Legacy Housing Corp 10-Q

Item 1. Financial Statements LEGACY HOUSING CORPORATION CONDENSED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ ​ 2022 ​ 2021 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 14,267 ​ $ 1,042 Accounts receivable, net ​ 5,688 ​ 5,118 Accounts receivable - dealer financed ​ ​ 10,394 ​ ​ 3,496 Current portion of consumer loans receivable ​ 5,759 ​ 6,080 Current portion of notes receivable from mobile home parks (“MHP”) ​ 10,310 ​ 10,049 Current portion of other notes receivable ​ 16,791 ​ 21,070 Inventories ​ 46,770 ​ 41,230 Prepaid expenses and other current assets ​ 4,284 ​ 4,456 Total current assets ​ 114,263 ​ 92,541 Consumer loans receivable, net ​ 125,172 ​ 119,543 Notes receivable from mobile home parks (“MHP”) ​ 111,972 ​ 92,943 Other notes receivable, net ​ 14,090 ​ 20,930 Inventories, net ​ ​ 4,603 ​ ​ 2,678 Other assets - leased mobile homes ​ ​ 9,943 ​ ​ 9,419 ROU assets - operating leases ​ ​ 3,083 ​ ​ — Other assets ​ 1,406 ​ 1,097 Property, plant and equipment, net ​ 28,497 ​ 27,516 Total assets ​ $ 413,029 ​ $ 366,667 Liabilities and Stockholders' Equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 5,505 ​ $ 4,155 Accrued liabilities ​ 14,980 ​ 20,686 Customer deposits ​ 11,934 ​ 7,749 Escrow liability ​ 9,771 ​ 9,350 Operating lease obligation ​ ​ 662 ​ ​ — Total current liabilities ​ 42,852 ​ 41,940 Long‑term liabilities: ​ ​ Operating lease obligation, less current portion ​ ​ 2,525 ​ ​ — Lines of credit ​ 12,614 ​ 7,993 Deferred income taxes, net ​ ​ 3,004 ​ ​ 3,004 Dealer incentive liability ​ 4,974 ​ 4,336 Total liabilities ​ 65,969 ​ 57,273 Commitments and contingencies (Note 13) ​ ​ Stockholders' equity: ​ ​ ​ ​ ​ ​ Preferred stock, $ .001 par value, 10,000,000 shares authorized: no shares issued or outstanding ​ ​ — ​ ​ — Common stock, $ .001 par value, 90,000,000 shares authorized; 24,851,085 and 24,654,621 issued and 24,406,020 and 24,209,556 outstanding at June 30, 2022 and December 31, 2021, respectively ​ ​ 29 ​ ​ 25 Treasury stock at cost, 445,065 shares at June 30, 2022 and December 31, 2021 ​ ​ ( 4,477 ) ​ ​ ( 4,477 ) Additional paid-in-capital ​ ​ 179,932 ​ ​ 175,623 Retained earnings ​ ​ 171,576 ​ ​ 138,223 Total stockholders' equity ​ ​ 347,060 ​ ​ 309,394 Total liabilities and stockholders' equity ​ $ 413,029 ​ $ 366,667 See accompanying notes to condensed financial statements. ​ 2 Table of Contents LEGACY HOUSING CORPORATION CONDENSED STATEMENTS OF INCOME (in thousands, except share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, ​ Six months ended June 30, ​ ​ ​ 2022 ​ 2021 2022 2021 ​ Net revenue: ​ ​ (restated) ​ ​ (restated) Product sales ​ $ 55,098 ​ $ 41,115 ​ $ 106,885 ​ $ 73,389 ​ Consumer and MHP loans interest ​ 7,497 ​ 6,734 ​ 14,262 ​ 13,372 ​ Other ​ 1,616 ​ 740 ​ 2,992 ​ 1,767 ​ Total net revenue ​ 64,211 ​ 48,589 ​ 124,139 ​ 88,528 ​ Operating expenses: ​ ​ ​ ​ ​ Cost of product sales ​ 37,411 ​ 28,343 ​ 71,138 ​ 50,344 ​ Selling, general and administrative expenses ​ 5,901 ​ 5,165 ​ 13,560 ​ 9,958 ​ Dealer incentive ​ 439 ​ 114 ​ 713 ​ 576 ​ Income from operations ​ 20,460 ​ 14,967 ​ 38,728 ​ 27,650 ​ Other income (expense): ​ ​ ​ ​ ​ Non‑operating interest income ​ 783 ​ 429 ​ 1,635 ​ 677 ​ Miscellaneous, net ​ 17 ​ 34 ​ 603 ​ 238 ​ Interest expense ​ ( 183 ) ​ ( 283 ) ​ ( 239 ) ​ ( 509 ) ​ Total other ​ 617 ​ 180 ​ 1,999 ​ 406 ​ Income before income tax expense ​ 21,077 ​ 15,147 ​ 40,727 ​ 28,056 ​ Income tax expense ​ ( 3,816 ) ​ ( 2,498 ) ​ ( 7,375 ) ​ ( 4,707 ) ​ Net income ​ $ 17,261 ​ $ 12,649 ​ $ 33,352 ​ $ 23,349 ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 24,406,020 ​ ​ 24,202,631 ​ ​ 24,355,412 ​ ​ 24,200,879 ​ Diluted ​ ​ 24,922,125 ​ ​ 24,234,913 ​ ​ 24,773,345 ​ ​ 24,229,265 ​ Net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.71 ​ $ 0.52 ​ $ 1.37 ​ $ 0.96 ​ Diluted ​ $ 0.69 ​ $ 0.52 ​ $ 1.35 ​ $ 0.96 ​ ​ See accompanying notes to condensed financial statements. ​ 3 Table of Contents LEGACY HOUSING CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (unaudited, in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ ​ 2022 2021 Operating activities: ​ ​ (restated) Net income ​ $ 33,352 ​ $ 23,349 ​ Adjustments to reconcile net income to net cash used in operating activities: ​ ​ ​ Depreciation and amortization expense ​ 880 ​ 754 ​ Amortization of deferred revenue ​ ​ ( 727 ) ​ ​ 267 ​ Provision for accounts and notes receivable ​ ​ 29 ​ ​ 558 ​ Provision for long term inventory ​ ​ ( 117 ) ​ ​ — ​ Share based payment expense ​ ​ 4,313 ​ ​ 108 ​ Changes in operating assets and liabilities: ​ ​ ​ Accounts receivable ​ ( 684 ) ​ ( 2,040 ) ​ Consumer loans activity, net ​ ( 5,205 ) ​ ( 5,337 ) ​ Notes receivable MHP activity, net ​ ( 19,169 ) ​ ( 10,221 ) ​ Dealer inventory loan activity, net ​ ​ ( 6,937 ) ​ ​ — ​ Inventories ​ ( 7,122 ) ​ ( 8,864 ) ​ Prepaid expenses and other current assets ​ 146 ​ ( 358 ) ​ Other assets ​ ( 4,265 ) ​ ( 1,208 ) ​ Accounts payable and accrued liabilities ​ ( 3,939 ) ​ ( 4,694 ) ​ Customer deposits ​ 4,185 ​ 2,125 ​ Escrow liability ​ ​ 666 ​ ​ 1,008 ​ Dealer incentive liability ​ 638 ​ ( 222 ) ​ Net cash used in operating activities ​ ( 3,956 ) ​ ( 4,775 ) ​ Investing activities: ​ ​ ​ Purchases of property, plant and equipment ​ ( 1,506 ) ​ ( 2,330 ) ​ Issuance of notes receivable ​ ( 2,423 ) ​ ( 13,554 ) ​ Notes receivable collections ​ ​ 13,731 ​ ​ 5,940 ​ Collections from purchased loans ​ ​ 270 ​ ​ 1,462 ​ Net cash provided by (used in) investing activities ​ 10,072 ​ ( 8,482 ) ​ Financing activities: ​ ​ ​ Proceeds from other liabilities ​ 2,525 ​ — ​ Proceeds from lines of credit ​ 62,863 ​ 46,109 ​ Payments on lines of credit ​ ( 58,279 ) ​ ( 32,811 ) ​ Net cash provided by financing activities ​ 7,109 ​ 13,298 ​ Net increase in cash and cash equivalents ​ 13,225 ​ 41 ​ Cash and cash equivalents at beginning of period ​ 1,042 ​ 768 ​ Cash and cash equivalents at end of period ​ $ 14,267 ​ $ 809 ​ Supplemental disclosure of cash flow information: ​ ​ ​ Cash paid for interest ​ $ 204 ​ $ 464 ​ Cash paid for taxes ​ $ 9,601 ​ $ 5,700 ​ ​ See accompanying notes to condensed financial statements. ​ 4 Table of Contents ​ ​ ​ LEGACY HOUSING CORPORATION ​ CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Treasury ​ Additional ​ Retained ​ ​ ​ ​ Shares Amount stock paid-in-capital earnings Total Balances, December 31, 2020 ​ 24,639,125 ​ $ 25 ​ $ ( 4,477 ) ​ $ 175,293 ​ $ 88,352 ​ $ 259,193 Share based compensation expense and stock units vested ​ 8,571 ​ ​ — ​ ​ — ​ ​ 44 ​ ​ — ​ ​ 44 Net income (restated) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 10,700 ​ ​ 10,700 Balances, March 31, 2021 (restated) ​ 24,647,696 ​ ​ 25 ​ ​ ( 4,477 ) ​ ​ 175,337 ​ ​ 99,052 ​ ​ 269,937 Share based compensation expense and stock units vested ​ — ​ ​ — ​ ​ — ​ ​ 64 ​ ​ — ​ ​ 64 Net income (restated) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 12,649 ​ ​ 12,649 Balances, June 30, 2021 (restated) ​ 24,647,696 ​ ​ 25 ​ ​ ( 4,477 ) ​ ​ 175,401 ​ ​ 111,701 ​ ​ 282,650 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Treasury ​ Additional ​ Retained ​ ​ ​ ​ Shares Amount stock ​ paid-in-capital earnings Total Balances, December 31, 2021 ​ 24,654,621 ​ $ 25 ​ $ ( 4,477 ) ​ $ 175,623 ​ $ 138,223 ​ $ 309,394 Share based compensation expense and stock units vested ​ 158,571 ​ ​ 4 ​ ​ — ​ ​ 4,003 ​ ​ — ​ ​ 4,007 