the Company’s financial statements previously reported on its Quarterly Report on Form 10-Q for the first quarter of 2021, its Quarterly Report on Form 10-Q for the second quarter of 2021, and its Quarterly Report on Form 10-Q for the third quarter of 2021 was approved by, and with the continuing oversight of, the Company’s Audit Committee. The effects of the restatement on the line items within the Company’s condensed balance sheet as of March 31, 2021, as of June 30, 2021 and as of September 30, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2021 June 30, 2021 September 30, 2021 ​ ​ As ​ ​ ​ ​ ​ As ​ ​ ​ ​ ​ As ​ ​ ​ ​ ​ ​ Originally ​ ​ ​ As ​ Originally ​ ​ ​ As ​ Originally ​ ​ ​ As ​ Reported Adjustments Restated ​ Reported Adjustments Restated ​ Reported Adjustments Restated Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventories ​ $ 31,915 ​ $ — ​ $ 31,915 ​ $ 39,702 ​ $ — ​ $ 39,702 ​ $ 36,951 ​ $ (257) ​ $ 36,694 Prepaid expenses and other current assets ​ $ 3,649 ​ $ (553) ​ $ 3,096 ​ $ 3,860 ​ $ (535) ​ $ 3,325 ​ $ 5,805 ​ $ (2,286) ​ $ 3,519 Total current assets: ​ $ 60,847 ​ $ (553) ​ $ 60,294 ​ $ 69,731 ​ $ (535) ​ $ 69,196 ​ $ 83,437 ​ $ (2,543) ​ $ 80,894 Other assets ​ $ 8,794 ​ $ 332 ​ $ 9,126 ​ $ 9,533 ​ $ 332 ​ $ 9,865 ​ $ 10,862 ​ $ 332 ​ $ 11,194 Propert, plant and equipment, net ​ $ 24,070 ​ $ — ​ $ 24,070 ​ $ 24,422 ​ $ — ​ $ 24,422 ​ $ 26,428 ​ $ 47 ​ $ 26,475 Total assets: ​ $ 356,918 ​ $ (221) ​ $ 356,697 ​ $ 373,794 ​ $ (203) ​ $ 373,591 ​ $ 348,989 ​ $ (2,164) ​ $ 346,825 Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 9,422 ​ $ (2,023) ​ $ 7,399 ​ $ 8,193 ​ $ (2,288) ​ $ 5,905 ​ $ 6,170 ​ $ (1,983) ​ $ 4,187 Accrued liabilities ​ $ 13,677 ​ $ 346 ​ $ 14,023 ​ $ 14,701 ​ $ 390 ​ $ 15,091 ​ $ 17,073 ​ $ (24) ​ $ 17,049 Total current liabilities: ​ $ 36,264 ​ $ (1,677) ​ $ 34,587 ​ $ 37,376 ​ $ (1,898) ​ $ 35,478 ​ $ 38,937 ​ $ (2,007) ​ $ 36,930 Long-term liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lines of credit ​ $ 45,347 ​ $ (221) ​ $ 45,126 ​ $ 49,675 ​ $ (203) ​ $ 49,472 ​ $ 8,281 ​ $ (185) ​ $ 8,096 Total liabilities: ​ $ 88,657 ​ $ (1,898) ​ $ 86,759 ​ $ 93,042 ​ $ (2,101) ​ $ 90,941 ​ $ 53,349 ​ $ (2,192) ​ $ 51,157 Stockholders' equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retained earnings ​ $ 97,376 ​ $ 1,677 ​ $ 99,053 ​ $ 109,803 ​ $ 1,898 ​ $ 111,701 ​ $ 124,536 ​ $ 28 ​ $ 124,564 Total stockholders' equity ​ $ 268,261 ​ $ 1,677 ​ $ 269,938 ​ $ 280,752 ​ $ 1,898 ​ $ 282,650 ​ $ 295,640 ​ $ 28 ​ $ 295,668 Total liabilities and stockholders' equity ​ $ 356,918 ​ $ (221) ​ $ 356,697 ​ $ 373,794 ​ $ (203) ​ $ 373,591 ​ $ 348,989 ​ $ (2,164) ​ $ 346,825 ​ 62 Table of Contents The effects of the restatement on the line items within the Company’s condensed statement of operations for the three months ended March 31, 2021, for the three months ended June 30, 2021 and for the three months ended September 30, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2021 ​ Three Months Ended June 30, 2021 Three Months Ended September 30, 2021 ​ ​ As ​ ​ ​ ​ ​ ​ As ​ ​ ​ ​ ​ As ​ ​ ​ ​ ​ ​ ​ Originally ​ ​ ​ As ​ Originally ​ ​ ​ As Originally ​ ​ ​ As ​ Reported Adjustments Restated Reported Adjustments Restated Reported Adjustments Restated ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product sale ​ $ 24,024 ​ $ (2,023) ​ $ 22,001 ​ $ 28,608 ​ $ (265) ​ $ 28,343 ​ $ 33,392 ​ $ 2,284 ​ $ 35,676 ​ Income from operations ​ $ 10,660 ​ $ 2,023 ​ $ 12,683 ​ $ 14,702 ​ $ 265 ​ $ 14,967 ​ $ 17,612 ​ $ (2,284) ​ $ 15,328 ​ Income before income tax expense ​ $ 10,886 ​ $ 2,023 ​ $ 12,909 ​ $ 14,882 ​ $ 265 ​ $ 15,147 ​ $ 17,998 ​ $ (2,284) ​ $ 15,714 ​ Income tax expense ​ $ (1,862) ​ $ (346) ​ $ (2,208) ​ $ (2,454) ​ $ (44) ​ $ (2,498) ​ $ (3,265) ​ $ 544 ​ $ (2,721) ​ Net income ​ $ 9,024 ​ $ 1,677 ​ $ 10,701 ​ $ 12,428 ​ $ 221 ​ $ 12,649 ​ $ 14,733 ​ $ (1,740) ​ $ 12,993 ​ Net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.37 ​ $ 0.07 ​ $ 0.44 ​ $ 0.51 ​ $ 0.01 ​ $ 0.52 ​ $ 0.61 ​ $ (0.07) ​ $ 0.54 ​ Diluted ​ $ 0.37 ​ $ 0.07 ​ $ 0.44 ​ $ 0.51 ​ $ 0.01 ​ $ 0.52 ​ $ 0.61 ​ $ (0.07) ​ $ 0.54 ​ ​ The effects of the restatement on the line items within the Company’s condensed statement of operations for the six months ended June 30, 2021 and for the nine months ended September 30, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, 2021 Nine Months Ended September 30, 2021 ​ ​ As ​ ​ ​ ​ ​ As ​ ​ ​ ​ ​ ​ ​ Originally ​ ​ ​ As Originally ​ ​ ​ As ​ Reported Adjustments Restated ​ Reported Adjustments Restated ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product sale ​ $ 52,632 ​ $ (2,288) ​ $ 50,344 ​ $ 86,024 ​ $ (4) ​ $ 86,020 ​ Income from operations ​ $ 25,362 ​ $ 2,288 ​ $ 27,650 ​ $ 42,972 ​ $ 4 ​ $ 42,976 ​ Income before income tax expense ​ $ 25,768 ​ $ 2,288 ​ $ 28,056 ​ $ 43,764 ​ $ 4 ​ $ 43,768 ​ Income tax expense ​ $ (4,317) ​ $ (390) ​ $ (4,707) ​ $ (7,581) ​ $ 154 ​ $ (7,427) ​ Net income ​ $ 21,451 ​ $ 1,898 ​ $ 23,349 ​ $ 36,183 ​ $ 158 ​ $ 36,341 ​ Net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.89 ​ $ 0.07 ​ $ 0.96 ​ $ 1.50 ​ $ — ​ $ 1.50 ​ Diluted ​ $ 0.89 ​ $ 0.07 ​ $ 0.96 ​ $ 1.49 ​ $ 0.01 ​ $ 1.50 ​ ​ 63 Table of Contents The effects of the restatement on the line items within the condensed statement of cash flows for the three months ended March 31, 2021, for the six months ended June 30, 2021 and for the nine months ended September 30, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months March 31, 2021 Six months June 30, 2021 Nine months September 30, 2021 ​ ​ As Originally ​ ​ ​ As ​ As Originally ​ ​ ​ As ​ As Originally ​ ​ ​ As ​ ​ Reported ​ Adjustments ​ Restated ​ Reported ​ Adjustments ​ Restated ​ Reported ​ Adjustments ​ Restated Operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 9,024 ​ $ 1,677 ​ $ 10,701 ​ $ 21,451 ​ $ 1,898 ​ $ 23,349 ​ $ 36,183 ​ $ 158 ​ $ 36,341 Inventories ​ $ (3,502) ​ $ — ​ $ (3,502) ​ $ (8,864) ​ $ — ​ $ (8,864) ​ $ (4,595) ​ $ 257 ​ $ (4,338) Prepaid expenses and other current assets ​ $ (433) ​ $ 553 ​ $ 120 ​ $ (893) ​ $ 535 ​ $ (358) ​ $ (2,571) ​ $ 2,286 ​ $ (285) Other assets ​ $ (5) ​ $ (332) ​ $ (337) ​ $ (876) ​ $ (332) ​ $ (1,208) ​ $ (2,352) ​ $ (332) ​ $ (2,684) Accounts payable ​ $ (775) ​ $ (2,023) ​ $ (2,798) ​ $ (2,004) ​ $ (2,288) ​ $ (4,292) ​ $ (4,027) ​ $ (1,983) ​ $ (6,010) Accrued liabilities ​ $ (1,183) ​ $ 346 ​ $ (837) ​ $ (792) ​ $ 390 ​ $ (402) ​ $ 1,583 ​ $ (154) ​ $ 1,429 Net cash provided by (used in) operating activities ​ $ (1,692) ​ $ 221 ​ $ (1,471) ​ $ (4,978) ​ $ 203 ​ $ (4,775) ​ $ 50,226 ​ $ 232 ​ $ 50,458 Investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases of property, plant and equipment ​ $ (1,717) ​ $ — ​ $ (1,717) ​ $ (2,330) ​ $ — ​ $ (2,330) ​ $ (4,596) ​ $ (47) ​ $ (4,643) Net cash used in investing activities ​ $ (6,127) ​ $ — ​ $ (6,127) ​ $ (8,482) ​ $ — ​ $ (8,482) ​ $ (22,348) ​ $ (47) ​ $ (22,395) Financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments on lines of credit ​ $ (13,208) ​ $ (221) ​ $ (13,429) ​ $ (32,608) ​ $ (203) ​ $ (32,811) ​ $ (103,165) ​ $ (185) ​ $ (103,350) Net cash provided by (used in) financing activities ​ $ 9,459 ​ $ (221) ​ $ 9,238 ​ $ 13,501 ​ $ (203) ​ $ 13,298 ​ $ (27,793) ​ $ (185) ​ $ (27,978) ​ ​ Restated Results of Operations Comparison of Three Months ended March 31, 2021 and 2020 The cost of product sales increased $0.1 million, or 0.6%, during the three months ended March 31, 2021 as compared to the same period in 2020. Income tax expense during the three months ended March 31, 2021 was $2.2 million compared to $2.6 million for the same period in 2020. The effective tax rate for the three months ended March 31, 2021 was 17.1% and primarily 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 March 31, 2020 was 22.3% and primarily differs from the federal statutory rate of 21% primarily due to state income taxes. Comparison of Three Months ended June 30, 2021 and 2020 The cost of product sales decreased $0.3 million, or 1.2%, during the three months ended June 30, 2021 as compared to the same period in 2020. Income tax expense during the three months ended June 30, 2021 was $2.5 million compared to $3.0 million for the same period in 2020. The effective tax rate for the three months ended June 30, 2021 was 16.5% and primarily 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 primarily differs from the federal statutory rate of 21% primarily due to state income taxes. Comparison of Six Months ended June 30, 2021 and 2020 The cost of product sales decreased $0.2 million, or 0.4%, during the six months ended June 30, 2021 as compared to the same period in 2020. 64 Table of Contents Income tax expense during the six months ended June 30, 2021 was $4.7 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 16.7% and primarily 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 primarily differs from the federal statutory rate of 21% primarily due to state income taxes. Comparison of Three Months ended September 30, 2021 and 2020 The cost of product sales increased $7.8 million, or 28.2%, during the three months ended September 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. Income tax expense during the three months ended September 30, 2021 was $2.7 million compared to $2.5 million for the same period in 2020. The effective tax rate for the three months ended September 30, 2021 was 17.3% and primarily 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 September 30, 2020 was 22.7% and primarily differs from the federal statutory rate of 21% primarily due to state income taxes. Comparison of Nine Months ended September 30, 2021 and 2020 The cost of product sales increased $7.6 million, or 9.7%, during the nine months ended September 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. Income tax expense during the nine months ended September 30, 2021 was $7.4 million compared to $8.1 million for the same period in 2020. The effective tax rate for the nine months ended September 30, 2021 was 17.0% and primarily 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 nine months ended September 30, 2020 was 22.7% and primarily differs from the federal statutory rate of 21% primarily due to state income taxes. ​ ​ PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Executive Officers and Directors The following table identifies our executive officers and directors as of the date of this filing. ​ ​ ​ ​ ​ Name Age Position (s) Executive Officers and Employee Directors Curtis D. Hodgson 68 Executive Chairman of the Board Kenneth E. Shipley 62 Founder, Executive Vice President and Director R. Duncan Bates ​ 34 ​ President and Chief Executive Officer Ronald C. Arrington ​ 60 ​ Chief Financial Officer Jeffrey V. Burt 61 Chief Accounting Officer Non ‑ Employee Directors Francisco J. Coll 37 Director Joseph P. Lane 55 Director Jeffrey K. Stouder ​ 50 ​ Director ​ 65 Table of Contents The following information provides a brief description of the business experience of each executive officer and director. Executive Officers and Employee Directors Curtis D. Hodgson co-founded our company in 2005 and served as our Co-Chief Executive Officer from January 2018 to February 2019, then became our executive Chairman of the Board. He has been a member of our board of directors since January 2018. Prior to that, Mr. Hodgson served as a partner of the company’s predecessor, Legacy Housing, Ltd., and controlled its general partner. Over the past 37 years, Mr. Hodgson has owned and operated several manufactured home retail operations and manufactured housing communities in Texas. Mr. Hodgson has significant expertise in the manufactured housing industry. Mr. Hodgson earned a B.S. in Engineering from the University of Michigan and J.D. from The University of Texas. Mr. Hodgson is the co-founder, executive Chairman and one of our largest stockholders and he was selected to serve on our board of directors due to his decades of experience and deep knowledge of our industry, his leadership and substantial operational and strategic planning expertise. His service as the executive Chairman creates a critical link between management and the board. Kenneth E. Shipley co-founded our company in 2005 with Curtis D. Hodgson. Mr. Shipley was our Co-Chief Executive Officer from January 2018 and, from February 2019 to June 2022, has served as our President and sole Chief Executive Officer. Effective in June 2022, Mr. Shipley became the Execitive Vice President of the Company. He has been a member of our board of directors since January 2018, when our company converted to a corporation and prior to that, Mr. Shipley, together with Mr. Hodgson, served as a general partner of the company’s predecessor, Legacy Housing, Ltd. Mr. Shipley has more than 30 years of experience in the manufactured home industry. Since 1981, he has also owned and operated Bell Mobile Homes and Shipley Bros. in Lubbock, Texas, a manufactured home retailer. Mr. Shipley is the co-founder, Executive Vice President and one of our largest stockholders and he was selected to serve on our board of directors due to his decades of experience and knowledge of our industry, his leadership and substantial sales and distribution experience with dealers and customers in the industry. His service as a director and the Executive Vice creates a critical link between management and the board. Duncan Bates joined our company in June 2022 and serves as President and Chief Executive Officer. Mr. Bates most recently served as Senior Vice President, Mergers & Acquisitions of Arcosa Inc., a publicly traded infrastructure products company since August 2018. Under his leadership, Arcosa executed 16 acquisitions and 2 divestitures in a three and ½ year period to reposition its portfolio around growth-oriented, high-margin products. Previously, he served as a Vice President in the Industrials Investment Banking Group at Stephens Inc. from June 2015 to August 2018. From February 2012 to June 2015, he worked in the Energy Investment Banking Group at Seaport Global Securities, LLC. Mr. Bates began his career in New York at Willis Re Inc. in July 2010. Mr. Bates received his B.S. Management degree with a double major in Finance and Legal Studies from Tulane University. ​ Mr. Bates resigned from the Company’s Board upon his appointment as the President and Chief Executive Officer . ​ Ronald Arrington joined our company in May 2022 and serves as Chief Financial Officer. In this capacity, he oversees the financial actions of the Company, as well as oversight of the accounting systems, policies and financial reporting of the Company. Mr. Arrington, in a career spanning more than thirty years, has served as chief financial officer, as well as finance vice president and corporate controller for construction, retail and restaurant franchisee companies, including most recently serving as the Controller for XIT Paving and Construction. He brings extensive experience in operational finance, financial management systems, operational restructuring, and process improvement. Mr. Arrington earned his Bachelor of Business Administration from the University of Texas at Arlington and is a Certified Public Accountant. ​ Jeffrey V. Burt joined our company in September 2010 and serves as Chief Accounting Officer. In this capacity, Mr. Burt oversees all accounting functions with respect to our manufacturing facilities. Mr. Burt began his 66 Table of Contents career with our company as Controller from 2010 to 2013, then as Chief Financial Officer and Treasurer from April 2013 to July 2019. Prior to joining our company, from 1993 to 2009, Mr. Burt served as Vice President and Chief Financial Officer of Kohner Properties, Inc., a company that manages multi-family housing for owners across the central part of the United States. Mr. Burt has more than 20 years of experience in the real estate and manufactured housing industry and has expertise in the areas of accounting systems, performance reporting tools and evaluations of key performance indicators versus a company’s goals. Mr. Burt earned a B.S. degree from the University of Southern Illinois and M.B.A. from the University of Notre Dame. Non-Employee Directors Jeffrey K. Stouder was elected to our board of directors at the annual meeting of stockholders, held on December 2, 2020. He has served as the Vice President, Global Controller at E2open, LLC, a leading provider of cloud-based supply chain software and solutions, since August 2019. Previously, he served as the Chief Financial Officer at Global Resale, LLC, a global leader in aftermarket services and reverse logistics for IT hardware, from March 2018 to August 2019. From July 2015 to March 2018, Mr. Stouder served as the Corporate Controller at NBG Home, the largest provider of affordable home décor products, with manufacturing and distribution facilities across the United States and internationally. From 2000 to 2015, he served at Dell, Inc. in various accounting and finance positions including SEC Reporting Manager, Global Sales Controller, and Finance Director for Dell Services. Mr. Stouder began his career at Arthur Andersen LLP in the Dallas office, where he worked in the audit practice as staff, senior, and audit manager from 1994 to 2000. Mr. Stouder received his B.B.A. and M.S. Accounting degrees from Texas Tech University and is a certified public accountant. ​ Mr. Stouder brings over 25 years of experience in accounting, finance, audit, corporate governance, mergers, and investor relations. His expertise in these areas make him well qualified as a member of the Board. Joseph P. Lane was appointed to our board of directors on December 7, 2021 to fill the vacancy in the Board created by the resignation of Stephen Crawford. Mr. Lane is currently Co-Founder, Chairman, and Chief Executive Officer at Bingie, Inc., a technology and entertainment company offering movie and television content across all streaming platforms. Prior to Mr. Lane’s current role, he served as Co-Founder, Chairman, and Chief Executive Officer of Growth Hackers, LLC, an advertising technology company, and he served as Founder, Chairman, and Chief Executive Officer of The Service Vault, LLC, a software company. Prior to his roles with Growth Hackers LLC and The Service Vault, LLC, Mr. Lane founded Lane Custom Homes, LP, a full-service real estate development and homebuilding company and he served as a Principal in JP Lane Investments, structuring partnerships that purchased, owned, and sold single family developments and home sites. Mr. Lane holds a BA in History from the University of Pennsylvania. ​ Mr. Lane has extensive experience and knowledge of real estate development, homebuilding industry, entertainment technology and the software industry, and this expertise is highly beneficial to our company. ​ Francisco J. Coll was appointed to our board of directors on June 7, 2022 to fill the vacancy in the Board created by the resignation of Duncan Bates. Mr. Coll has served as the President of Universal Air Conditioner, Inc., a wholesale distributor of aftermarket auto parts since March 2015. Previously, he was the US Head of Sales for BTG Pactual, a Brazilian investment bank and asset manager that operates throughout Latin America, from March 2011 until March 2015. Mr. Coll began his career at UBS Investment Bank in the sales & trading and wealth management rotational program in July 2007. Mr. Coll received his B.S. degree in East Asian Studies with a minor in Financial Economics from Vanderbilt University. ​ Mr. Coll’s substantial knowledge in capital markets transactions and risk management solutions make him well qualified as a member of the Board. ​ ​ 67 Table of Contents Board Composition Our business and affairs are managed under the direction of our board of directors. The number of directors is determined by our board of directors, subject to the terms of our certificate of incorporation and bylaws. Our board of directors currently consists of five members. The Board of Directors held its inaugural meeting on February 7, 2019. Director Independence Our common stock trades on The NASDAQ Global Market. Under Nasdaq rules, independent directors must comprise a majority of a listed company’s board of directors. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees must be independent. Under Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries. Our board of directors undertook a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Jeffrey K. Stouder, R. Duncan Bates and Joseph P. Lane, representing a majority of our directors, do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under Nasdaq rules. In making these determinations, our board of directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. Board Committees Commencing with the closing of our IPO on December 14, 2018, our board of directors established three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Under Nasdaq rules, the membership of each committee consists entirely of independent directors. Given the date our committees were first established, our committees did not separately meet until early 2019. The following is a brief description of our committees. Audit committee. In accordance with our audit committee charter, our audit committee oversees our corporate accounting and financial reporting processes and our internal controls over financial