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 16,092 ​ ​ 16,092 Balances, March 31, 2022 ​ 24,813,192 ​ ​ 29 ​ ​ ( 4,477 ) ​ ​ 179,626 ​ ​ 154,315 ​ ​ 329,493 Share based compensation expense and stock units vested ​ — ​ ​ — ​ ​ — ​ ​ 306 ​ ​ — ​ ​ 306 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 17,261 ​ ​ 17,261 Balances, June 30, 2022 ​ 24,813,192 ​ ​ 29 ​ ​ ( 4,477 ) ​ ​ 179,932 ​ ​ 171,576 ​ ​ 347,060 ​ See accompanying notes to condensed financial statements. ​ ​ 5 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ 1. NATURE OF OPERATIONS Legacy Housing Corporation (referred herein as ”Legacy”, “we”, “our”, “us”, or the “Company”) was formed on January 1, 2018 as a Delaware corporation through a corporate conversion of Legacy Housing, Ltd. (the “Partnership”), a Texas limited partnership formed in May 2005. Effective December 31, 2019, the Company reincorporated from a Delaware corporation to a Texas corporation. The Company is headquartered in Bedford, Texas. The Company (1) manufactures and provides for the transport of mobile homes, (2) provides wholesale financing to dealers and mobile home parks, (3) provides retail financing to consumers and (4) is involved in financing and developing new manufactured home communities. The Company manufactures its mobile homes at plants located in Fort Worth, Texas, Commerce, Texas and Eatonton, Georgia. The Company relies on a network of dealers to market and sell its mobile homes. The Company also sells homes directly to dealers and mobile home parks. In December 2018, the Company sold 4,000,000 shares of its common stock through an initial public offering (“IPO”) at $ 12.00 per share. Proceeds from the IPO, net of $ 4,504 of underwriting discounts and offering expenses paid by the Company, were $ 43,492 . In January 2019, the Company sold an additional 600,000 shares of its common stock as part of the IPO at $ 12.00 per share. Proceeds from the January 2019 issuance, net of $ 505 of underwriting discounts and offering expenses paid by the Company, were $ 6,695 . On April 17, 2019, the Company purchased 300,000 shares of its common stock at the price of $ 10.20 per share, pursuant to the Company’s repurchase program. During the year ended December 31, 2020, the Company purchased 145,065 shares of its common stock at an average price of $ 9.77 per share, pursuant to the Company’s repurchase program. Under the repurchase program, the Company may purchase up to $ 10,000 of its common stock. Share purchases may be made from time to time in the open market or through privately negotiated transactions depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be made in accordance with applicable insider trading and other securities laws and regulations. These repurchases may be commenced or suspended at any time or from time to time without prior notice. Corporate Conversion Effective January 1, 2018, the Partnership converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Legacy Housing Corporation. In order to consummate the corporate conversion completed on January 1, 2018, a certificate of conversion was filed with the Secretary of State of the State of Delaware and with the Secretary of State of the State of Texas. Holders of partnership interests in Legacy Housing, Ltd. received an initial allocation, on a proportional basis, of 20,000,000 shares of common stock of Legacy Housing Corporation. Following the corporate conversion, Legacy Housing Corporation continues to hold all property and assets of Legacy Housing, Ltd. and all of the debts and obligations of Legacy Housing, Ltd. On the effective date of the corporate conversion, the officers of Legacy Housing, Ltd. became the officers of Legacy Housing Corporation. As a result of the corporate conversion, the Company is now a federal corporate taxpayer. Basis of Presentation The accompanying unaudited interim condensed financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03. In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 6 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ 2022, or any other period. The accompanying balance sheet as of December 31, 2021 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2021 (the "Form 10-K"). The accompanying financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net income. Restatement of Previously Issued Condensed Financial Statements (unaudited) As previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company has restated its interim financial statements for the period ended June 30, 2021 to correct (i) an overstatement of costs errantly assigned to accounts payable for inventory received but not invoiced, (ii) a reclassification between prepaid expenses and other current assets and other assets, (iii) a reclassification between prepaid expenses and other current assets and lines of credit, and (iv) a change in accrued liabilities and income tax expense. The effects of the restatement on the line items within the Company’s condensed statement of income for the three months ended June 30, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, 2021 ​ ​ As ​ ​ ​ ​ ​ ​ ​ Originally ​ ​ ​ As ​ Reported Adjustments Restated Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product sale ​ $ 28,608 ​ $ ( 265 ) ​ $ 28,343 Income from operations ​ $ 14,702 ​ $ 265 ​ $ 14,967 Income before income tax expense ​ $ 14,882 ​ $ 265 ​ $ 15,147 Income tax expense ​ $ ( 2,454 ) ​ $ ( 44 ) ​ $ ( 2,498 ) Net income ​ $ 12,428 ​ $ 221 ​ $ 12,649 Net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.51 ​ $ 0.01 ​ $ 0.52 Diluted ​ $ 0.51 ​ $ 0.01 ​ $ 0.52 ​ The effects of the restatement on the line items within the Company’s condensed statement of income for the six months ended June 30, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, 2021 ​ ​ As ​ ​ ​ ​ ​ ​ ​ Originally ​ ​ ​ As ​ Reported Adjustments Restated Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product sale ​ $ 52,632 ​ $ ( 2,288 ) ​ $ 50,344 Income from operations ​ $ 25,362 ​ $ 2,288 ​ $ 27,650 Income before income tax expense ​ $ 25,768 ​ $ 2,288 ​ $ 28,056 Income tax expense ​ $ ( 4,317 ) ​ $ ( 390 ) ​ $ ( 4,707 ) Net income ​ $ 21,451 ​ $ 1,898 ​ $ 23,349 Net income per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.89 ​ $ 0.07 ​ $ 0.96 Diluted ​ $ 0.89 ​ $ 0.07 ​ $ 0.96 ​ ​ 7 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ The effects of the restatement on the line items within the Company’s condensed statement of cash flows for the six months ended June 30, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months June 30, 2021 ​ ​ As Originally ​ ​ ​ As ​ ​ Reported ​ Adjustments ​ Restated Operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 21,451 ​ $ 1,898 ​ $ 23,349 Inventories ​ $ ( 8,864 ) ​ $ — ​ $ ( 8,864 ) Prepaid expenses and other current assets ​ $ ( 893 ) ​ $ 535 ​ $ ( 358 ) Other assets ​ $ ( 876 ) ​ $ ( 332 ) ​ $ ( 1,208 ) Accounts payable ​ $ ( 2,004 ) ​ $ ( 2,288 ) ​ $ ( 4,292 ) Accrued liabilities ​ $ ( 792 ) ​ $ 390 ​ $ ( 402 ) Net cash used in operating activities ​ $ ( 4,978 ) ​ $ 203 ​ $ ( 4,775 ) Investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases of property, plant and equipment ​ $ ( 2,330 ) ​ $ — ​ $ ( 2,330 ) Net cash used in investing activities ​ $ ( 8,482 ) ​ $ — ​ $ ( 8,482 ) Financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments on lines of credit ​ $ ( 32,608 ) ​ $ ( 203 ) ​ $ ( 32,811 ) Net cash provided by financing activities ​ $ 13,501 ​ $ ( 203 ) ​ $ 13,298 ​ ​ Use of Estimates The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Material estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans, other notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities. Actual results could differ from these estimates. Revenue Recognition Product sales primarily consist of sales of mobile homes to consumers and mobile home parks through various sales channels, which include Direct Sales, Commercial Sales, Consignment Sales, and Retail Store Sales. Direct Sales include homes sold directly to independent retailers or customers that are not financed by the Company and are not sold under a consignment arrangement. These types of homes are generally paid for prior to shipment. Commercial Sales include homes sold to mobile home parks under commercial loan programs or paid for upfront. The Company provides floor plan financing for independent retailers, which takes the form of a consignment arrangement. Consignment Sales are considered sales of consigned homes from independent dealers to individual customers. Retail Store Sales are homes sold through Company-owned retail locations. Consignment Sales and Retail Sales of homes may be financed by the Company, by a third party, or paid in cash. Revenue from product sales is recognized at a point in time when the performance obligation under the terms of a contract with our customer is satisfied, which typically occurs upon delivery and transfer of title of the home, as this depicts when control of the promised good is transferred to our customer. For financed sales by the Company, the individual customer enters into a sales and financing contract and is required to make a down payment. These financed sales contain a significant financing component and any interest income is separately recorded in the statement of operations. 8 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ Revenue is measured as the amount of consideration expected to be received in exchange for transferring the homes to the customers. Sales and other similar taxes collected concurrently with revenue-producing activities are excluded from revenue. The Company made an accounting policy election to account for any shipping and handling costs that occur after the transfer of control as a fulfillment cost that is accrued when control is transferred. Warranty obligations associated with the sale of a unit are assurance-type warranties for a period of twelve months that are a guarantee of the home’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. The Company has elected to use the practical expedient to expense the incremental costs of obtaining a contract if the amortization period of the asset that the Company would have otherwise recognized is one year or less. Contract costs, which include commissions incurred related to the sale of homes, are expensed at the point-in-time when the related revenue is recognized. Warranty costs and contract costs are included in selling, general and administrative expenses in the statements of income. For the three months ended June 30, 2022 and 2021, sales to an independent third-party and its affiliates accounted for $ 3,296 or 6.0 % and $ 2,643 or 6.4 % of our product sales, respectively. For the six months ended June 30, 2022 and 2021, sales to an independent third-party and its affiliates accounted for $ 6,194 or 5.8 % and $ 4,948 or 6.7 % of our product sales, respectively. For the three months ended June 30, 2022 and 2021, total cost of product sales included $ 3,253 and $ 3,206 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales . For the six months ended June 30, 2022 and 2021, total cost of product sales included $ 6,252 and $ 5,407 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales . Other revenue consists of consignment fees, commercial lease rents, service fees and other miscellaneous income. Consignment fees are charged to independent retailers on a monthly basis for homes held by the independent retailers pursuant to a consignment arrangement until the home is sold to an individual customer. Consignment fees are determined as a percentage of the home’s wholesale price to the independent dealer. Revenue recognition for consignment fees is recognized over time using the output method as it provides a faithful depiction of the Company’s performance toward completion of the performance obligation under the contract and the value transferred to the independent retailer for the time the home is held under consignment. Revenue for commercial leases is recognized as earned monthly over a contractual period of 96 or 120 months . Revenue for service fees and miscellaneous income is recognized at a point in time when the performance obligation is satisfied. 9 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ Disaggregation of Revenue . The following table summarizes customer contract revenues disaggregated by source of the revenue for the three and six months ended June 30, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Six months ended ​ ​ June 30, ​ June 30, ​ ​ 2022 2021 ​ 2022 2021 Product sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct sales ​ $ 11,745 ​ $ 5,493 ​ $ 22,608 ​ $ 8,915 Commercial sales ​ 14,305 ​ 13,050 ​ 28,364 ​ 25,368 Consignment sales ​ ​ 20,247 ​ ​ 13,889 ​ ​ 40,287 ​ ​ 24,488 Retail store sales ​ ​ 5,657 ​ ​ 6,183 ​ ​ 9,816 ​ ​ 9,504 Other (1) ​ 3,144 ​ 2,500 ​ 5,810 ​ 5,114 Total product sales ​ 55,098 ​ 41,115 ​ 106,885 ​ 73,389 Consumer and MHP loans interest: ​ ​ ​ ​ Interest - consumer installment notes ​ 4,701 ​ 4,046 ​ 9,158 ​ 8,189 Interest - MHP notes ​ 2,796 ​ 2,688 ​ 5,104 ​ 5,183 Total consumer and MHP loans interest ​ 7,497 ​ 6,734 ​ 14,262 ​ 13,372 Other ​ 1,616 ​ 740 ​ 2,992 ​ 1,767 Total net revenue ​ $ 64,211 ​ $ 48,589 ​ $ 124,139 ​ $ 88,528 (1) Other product sales revenue from ancillary products and services including parts, freight and other services Share-Based Compensation The Company accounts for share-based compensation in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation . Share-based compensation expense is recognized based on the award’s estimated grant date fair value in order to recognize compensation cost for those shares expected to vest. The Company has elected to record forfeitures as they occur. Compensation cost is recognized on a straight-line basis over the vesting period of the awards and adjusted as forfeitures occur. The fair value of each option grant with only service-based conditions is estimated using the Black-Scholes pricing model. The fair value of each restricted stock unit (the ”RSU”) with only service-based conditions is calculated based on the closing price of the Company’s common stock on the grant date. The fair value of each RSU with market based conditions is estimated using the Monte-Carlo Simulation valuation model. The fair value of stock option awards on the date of grant is estimated using the Black-Scholes option pricing model, which requires the Company to make certain predictive assumptions. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the award. As a recently formed public entity with a small public float and limited trading of its common shares on the NASDAQ Global Market, it was not practicable for the Company to estimate the volatility of its common shares; therefore, management estimated volatility based on the historical volatilities of a small group of companies considered as close to comparable to the Company as available, all equally weighted, over the expected life of the option. Management concluded that this group is more characteristic of the Company’s business than a broad industry index. The expected life of awards granted represents the period of time that the awards are expected to be outstanding based on the “simplified” method, which is allowed for companies that cannot reasonably estimate the expected life of options based on its historical award exercise experience. The Company does not expect to pay dividends on its common stock. 10 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ The fair value of RSU awards with market based conditions on the date of grant is estimated using the Monte-Carlo Simulation valuation model, and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the Company’s historic stock price volatility; the expected term of the awards is based on performance measurement period; the risk-free interest rate is based on the U.S. Treasury bond yield issued with similar life terms to the expected life of the grant. Accounts Receivable Included in accounts receivable “net” are receivables from direct sales of mobile homes, sales of parts and supplies to customers, consignment fees and interest. Accounts receivable “dealer financed” are receivables for interest, fees and curtailments owed from dealers under their inventory finance agreements. Accounts receivables “net” are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts receivables “dealer financed” are due upon receipt and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible. On June 30, 2022 and December 31, 2021, the allowance for doubtful accounts totaled $ 456 and $ 343 , respectively. Leased Property The Company offers mobile home park operators the opportunity to lease mobile homes for rent in lieu of purchasing the homes for cash or under a longer-term financing agreement. In this arrangement title for the mobile homes remains with the Company. The standard lease agreement is typically for 96 months or 120 months . Under the lease arrangement, the lessee (mobile home park operator) uses the mobile homes as personal property to be rented as a residence at the lessee's mobile home park. The lessee makes monthly, periodic lease payments to the Company over the term of the lease. The lessee is responsible for maintaining the homes during the term of the lease. The lessee is also responsible for repairing all damages caused by force majeure events even in cases of total or partial loss of the property. At the end of the lease term or in the event of default, the lessee is required to deliver to the Company the homes with all improvements in good repair and condition in substantially the same condition as existed at the commencement of the lease. The lessee may terminate the lease with 30 days written notice to the Company and pay a lease termination fee equal to 10 % of the remaining lease payments or six month ’s rent, whichever is greater. The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed upon determination of fair market value by both parties using comparable sales, recent appraisal, or NADA official guidance. The lessee must provide the Company with 30 days written notice prior to expiration of the lease of intent to purchase the property for fair market value. The lease also includes a renewal option whereby the lessee has the option to extend the lease for an additional 48 months (the extended term) at the same terms and conditions as the original lease. The lessee must notify the Company of the intent to exercise the renewal extension option not less than six months prior to expiration of the lease term. The leased mobile homes are included in other assets on the Company’s balance sheet, capitalized at manufactured cost and depreciated over a 15 year useful life. Homes returned to the Company upon expiration of the lease or in the event of default will be sold by the Company through its standard sales and distribution channels. Depreciation expense for the leased property was $ 180 and $ 132 for the three months ended June 30, 2022 and 2021, respectively, and $ 340 and $ 230 for the six months ended June 30, 2022 and 2021, respectively. ​ ​ 11 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ Future minimum lease income under all operating leases for each of the next five years at June 30, 2022, are as follows: ​ ​ ​ ​ ​ 2022 $ 1,082 2023 ​ 2,163 2024 ​ 2,163 2025 ​ 2,163 2026 ​ 2,163 Thereafter ​ 4,929 Total ​ $ 14,663 ​ Recent Accounting Pronouncements The Company has elected to use longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act as an emerging growth company. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and an asset representing its right to use the underlying asset for the lease term. As an emerging growth company, ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, and interim periods within those years. The Company adopted this standard in the first quarter of fiscal 2022 and elected certain practical expedients permitted under the transition guidance, including the package of practical expedients; however, the Company did not elect the hindsight practical expedient. Additionally, the Company elected the optional transition method that allowed for a cumulative-effect adjustment in the period of adoption and did not restate prior periods. The adoption of ASU 2016-02 resulted in an increase in total assets and total liabilities of $ 3,258 at transition. However, this standard did not have a material impact on the consolidated statement of income or the consolidated statement of cash flows. See Note 5 for further discussion on leases. In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down and affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company plans to use the longer phase-in period for adoption, and accordingly this ASU is effective for the Company’s fiscal year beginning January 1, 2023. The Company is continuing to evaluate the impact of the adoption of this ASU and is uncertain of the impact on the financial statements and disclosures at this point in time. From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption. ​ ​ ​ 12 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ 2. CONSUMER LOANS Consumer loans result from financing transactions entered into with retail consumers of mobile homes sold through independent retailers and company-owned retail locations. Consumer loans receivable generally consist of the sales price and any additional financing fees, less the buyer’s down payment. Interest income is recognized monthly per the terms of the financing agreements. The average contractual interest rate per loan was approximately 13.5 % as of June 30, 2022 and December 31, 2021, respectively. Consumer loans receivable have maturities that range from 3 to 30 years . Loan applications go through an underwriting process that considers credit history to evaluate credit risk of the consumer. Interest rates on approved loans are determined based on consumer credit score, payment ability and down payment amount. The Company uses payment history to monitor the credit quality of the consumer loans on an ongoing basis. The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections. The liabilities associated with these escrow collections totaled $ 9,771 and $ 9,350 as of June 30, 2022 and December 31, 2021, respectively, and are included in escrow liability in the condensed balance sheets. Allowance for Loan Losses—Consumer Loans Receivable The allowance for loan losses reflects management’s estimate of losses inherent in the consumer loans that may be uncollectible based upon review and evaluation of the consumer loan portfolio as of the date of the condensed balance sheet. An allowance for loan losses is determined after giving consideration to, among other things, the loan characteristics, including the financial condition of borrowers, the value and liquidity of collateral, delinquency and historical loss experience. The allowance for loan losses is comprised of two components: the general reserve and specific reserves. The Company’s calculation of the general reserve considers the historical loss rate for the last three years , adjusted for the estimated loss discovery period and any qualitative factors both internal and external to the Company. Specific reserves are determined based on probable losses on specific classified impaired loans. The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is when either principal or interest is past due and remains unpaid for more than 90 days or other indications of distress. Management implemented this policy based on an analysis of historical data, current performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days. Payments received on nonaccrual loans are accounted for on a cash basis, first to interest and then to principal, as long as the remaining book balance of the asset is deemed to be collectible. The accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current. Impaired loans are those loans where it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans, or portions thereof, are charged off when deemed uncollectible. A loan is generally deemed impaired if it is more than 90 days past due on principal or interest, is in bankruptcy proceedings, or is in the process of repossession. A specific reserve is created for impaired loans based on fair value of underlying collateral value, less estimated selling costs. The Company uses various factors to determine the value of the underlying collateral for impaired loans. These factors are: (1) the length of time the unit was unsold after construction; (2) the amount of time the house was occupied; (3) the cooperation level of the borrowers, i.e., loans requiring legal action or extensive field collection efforts; (4) units located on private property as opposed to a manufactured home park; (5) the length of time the borrower has lived in the house without making payments; (6) location, size, and market conditions; and (7) the experience and expertise of the particular dealer assisting in collection efforts. 13 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is computed based on the historical recovery rates of previously charged off loans; the loan is charged off and the loss is charged to the allowance for loan losses. At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes totaled $ 725 and $ 517 as of June 30, 2022 and December 31, 2021, respectively, and are included in other assets in the condensed balance sheets. Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Consumer loans receivable ​ $ 134,215 ​ $ 129,119 Loan discount and deferred financing fees ​ ( 2,522 ) ​ ( 2,612 ) Allowance for loan losses ​ ( 763 ) ​ ( 884 ) Consumer loans receivable, net ​ $ 130,930 ​ $ 125,623 ​ The following table presents a detail of the activity in the allowance for loan losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, ​ Six Months Ended June 30, ​ ​ ​ 2022 2021 ​ 2022 2021 Allowance for loan losses, beginning of period ​ $ 724 ​ $ 927 ​ $ 884 ​ $ 905 ​ Provision for loan losses ​ 55 ​ 23 ​ ( 257 ) ​ 558 ​ Charge offs (recoveries) ​ ( 16 ) ​ ( 136 ) ​ 136 ​ ( 649 ) ​ Allowance for loan losses ​ $ 763 ​ $ 814 ​ $ 763 ​ $ 814 ​ ​ The reserve for loan losses consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Total consumer loans ​ $ 134,215 ​ $ 129,119 Allowance for loan losses ​ $ 763 ​ $ 884 Impaired loans individually evaluated for impairment ​ $ 1,180 ​ $ 1,239 Specific reserve against impaired loans ​ $ 502 ​ $ 533 Other loans collectively evaluated for allowance ​ $ 133,035 ​ $ 127,880 General allowance for loan losses ​ $ 261 ​ $ 351 ​ 14 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ As of June 30, 2022 and December 31, 2021, the total principal outstanding for consumer loans on nonaccrual status was $ 1,180 and $ 1,239 , respectively. A detailed aging of consumer loans receivable that are past due as of June 30, 2022 and December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, ​ As of December 31, ​ ​ ​ 2022 ​ % ​ 2021 ​ % Total consumer loans receivable ​ $ 134,215 100.0 $ 129,119 100.0 Past due consumer loans: ​ ​ 31 - 60 days past due ​ $ 191 0.1 ​ $ 594 0.5 61 - 90 days past due ​ 402 0.3 ​ 407 0.3 91 - 120 days past due ​ 94 0.1 ​ 114 0.1 Greater than 120 days past due ​ 1,105 0.8 ​ 967 0.7 Total past due ​ $ 1,792 1.3 ​ $ 2,082 1.6 ​ ​ 3. NOTES RECEIVABLE FROM MOBILE HOME PARKS The notes receivable from mobile home parks (“MHP Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable. The MHP Notes have varying maturity dates and call for monthly principal and interest payments. The interest rate on the MHP Notes can be fixed or variable. Approximately $ 102 million of the MHP Notes have a fixed interest rate ranging from 6.9 % to 8.9 %. The remaining MHP Notes have a variable rate typically set at 4.0 % above prime with a minimum of 8.0 %. The average interest rate per loan was approximately 7.6 % and 7.6 % as of June 30, 2022 and December 31, 2021, respectively, with maturities that range from 1 to 18 years . The collateral underlying the MHP Notes are individual mobile homes which can be repossessed and resold. The MHP Notes are generally guaranteed by the borrowers personally. The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 29.1 % and 52.1 % of the principal balance outstanding, all of which was secured by the mobile homes, as of June 30, 2022 and December 31, 2021, respectively. MHP Notes are stated at amounts due from customers, net of allowance for loan losses. The Company determines the allowance by considering several factors including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance reserve composed of specific and general reserve amounts. As of June 30, 2022 and December 31, 2021, the MHP Note balance is presented net of unamortized finance fees of $ 771 and $ 445 , respectively. The finance fees are amortized over the life of the MHP Notes. There were minimal past due balances on the MHP Notes as of June 30, 2022 and December 31, 2021 and no charge offs were recorded for MHP Notes during the three and six months ended June 30, 2022 and 2021, respectively. Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of June 30, 2022 and December 31, 2021. There were no impaired MHP Notes as of June 30, 2022 and December 31, 2021, respectively, and there were no repossessed homes balances as of June 30, 2022 and December 31, 2021, respectively. Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. 