reporting; evaluates the independent public accounting firm’s qualifications, independence and performance; engages and provides for the compensation of the independent public accounting firm; approves the retention of the independent public accounting firm to perform any proposed permissible non-audit services; reviews our financial statements; reviews our critical accounting policies and estimates and internal controls over financial reporting; and discusses with management and the independent registered public accounting firm the results of the annual audit and the reviews of our quarterly financial statements. We believe that our audit committee members meet the requirements for financial literacy under the current requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. In addition, the board of directors has determined that Jeffrey K. Stouder is qualified as an audit committee financial expert within the meaning of SEC regulations. We have made this determination based on information received by our board of directors. The audit committee is composed of Messrs. Stouder (Chairman), Coll and Lane. 68 Table of Contents Compensation committee. In accordance with our compensation committee charter, our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives and setting compensation of these officers based on such evaluations. The compensation committee also administers the issuance of stock options and other awards under our equity-based incentive plans. We believe that the composition of our compensation committee meets the requirements for independence under, and the functioning of our compensation committee complies with, any applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us. The compensation committee is composed of Messrs. Lane (Chairman), Coll and Stouder. Nominating and governance committee. In accordance with our nominating and governance committee charter, our nominating and governance committee recommends to the board of directors nominees for election as directors, and meets as necessary to review director candidates and nominees for election as directors; recommends members for each committee of the board; oversees corporate governance standards and compliance with applicable listing and regulatory requirements; develops and recommends to the board governance principles applicable to the company; and oversees the evaluation of the board and its committees. We believe that the composition of our nominating and governance committee meets the requirements for independence under, and the functioning of our compensation committee complies with, any applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us. The nominating and governance committee is composed of Messrs. Coll (Chairman), Lane and Stouder. Code of Business Conduct and Ethics We adopted a code of business conduct and ethics that applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, which is posted on our website. Our code of business conduct and ethics is a “code of ethics,” as defined in Item 406(b) of Regulation S-K. The information contained on, or accessible from, our website is not part of this Form 10-K by reference or otherwise. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of business conduct and ethics on our website. Compensation Committee Interlocks and Insider Participation None of the members of our compensation committee is an executive officer or employee of our company. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee. Limitations on Director and Officer Liability and Indemnification Our certificate of incorporation limits the liability of our directors to the maximum extent permitted by Texas law. Texas law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for: ● any breach of their duty of loyalty to the corporation or its stockholders; ● acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; ● unlawful payments of dividends or unlawful stock repurchases or redemptions; or ● any transaction from which the director derived an improper personal benefit. Our certificate of incorporation and our bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Texas law. Any repeal of, or modification to, our certificate of 69 Table of Contents incorporation and our bylaws may not adversely affect any right or protection of a director or officer for or with respect to any acts or omissions of such director or officer occurring prior to such amendment or repeal. Our bylaws also provide that we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification. We have entered into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our bylaws. These agreements, among other things, provide that we will indemnify our directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines, penalties and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of such person’s services as one of our directors or executive officers, or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. The limitation of liability and indemnification provisions that are contained in our certificate of incorporation and our bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. There is no pending litigation or proceeding involving one of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification. ITEM 11. EXECUTIVE COMPENSATION. Summary Compensation Table The following table sets forth summary compensation information for the following persons: (i) all persons serving as our principal executive officers during the years ended December 31, 2021 and 2020, and (ii) our three other most highly compensated executive officers who received compensation during the years ended December 31, 2021 and 2020 of at least $100,000 and who were executive officers on December 31, 2021 and 2020. We refer to these persons as our “named executive officers” in this Form 10-K. The following table includes all compensation earned by the named executive officers for the respective period, regardless of whether such amounts were actually paid during the period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock Option All Other ​ Name and Position ​ Years ​ Salary ($) ​ Bonus ($) Awards ($) Awards ($) Compensation ($) ​ Total ($) Curtis D. Hodgson 2021 49,846 — — — — 49,846 Executive Chairman (former Co-Chief Executive Officer) 2020 46,923 — — — — 46,923 Kenneth E. Shipley 2021 49,846 — — — — 49,846 President and Chief Executive Officer (former Co‑Chief Executive Officer) 2020 46,923 — — — — 46,923 Jeffrey V. Burt 2021 240,000 10,000 143,735 — — 393,735 Chief Accounting Officer 2020 230,539 10,000 120,251 — — 360,790 Thomas J. Kerkaert 2021 173,485 20,000 — 30,885 — 224,370 Chief Financial Officer (1) 2020 59,769 — — — — 59,769 Neal J. Suit 2021 — — ​ — — — Executive Vice President, General Counsel and Secretary (2) 2020 90,000 — — 56,421 — 146,421 (1) Mr. Kerkaert joined the Company’s as Chief Financial Officer in August 2020 . 70 Table of Contents (2) Mr. Suit left his position as the Company’s Executive Vice President and General Counsel in May 2020 . Mr. Hodgson and Mr. Shipley’s compensation structure, in light of the fact they have historically only received a relatively nominal salary of $50,000, is focused on increasing the equity value of our company as their primary compensation is in the value of their ownership interests in the company. Mr. Hodgson, whether individually or through entities or trusts he controls, owned 50% of the partnership interests in the company as of year-end 2017, which interests were converted to an initial allocation of 10,000,000 shares of common stock of the company upon the conversion to a corporation effective January 1, 2018. Mr. Shipley and his family members, whether individually or through an entity Mr. Shipley controls, owned 50% of the partnership interests of the company as of year-end 2017, which interests were converted into an initial allocation of 10,000,000 shares of our common stock of the company upon the conversion to a corporation. Mr. Shipley will continue to be compensated based on a fixed annual salary of $50,000. In January 2022, Mr. Hodgson entered into an amended and restated employment agreement (see Employment Agreements below). Employment Agreements On November 27, 2018, we entered into an employment agreement with each of Curtis D. Hodgson and Kenneth E. Shipley to serve as our Co-Chief Executive Officer for an initial term beginning January 1, 2018 and ending December 31, 2021. Following the initial expiration date of the employment agreements, and on each subsequent one year anniversary of such date, the term of the employment agreements will automatically be extended for one year, unless earlier terminated by either party. Generally, since founding our company, Mr. Hodgson has overseen our day-to-day business operations, including strategic planning and manufacturing, and Mr. Shipley has overseen our sales and distribution, including our company-owned retail locations. Under the employment agreements, each executive’s annual salary is $50,000, which is subject to increase at the discretion of our compensation committee. The employment agreements provide for customary provisions for the termination of the executive’s employment with us for cause (as defined in the applicable employment agreement) and for any reason other than for cause. The executive will be entitled to receive his salary for the remaining portion of the employment period if he is terminated other than for cause, payable in accordance with our company’s regular payroll practices. Additionally, in the event the executive’s employment with us is terminated within one year after a change of control (as defined in the applicable employment agreement) for reasons other than cause, we have agreed to pay the executive an amount equal to two years’ compensation at his then current rate of pay. The employment agreements also contain covenants (a) confirming that all intellectual property developed by each executive and relating to our business constitutes our sole and exclusive property, (b) prohibiting each executive from disclosing confidential information regarding our company at any time, (c) restricting each executive from engaging in any activities competitive with our business during his employment with us and for a period of one year thereafter, and (d) preventing each executive from recruiting, soliciting or hiring away employees of our company for a period of two years after his employment with us. The employment agreements are governed by the laws of the State of Delaware. On December 31, 2021, Mr. Shipley’s employment agreement was automatically extended for one year. In January 2022, Mr. Hodgson entered into an amended and restated employment agreement which provides him with an annual salary of $200,000 and a signing bonus of 150,000 shares of restricted stock, which vested upon grant. Under this new agreement, he is also eligible for an annual incentive bonus at the discretion of our compensation committee and he is eligible for equity awards if the Company’s stock price achieves certain targets. On February 7, 2019, our board of directors separated the roles of Chief Executive Officer and Chairman of the Board, consistent with corporate governance best practices. Mr. Hodgson transitioned from his role as our Co-Chief Executive Officer to become our executive Chairman of the Board and Mr. Shipley became our sole Chief Executive Officer and President. Mr. Hodgson, as an executive Chairman, will remain actively involved in our management in this role, including with respect to overall corporate strategy and manufactured home park development and financing. 71 Table of Contents Outstanding Equity Awards at December 31, 2021 The following table shows outstanding option awards held by the named executive officers as of December 31, 2021. ​ ​ ​ ​ ​ ​ ​ Name Vested Shares Unvested Shares Total Shares Curtis D. Hodgson — — — Kenneth E. Shipley — — — Jeffrey V. Burt — — — Thomas J. Kerkaert (1) ​ 6,925 ​ 27,701 ​ 34,626 (1) Mr. Kerkaert was awarded options to purchase 34,626 shares of common stock under our 2018 Incentive Compensation Plan. The grant date of the options was August 10, 2020 and the strike price is $14.44. The options vest at a rate of 20.0% annually, beginning August 10, 2021, until fully vested on August 10, 2025. The options expire on August 10, 2030. ​ 2018 Incentive Compensation Plan Our board of directors and the holders of a majority of our outstanding shares of common stock adopted our 2018 Incentive Compensation Plan (the “Plan”) prior to the closing of our IPO. The purpose of our Plan is to assist us in attracting, motivating, retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide services to us. We have set aside an aggregate of 2,500,000 shares of common stock (including stock options) as additional compensation that we expect to award to our officers, directors and key personnel under the terms of our Plan, and this amount will not exceed 10% of the then outstanding shares of our common stock. Administration. Our Plan is to be administered by our Compensation Committee, provided, however, that except as otherwise expressly provided in the Plan, the board of directors may exercise any power or authority granted to the committee under our Plan. Subject to the terms of our Plan, the committee is authorized to select eligible persons to receive awards, determine the type, number and other terms and conditions of, and all other matters relating to, awards, prescribe award agreements (which need not be identical for each participant), and the rules and regulations for the administration of the Plan, construe and interpret the Plan and award agreements, and correct defects, supply omissions or reconcile inconsistencies in them, and make all other decisions and determinations as the committee may deem necessary or advisable for the administration of our Plan. Eligibility. The persons eligible to receive awards under our Plan are the officers, directors, employees, consultants and other persons who provide services to us. An employee on leave of absence may be considered as still in the employ of our company for purposes of eligibility for participation in our Plan. Types of Awards. Our Plan provides for the issuance of stock options, stock