4. OTHER NOTES RECEIVABLE Other notes receivable relate to various notes issued to mobile home park owners and dealers, which are not directly tied to sales of mobile homes. The other notes have varying maturity dates and call for monthly principal and interest payments. The other notes are collateralized by mortgages on real estate, units being financed and used as 15 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ offices, as well as vehicles, and are typically guaranteed by the borrowers personally. The interest rate on the other notes are fixed and range from 5.00 % to 12.00 %. The Company reserves for estimated losses on the other notes based on current economic conditions that may affect the borrower’s ability to pay, the borrower’s financial strength, and historical loss experience. There were no past due balances for other notes as of June 30, 2022 and December 31, 2021, respectively, and there were no impaired balances for other notes as of June 30, 2022 and December 31, 2021, respectively. The balance outstanding on the other notes receivable were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Outstanding principal balance ​ $ 30,934 ​ $ 42,074 Allowance for loan losses ​ ( 53 ) ​ ( 74 ) Total ​ $ 30,881 ​ $ 42,000 ​ ​ 5. LEASES The Company currently has 13 operating leases, eight of which are for the Company’s Heritage Housing and Tiny Homes retail locations, three which are subleased by the Company and two are for corporate and administrative offices in Bedford, TX and Norcross, GA. These leases typically have initial terms ranging from 5 to 10 years and include one or more options to renew. Under ASC 842, a modified retrospective transition is required, applying the new standard to all leases at the date of initial application. The Company chose to use the adoption date of January 1, 2022 for ASC 842. As such, all periods presented after January 1, 2022, are under ASC 842 whereas periods presented prior to January 1, 2022, are in accordance with prior lease accounting of ASC 840. Financial information was not updated and the disclosures required under ASC 842 were not provided for dates and periods before January 1, 2022. We determine if an arrangement is a lease at inception. Operating leases are right-of-use (“ROU”) assets and are shown as ROU assets – operating leases on our Condensed Balance Sheet. The lease liabilities are shown as Operating lease obligation and Operating lease obligation, less current portion on our Condensed Balance Sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. We have elected the practical expedient to not separate lease and non-lease components. Therefore, lease payments included in the measurement of the lease liability include all fixed payments in the lease arrangement. We record a ROU asset for an amount equal to the lease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and ROU asset when a change to our future minimum lease payments occurs. Key assumptions and judgments included in the determination of the lease liability include the discount rate used in the present value calculation and the exercise of renewal options. Many of our leases contain renewal options. As the exercise of the renewal options is not certain at commencement of a lease, we generally do not include the option periods in the lease term when determining the lease liabilities and ROU assets. We remeasure the lease liability and ROU asset when we are reasonably certain that we will exercise a renewal option. Our leases do not provide information about the rate implicit in the lease. Therefore, we utilize an incremental borrowing rate to calculate the present value of our future lease obligations. The incremental borrowing rate represents the rate of interest we would have to pay on a collateralized borrowing, for an amount equal to the lease payments, over 16 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ a similar term and in a similar economic environment. The remaining weighted-average lease term is 5.0 years and the weighted-average discount rate is 2.12 %. We consider lease payments that cannot be predicted with reasonable certainty upon lease commencement to be variable lease payments, which are recorded as incurred each period and are excluded from our calculation of lease liabilities. There were no variable lease costs for the three months ended June 30, 2022. Short-term leases, those with a term of 12 months or less, are not recorded on our Condensed Balance Sheet. Our short-term lease costs were not material for the three months ended June 30, 2022. ​ ​ ​ As of June 30, 2022, future minimum lease payments under our operating lease liabilities were as follows: ​ ​ ​ ​ ​ 2022 $ 350 2023 ​ 709 2024 ​ 644 2025 ​ 608 2026 ​ 546 Thereafter ​ 429 Total lease payments ​ $ 3,286 Less amount representing interest ​ ​ ( 99 ) Total lease liability ​ $ 3,187 Less current lease liability ​ ​ ( 662 ) Total non-current lease liability ​ $ 2,525 ​ ​ ​ 6 . INVENTORIES Inventories consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Raw materials ​ $ 17,833 ​ $ 15,431 Work in progress ​ 783 ​ 714 Finished goods (1) ​ 33,072 ​ 28,195 Allowance for obsolescence ​ ​ ( 315 ) ​ ​ ( 432 ) Total ​ $ 51,373 ​ $ 43,908 (1) Finished goods includes $ 4,603 and $ 2,678 as of June 30, 2022 and December 31, 2021, respectively , held for more than twelve months and classified as long-term. ​ ​ 17 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Land ​ $ 14,953 ​ $ 14,949 Buildings and leasehold improvements ​ 14,936 ​ 13,722 Vehicles ​ 1,702 ​ 1,682 Machinery and equipment ​ 5,515 ​ 5,058 Furniture and fixtures ​ 300 ​ 298 Total ​ 37,406 ​ 35,709 Less accumulated depreciation ​ ( 8,909 ) ​ ( 8,193 ) Total property, plant and equipment ​ $ 28,497 ​ $ 27,516 ​ Depreciation expense was $ 286 with $ 127 included as a component of cost of product sales for the three months ended June 30, 2022 and $ 261 with $ 109 included as a component of cost of product sales for the three months ended June 30, 2021. Depreciation expense was $ 563 with $ 248 included as a component of cost of product sales for the six months ended June 30, 2022 and $ 524 with $ 214 included as a component of cost of product sales for the six months ended June 30, 2021. 8. OTHER ASSETS Other assets consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Prepaid rent ​ $ 349 ​ $ 248 Other ​ 332 ​ 332 Repossessed homes ​ 725 ​ 517 Total ​ $ 1,406 ​ $ 1,097 ​ ​ 18 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ 9. ACCRUED LIABILITIES Accrued liabilities consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, As of December 31, ​ ​ 2022 ​ 2021 Warranty reserve ​ $ 2,240 ​ $ 2,876 Litigation reserve ​ 1,402 ​ 2,764 Payroll ​ ​ 2,280 ​ ​ 1,685 Portfolio taxes and title ​ 2,283 ​ 2,467 Property tax ​ ​ 466 ​ ​ 546 Dealer rebates ​ ​ 1,224 ​ ​ 1,160 Sales tax ​ 47 ​ 310 Federal and state income taxes ​ 3,170 ​ 7,445 Other ​ 1,868 ​ 1,433 Total accrued liabilities ​ $ 14,980 ​ $ 20,686 ​ ​ 10 . DEBT Lines of Credit Revolver 1 At December 31, 2019, the Company had a revolving line of credit (“Revolver 1”) with Capital One, N.A. with a maximum credit limit of $ 45,000 and a maturity date of May 11, 2020. On March 30, 2020, the Company 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 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. The New Revolver accrues interest at one-month LIBOR plus 2.00 %. The interest rate in effect