appreciation rights, or SARs, restricted stock, deferred stock, dividend equivalents, bonus stock and awards in lieu of cash compensation, other stock-based awards and performance awards. Performance awards may be based on the achievement of specified business or personal criteria or goals, as determined by the committee. Shares Available for Awards. The total number of shares of common stock that may be subject to the granting of awards under our Plan at any time during the term of the Plan will be equal to 2,500,000 shares. This limit will be increased by the number of shares with respect to which awards previously granted under our Plan that are forfeited, expire or otherwise terminate without issuance of shares, or that are settled for cash or otherwise do not result in the issuance of shares, and the number of shares that are tendered (either actually or by attestation) or withheld upon exercise of an award to pay the exercise price or any tax withholding requirements. Stock Options and Stock Appreciation Rights. The committee is authorized to grant stock options, including both incentive stock options, or ISOs, which can result in potentially favorable tax treatment to the participant, and non-qualified stock options, and stock appreciation rights entitling the participant to receive the amount by which the fair 72 Table of Contents market value of a share of common stock on the date of exercise exceeds the grant price of the stock appreciation right. The exercise price per share subject to an option and the grant price of a stock appreciation right are determined by the committee, but in the case of an ISO must not be less than the fair market value of a share of common stock on the date of grant. For purposes of our Plan, the term “fair market value” means the fair market value of common stock, awards or other property as determined by the committee or under procedures established by the committee. The maximum term of each option or stock appreciation right, the times at which each option or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised options or stock appreciation rights at or following termination of employment generally are fixed by the committee, except that no option or stock appreciation right may have a term exceeding ten years. Restricted and Deferred Stock. The committee is authorized to grant restricted stock and deferred stock. Restricted stock is a grant of shares of common stock which may not be sold or disposed of, and which may be forfeited in the event of certain terminations of employment, prior to the end of a restricted period specified by the committee. A participant granted restricted stock generally has all of the rights of a stockholder of our company, unless otherwise determined by the committee. An award of deferred stock confers upon a participant the right to receive shares of common stock at the end of a specified deferral period, subject to possible forfeiture of the award in the event of certain terminations of employment prior to the end of a specified restricted period. Prior to settlement, an award of deferred stock carries no voting or dividend rights or other rights associated with share ownership, although dividend equivalents may be granted, as discussed below. Other Terms of Awards. Awards may be settled in the form of cash, shares of common stock, other awards or other property, in the discretion of the committee. The committee may require or permit participants to defer the settlement of all or part of an award in accordance with such terms and conditions as the committee may establish, including payment or crediting of interest or dividend equivalents on deferred amounts, and the crediting of earnings, gains and losses based on deemed investment of deferred amounts in specified investment vehicles. The committee is authorized to place cash, shares of common stock or other property in trusts or make other arrangements to provide for payment of our obligations under our Plan. Awards under our Plan are generally granted without a requirement that the participant pay consideration in the form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law. The committee may, however, grant awards in exchange for other awards under our Plan, awards under other company plans or other rights to payment from us, and may grant awards in addition to and in tandem with such other awards, rights or other awards. Acceleration of Vesting; Change in Control. The committee may, in its discretion, accelerate the exercisability, the lapsing of restrictions or the expiration of deferral or vesting periods of any award, and such accelerated exercisability, lapse, expiration and if so provided in the award agreement or otherwise determined by the committee, vesting will occur automatically in the case of a “change in control” of our company, as defined in our Plan (including the cash settlement of stock appreciation rights which may be exercisable in the event of a change in control). In addition, the committee may provide in an award agreement that the performance goals relating to any performance award will be deemed to have been met upon the occurrence of any “change in control.” Amendment and Termination. The board of directors may amend, alter, suspend, discontinue or terminate our Plan or the committee’s authority to grant awards without further stockholder approval, except stockholder approval must be obtained for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock exchange or quotation system on which shares of common stock are then listed or quoted. Thus, stockholder approval may not necessarily be required for every amendment to our Plan which might increase the cost of our Plan or alter the eligibility of persons to receive awards. Stockholder approval will not be deemed to be required under laws or regulations, such as those relating to ISOs, that condition favorable treatment of participants on such approval, although the board of directors may, in its discretion, seek stockholder approval in any circumstance in which it deems such approval advisable. Our Plan will terminate at the earliest of (a) such time as no shares of common stock remain available for issuance under our Plan, (b) termination of our Plan by the board of directors, or (c) the tenth anniversary of the effective date of the Plan. Awards outstanding upon expiration of our Plan will remain in effect until they have been exercised or terminated, or have expired. 73 Table of Contents It is intended that any amounts payable under the Plan will either be exempt from Section 409A of the Code or will comply with Section 409A (including Treasury regulations and other published guidance related thereto) so as not to subject an employee to payment of any other additional tax, penalty or interest imposed under Section 409A of the Code. Director Compensation We currently compensate each non-employee director through annual stock option grants and by paying annual fees for their participation on the board and on respective board committees. Our board members will receive compensation of $10,000 per quarter, as well as an annual award of $10,000 in stock option grants that vest as of the next annual meeting or in one year. Our board of directors review director compensation annually or when circumstances exist requiring reexamination and adjust it according to then current market conditions and good business practices. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. TO BE UPDATED The following table and accompanying footnotes set forth certain information with respect to the beneficial ownership of our common stock as of March 10, 2022, referred to in the table below as the “Beneficial Ownership Date,” by: ● each person who is known to be the beneficial owner of 5% or more of the outstanding shares of our common stock; ● each of our current directors and director nominees and each of our named executive officers individually; and ● all our current directors, director nominees and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to stock options or warrants held by that person that are currently exercisable or exercisable within 60 days of the Beneficial Ownership Date and shares of restricted stock subject to vesting until the occurrence of certain events are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Percentage of beneficial ownership is based on 24,406,020 shares of common stock outstanding as of the Beneficial Ownership Date. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth 74 Table of Contents opposite such person’s name. Except as otherwise indicated, the address of each of the persons in this table is c/o Legacy Housing Corporation, 1600 Airport Freeway, #100, Bedford, Texas 76022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of Common ​ ​ ​ Stock Beneficially ​ ​ ​ Owned ​ Name and Address of Beneficial Owner Number of Shares Percentage Directors and Executive Officers Curtis D. Hodgson (1) 6,078,411 25.1 % Kenneth E. Shipley (2) 3,181,667 13.1 % Thomas Kerkaert (3) ​ 6,925 ​ * ​ Jeffrey V. Burt (4) 10,714 * Robert D. Bates ​ 1,075 ​ * ​ Joseph P. Lane ​ 400 ​ — ​ Jeffrey K. Stouder ​ 1,075 ​ * ​ 5% Stockholders William Shipley (2) 3,114,072 12.9 % Douglas Shipley (2) 3,136,667 13.0 % All directors, director nominees and executive officers as a group (9 persons) 9,280,267 38.3 % * Less than 1% of outstanding shares of common stock (1) Mr. Hodgson’s beneficial ownership includes 1,000,000 shares of common stock owned by Hodgson Ventures, a Texas limited partnership, of which Mr. Hodgson is the general partner, 2,770,594 shares of common stock owned by the Hodgson 2015 Grandchild’s Trust, of which Mr. Hodgson shares voting and investment power with respect to such shares and 100,000 shares owned by Cusach, Inc., an entity controlled by Mr. Hodgson. (2) Kenneth E. Shipley’s beneficial ownership includes 100,000 shares of common stock owned by Shipley Bros., Ltd., an entity controlled by Kenneth E. Shipley. Each of Kenneth E. Shipley’s brothers, William Shipley and Douglas Shipley, owns 3,114,072 and 3,136,667 shares of our common stock, respectively, as to which shares Kenneth E. Shipley disclaims any beneficial interest. (3) Mr. Kerkaert’s beneficial ownership consists of 6,925 shares of common stock underlying stock options, representing 20.0% of the 34,626 stock options granted to him during the five-year period commencing August 10, 2020 under our 2018 Incentive Compensation Plan, which were exercised in September 2021. (4) Mr. Burt’s beneficial ownership consists of 10,714 shares of common stock, representing 42.9% of the 60,000 shares of common stock granted to him during the seven-year period commencing February 7, 2019 under our 2018 Incentive Compensation Plan, which are currently vested, less 5,143 shares sold during 2019 and 9,857 shares sold during 2020. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Transactions and Relationships with Directors, Officers and 5% Stockholders Bell Mobile Homes, a retailer owned by one of the Company’s significant shareholders, purchases manufactured homes from the Company. Accounts receivable balances due from Bell Mobile Homes were $1,000 and $1,000 as of December 31, 2021 and 2020, respectively. Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $49,000 and $61,000 as of December 31, 2021 and 2020, respectively. Home 75 Table of Contents sales to Bell Mobile Homes were $3,724,000 and $2,631,000 for the years ended December 31, 2021 and 2020, respectively. Indemnification Agreements We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Texas law. Corporate Conversion Effective January 1, 2018, we converted to a Delaware corporation and changed our name to Legacy Housing Corporation. Prior to January 1, 2018, we were a Texas limited partnership controlled by our Executive Chairman and President and Chief Executive Officer. Upon the corporate conversion, all of our outstanding partnership interests were exchanged on a proportional basis for shares of common stock of Legacy Housing Corporation. The conversion qualified as a tax free transaction under Section 351 of the Internal Revenue Code. Effective December 31, 2019, the Company converted from a Delaware corporation to a Texas corporation. Policies and Procedures for Transactions with Related Persons Our board of directors adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions. Related persons include any executive officer, director or a holder of more than 5% of our common stock, including any of their immediate family members and any entity owned or controlled by such persons. Related person transactions refer to any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which (i) we were or are to be a participant, (ii) the amount involved exceeds $120,000, and (iii) a related person had or will have a direct or indirect material interest. Related person transactions include, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness, and employment by us of a related person, in each case subject to certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act. The policy provides that in any related person transaction, our audit committee and board of directors will consider all of the available material facts and circumstances of the transaction, including the direct and indirect interests of the related persons, in the event the related person is a director (or immediate family member of a director or an entity with which a director is affiliated), the impact that the transaction will have on a director’s independence, the risks, costs and benefits of the transaction to us, and whether any alternative transactions or sources for comparable services or products are available. After considering all such facts and circumstances, our audit committee and board of directors will determine whether approval or ratification of the related person transaction is in our best interests. For example, if our audit committee determines that the proposed terms of a related person transaction are reasonable and at least as favorable as could have been obtained from unrelated third parties, it will recommend to our board of directors that such transaction be approved or ratified. In addition, if a related person transaction will compromise the independence of one of our directors, our audit committee may recommend that our board of directors reject the transaction if it could affect our ability to comply with securities laws and regulations or Nasdaq listing requirements. Each transaction described above was entered into prior to the adoption of our audit committee charter and the foregoing policy. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Weaver, LLP served as our independent registered public accountants for the year ended December 31, 2021 and BKD, LLP served as our independent registered public accountants for the year ended December 31, 2020. 76 Table of Contents Audit Fees ​ For our fiscal year ended December 31, 2021, we were billed approximately $77,000 for professional services rendered by Weaver, LLP and for our fiscal year ended December 31, 2020, we were billed approximately $358,000 for professional services rendered by BKD, LLP. Audit fees consist of the aggregate fees billed for (i) the audit of our annual financial statements included herein (ii) services that are normally provided in connection with statutory and regulatory filings or engagements such as comfort letters, consents and other services, and (iii) accounting consultations. Audit Related Fees There were no fees for audit related services rendered by our independent auditors for the years ended December 31, 2021 and 2020. Tax Fees For our fiscal years ended December 31, 2021 and 2020, there were no fees for professional services rendered by our independent auditors for tax compliance, tax advice, and tax planning. All Other Fees There were no fees that fell into the classification of “Other Fees” for our fiscal years ended December 31, 2021 and 2020. ​ Pre-Approval Policies Following the appointment of all three current members to the Board’s audit committee, such committee began its activities in December 2018. Prior to then, all of the above services and fees were reviewed and approved by the entire Board. No services were performed before or without approval. ​ 77 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. Exhibit Number ​ Description ​ ​ ​ 3.1 ​ Amended and Restated Certificate of Incorporation of Legacy Housing Corporation. 3.2 ​ Amended and Restated Bylaws of Legacy Housing Corporation. 4.1 ​ Specimen Common Stock Certificate. 4.2 * Description of Securities of the Registrant 10.1 † 2018 Incentive Compensation Plan . 10.2 ​ Promissory Note, dated December 14, 2011, from Legacy Housing, Ltd. to Capital One, N.A. 10.3 ​ Amended and Restated Promissory Note, dated December 12, 2013, from Legacy Housing, Ltd. to Capital One, N.A . 10.4 ​ Second Amended and Restated Promissory Note, dated March 31, 2014, from Legacy Housing, Ltd. to Capital One, N.A. 10.5 ​ Third Amended and Restated Promissory Note, dated May 12, 2017, from Legacy Housing, Ltd. to Capital One, N.A. 10.6 ​ Fourth Amendment to Loan and Security Agreement, dated July 2015, between Legacy Housing, Ltd. and Capital One, N.A. 10.7 ​ Amended and Restated Promissory Note, dated April 4, 2016, from Legacy Housing, Ltd. to Veritex Community Bank . 10.8 ​ Promissory Note, dated April 7, 2011, from Legacy Housing, Ltd. to Woodhaven Bank Fossil Creek, a Branch of Woodhaven National Bank. 10.9 ​ Promissory Note, dated May 24, 2016, from Legacy Housing, Ltd. to Eagle One, LLC. 10.10 ​ Promissory Note, dated February 16, 2016, from Legacy Housing, Ltd. to DT Casualty Insurance Company Ltd. 10.11 ​ Lease Agreement, dated as of December 1, 2016, between Putnam Development Authority and Legacy Housing, Ltd., together with related Option Agreement. 10.12 ​ Bond Purchase Loan Agreement, dated as of December 1, 2016, between Putnam Development Authority and Legacy Housing, Ltd. 10.13 ​ Form of Indemnification Agreement. 10.14 ​ Form of Non-Disclosure, Non-Competition and Non-Solicitation Agreement between Legacy Housing Corporation and its employees. 10.15 † Employment Agreement, dated as of November 27, 2018, between Legacy Housing Corporation and Curtis D. Hodgson. 10.16 † Employment Agreement, dated as of November 27, 2018, between Legacy Housing Corporation and Kenneth E. Shipley . 10.17 ​ Loan and Security Agreement, dated December 14, 2011, between Legacy Housing, Ltd. and Capital One, N.A. 10.18 ​ First Amendment to Loan and Security Agreement, dated December 12, 2013, between Legacy Housing, Ltd. and Capital One, N.A . 10.19 ​ Second Amendment to Loan and Security Agreement, dated March 31, 2014, between Legacy Housing, Ltd. and Capital One, N.A. 10.20 ​ Third Amendment to Loan and Security Agreement, dated May 20, 2014, between Legacy Housing, Ltd. and Capital One, N.A . 10.21 ​ Amendment to Loan and Security Agreement, dated May 12, 2017, between Legacy Housing, Ltd. and Capital One, N.A. 10.22 ​ Loan Agreement, dated April 4, 2016, by and between Legacy Housing, Ltd. and Veritex Bank. 10.23 † Amended and Restated Employment Agreement, dated as of January 5, 2022, between Legacy Housing Corporation and Curtis D. Hodgson (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed on January 6, 2022). 14.1 ​ Code of Ethics and Business Conduct. 78 Table of Contents Exhibit Number ​ Description ​ ​ ​ 14.2 ​ Code of Ethics for the CEO and Senior Financial Officers. 31.1 * Rule 13a-14(a)/15d-14(a) Certification. 31.2 * Rule 13a-14(a)/15d-14(a) Certification. 32.1 * Section 1350 Certifications . 32.2 * Section 1350 Certifications. 101.INS ​ Inline XBRL Instance Document 101.SCH ​ Inline XBRL Taxonomy Extension Schema Document 101.CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF ​ Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB ​ Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) ​ Unless otherwise indicated, each document was filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-228288). † Compensatory plan or agreement. * Filed herewith. ​ ​ ​ (a)2. ​ Financial Statement Schedules ​ ​ ​ ​ ​ There are no Financial Statement Schedules included with this filing for the reason that they are not applicable or are not required or the information is included in the financial statements or notes thereto. ​ ​ ​ ​ 79 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ ​ ​ LEGACY HOUSING CORPORATION ​ ​ ​ ​ ​ ​ ​ By: /s/ R. Duncan Bates ​ ​ Name: R. Duncan Bates ​ ​ Title: President and Chief Executive Officer ​ ​ Date: August 3, 2022 ​ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Signature ​ ​ ​ Title ​ ​ ​ ​ ​ Date ​ ​ ​ ​ ​ ​ /s/ Curtis D. Hodgson Curtis D. Hodgson Executive Chairman of the Board August 3, 2022 ​ ​ ​ /s/ Kenneth E. Shipley Kenneth E. Shipley Executive Vice President and Director ( principal executive officer ) August 3, 2022 ​ ​ ​ /s/ Ronald C. Arrington Chief Financial Officer ( principal August 3, 2022 Ronald C. Arrington financial officer ) ​ ​ ​ ​ /s/ Jeffrey V. Burt Jeffrey V. Burt Chief Accounting Officer ( principal accounting officer ) August 3, 2022 ​ ​ ​ /s/ Jeffrey K. Stouder Jeffrey K. Stouder Director August 3, 2022 ​ ​ ​ /s/ Joseph P. Lane Joseph P. Lane Director August 3, 2022 ​ ​ ​ /s/ Francisco J. Coll Francisco J. Coll Director August 3, 2022 ​ ​ ​ ​ 80