as of June 30, 2022 and December 31, 2021 was 3.06 % and 2.10 %, respectively. As with Revolver 1, amounts available under the New Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable, consumer loans and MHP Notes. The amount of available credit under the New Revolver was $ 57,386 and $ 61,841 as of June 30, 2022 and December 31, 2021, respectively. In connection with the New Revolver, the Company paid certain arrangement fees and other fees of approximately $ 295 , which were capitalized as unamortized debt issuance costs and will be amortized to interest expense over the life of the New Revolver. For the three months ended June 30, 2022 and 2021, interest expense under the New Revolver was $ 182 and $ 283 , respectively. For the six months ended June 30, 2022 and 2021, interest expense under the New Revolver was $ 239 and $ 509 , respectively. The outstanding balance as of June 30, 2022 and December 31, 2021 was $ 12,614 and $ 7,993 , respectively. The New Revolver requires the Company to comply with certain financial and non-financial covenants. As of June 30, 2022, the Company was in compliance with all financial covenants, including that it maintain a tangible net worth of at least $ 120,000 and that it maintain a ratio of debt to EBITDA of 4 to 1, or less. On June 21, 2022, the Company received a Reservation of Rights notice from Capital One, N.A. The letter stated that the Company’s New Revolver was in default. The default condition occurred due to the Company’s failure to timely file the Form 10-K and deliver certain financial statement to Capital One, N.A. On July 28, 2022, the Company executed a forbearance agreement with Capital One, N.A. ​ 19 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ PILOT Agreement In December 2016, the Company 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 the Company with incentives through the abatement of local, city and county property taxes and to provide financing for improvements to the Company’s Georgia plant (the “Project”). In connection with the PILOT agreement, the Putman County Development Authority provides a credit facility for up to $ 10,000 , which can be drawn upon to fund Project improvements and capital expenditures as defined in the agreement. If funds are drawn, the Company would pay transaction costs and debt service payments. The PILOT agreement requires interest payments of 6.00 % per annum on outstanding balances, which are due each December 1st through maturity on December 1, 2021, at which time all unpaid principal and interest are due. The PILOT agreement is collateralized by the assets of the Project. As of June 30, 2022, the Company had not drawn on this credit facility. 11. SHARE-BASED COMPENSATION Pursuant to the Legacy Housing Corporation 2018 Incentive Compensation Plan (the “Compensation Plan”), the Company may issue up to 10.0 million equity awards to employees, directors, consultants and nonemployee service providers in the form of stock options, stock and stock appreciation rights. Stock options may be granted with a contractual life of up to ten years . At June 30, 2022, the Company had 8.1 million shares available for grant under the Compensation Plan. In February 2019, the Company granted 120,000 restricted shares of its common stock to members of senior management. The shares were granted on February 7, 2019 and had a grant date fair value of $ 1,636 . The shares vest at a rate of 14.3 % annually, beginning on February 7, 2019, and becoming fully vested on February 7, 2025. During the second quarter of 2020, 42,857 of these restricted shares were forfeited due to the departure of a member of senior management. In December 2020, the Company granted 2,022 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on December 2, 2020 and had a grant date fair value of $ 30 . The shares become fully vested on October 4, 2021. In November 2021, the Company granted 1,202 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on November 30, 2021 and had a grant date fair value of $ 30 . The shares become fully vested on October 24, 2022. In January 2022, the Company granted 150,000 restricted shares of its common stock to the Executive Chairman of the Company pursuant to an amended and restated employment agreement. The shares were granted on January 6, 2022 and had a grant date fair value of $ 3,741 . The shares became fully vested upon grant. On January 6, 2022, the Company gave contingent equity awards of 350,000 shares of the Company’s restricted stock to the Executive Chairman of the Company pursuant to an amended and restated employment agreement. An equity award of 175,000 shares will be granted if the Company’s stock price reaches and remains for a period of fifteen consecutive market days at a closing price of $ 36 per share (the “$ 36 Equity Award”). The $ 36 Equity Awards had a grant date fair value of $ 1,412 and fifty percent of the shares shall be vested at grant and fifty percent shall vest on June 16, 2024, so long as the Executive Chairman is employed by the Company on that date. An additional equity award of 175,000 shares of the Company’s restricted stock will be granted if the Company’s stock price reaches and remains for a period of fifteen consecutive market days at a closing price of $ 48 per share (the “$ 48 Equity Award”). The $ 48 Equity Awards had a grant date fair value of $ 683 and fifty percent of the shares shall be vested at grant and fifty percent shall vest on June 16, 2024, so long as the Executive Chairman is employed by the Company on that date. As of June 30, 2022, none of the conditions have been met for the vesting of the $ 36 Equity Awards or the $ 48 Equity Awards. 20 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ On June 7, 2022, the Company granted 14,700 restricted shares of its common stock to the Chief Executive Officer of the Company pursuant to an employment agreement. The shares were granted on June 7, 2022 and had a grant date fair value of $ 235 . One-half of the shares vest on June 7, 2023 and the remaining half vest on June 7, 2024. The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data): ​ ​ ​ ​ ​ ​ ​ ​ Number of Units ​ ​ Weighted Average Grant Date Fair Value Per Unit Nonvested, January 1, 2022 ​ 35 ​ $ 14.01 Granted ​ 515 ​ $ 11.80 Vested ​ ( 158 ) ​ $ 24.33 Nonvested, June 30, 2022 ​ 392 ​ $ 6.92 ​ As of June 30, 2022, approximately 392,000 RSUs remained unvested. Unrecognized compensation expense related to these RSUs at June 30, 2022 was $ 2,219 and is expected to be recognized over 2.04 years. The Company granted 34,626 incentive stock options to a member of senior management. The options were granted on August 10, 2020 at an exercise price of $ 14.44 per share. The options vest at a rate of 20.0 % annually, beginning on August 10, 2021, and becoming fully vested on August 10, 2025. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 0.24 %; dividend yield of 0.00 %; expected volatility of common stock of 75.0 % and expected life of options of 6.5 years. During the first quarter of 2022, 27,701 of these options were forfeited due to the departure of the senior manager. The Company granted 55,490 incentive stock options to a member of management. The options were granted on September 23, 2021 at an exercise price of $ 18.02 per share. The options vest at a rate of 10.0 % annually, beginning on September 23, 2022, and becoming fully vested on September 23, 2031. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 1.41 %; dividend yield of 0.00 %; expected volatility of common stock of 75.0 % and expected life of options of 7.8 years. The Company granted 62,460 incentive stock options to the Chief Executive Officer. The options were granted on June 7, 2022 at an exercise price of $ 16.01 per share. The options vest at a rate of 10.0 % annually, beginning on June 7, 2023, and becoming fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98 %; dividend yield of 0.00 %; expected volatility of common stock of 45.7 % and expected life of options of 7.8 years. The Company granted options to purchase 900,000 shares of the Company’s stock to the Chief Executive Officer. An option to purchase 300,000 shares of the Company’s stock was granted on June 7, 2022 at an exercise price of $ 36.00 per share and an option to purchase 600,000 shares of the Company’s stock was granted on June 7, 2022 at an exercise price of $ 48.00 per share. The options vest at a rate of 10.0 % annually, beginning on June 7, 2023, and becoming fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98 %; dividend yield of 0.00 %; expected volatility of common stock of 45.7 % and expected life of options of 7.8 years. 21 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ The Company granted 62,460 incentive stock options to the Chief Financial Officer. The options were granted on June 7, 2022 at an exercise price of $ 16.01 per share. The options vest at a rate of 10.0 % annually, beginning on June 7, 2023, and becoming fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98 %; dividend yield of 0.00 %; expected volatility of common stock of 45.7 % and expected life of options of 7.8 years. The following is a summary of option activity (in thousands, except per unit data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Units Weighted Average Exercise Price Per Unit Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding, January 1, 2022, nonvested ​ 83 ​ $ 16.83 ​ $ 12.27 ​ 9.36 ​ ​ ​ Granted ​ 1,025 ​ $ 40.59 ​ $ 4.99 ​ 10 ​ ​ ​ Exercised ​ — ​ $ — ​ $ — ​ — ​ ​ ​ Forfeited ​ ( 28 ) ​ ​ 14.44 ​ ​ 8.67 ​ — ​ ​ ​ Outstanding, June 30, 2022, nonvested ​ 1,080 ​ $ 39.43 ​ $ 5.46 ​ 9.91 ​ $ — Exercisable, June 30, 2022 ​ — ​ $ — ​ $ — ​ — ​ $ — ​ As of June 30, 2022, approximately 1,080,000 options remained nonvested. Unrecognized compensation expense related to these options at June 30, 2022 was $ 5,804 and is expected to be recognized over 9.91 years. On March 31, 2020, the Company filed a registration statement on Form S-8 to register with the SEC approximately 2.3 million shares of Legacy common stock available for issuance under the 2018 Incentive Compensation Plan. The registration statement became effective upon filing. ​ 12. INCOME TAXES The provision for income tax expense for the six months ended June 30, 2022 and 2021 was $ 7,375 and $ 4,707 , respectively. The effective tax rate for the six months ended June 30, 2022 was 18.1 % 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, 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. ​ 13. COMMITMENTS AND CONTINGENCIES As of January 1, 2020, the Company instituted a self-insured health benefits plan with a stop-loss policy, which provides medical benefits to employees electing coverage under the plan. The Company estimates and records costs for incurred but not reported medical claims and claim development. This reserve is based on historical experience and other assumptions, some of which are subjective. The Company will adjust its self-insured medical benefits reserve based on actual experience, estimated costs and changes to assumptions. At June 30, 2022 and December 31, 2021, the Company accrued a $ 280 and $ 373 , respectively, liability for incurred but not reported claims. The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent retailers of its products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to retailers in the event of default by the retailer. The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer. The maximum amount 22 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ for which the Company was liable under such agreements totaled $ 11,400 and $ 4,908 at June 30, 2022 and December 31, 2021, respectively, without reduction for the resale value of the homes. The Company considers its obligations on current contracts to be insignificant and accordingly have not recorded any reserve for repurchase commitment as of June 30, 2022 and December 31, 2021. Leases. The Company leases facilities under operating leases that typically have 10-year terms. These leases usually offer the Company a right of first refusal that affords the Company the option to purchase the leased premises under certain terms in the event the landlord attempts to sell the leased premises to a third party. Rent expense was $ 176 and $ 146 for the three months ended June 30, 2022 and 2021, respectively, and $ 339 and $ 402 for the six months ended June 30, 2022 and 2021, respectively. The Company also subleases properties to third parties, ranging from 3-year to 11-year terms with various renewal options. Rental income from the subleased property was approximately $ 55 and $ 91 for the three months ended June 30, 2022 and 2021, respectively, and approximately $ 110 and $ 182 for the six months ended June 30, 2022 and 2021, respectively. See Note 5 – Leases, for a schedule of the Company’s future minimum lease commitments. Legal Matters The Company is party to certain legal proceedings that arise in the ordinary course and are incidental to its business. Certain of the claims pending against the Company in these proceedings allege, among other things, breach of contract and warranty, product liability and personal injury. The Company has determined that it is probable that it has some liability related to the claims. The Company has included legal reserves of $ 1,402 and $ 2,764 as of June 30, 2022 and December 31, 2021, respectively, in accrued liabilities on the accompanying condensed balance sheets. Although litigation is inherently uncertain, based on past experience and the information currently available, management does not believe that the currently pending and threatened litigation or claims will have a material adverse effect on the Company’s financial position, liquidity or results of operations. However, future events or circumstances currently unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company’s financial position, liquidity or results of operations in any future reporting periods. 14. FAIR VALUE MEASUREMENTS The Company accounts for its investments and derivative instruments in accordance with ASC 820-10, Fair Value Measurement, which among other things provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurement) and the lowest priority to unobservable inputs (Level III measurements). The three levels of fair value hierarchy under ASC 820-10, Fair Value Measurement , are as follows: Level I Quoted prices are available in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level II Significant observable inputs other than quoted prices in active markets for which inputs to the valuation methodology include: (1) Quoted prices for similar assets or liabilities in active markets; (2) Quoted prices for identical or similar assets or liabilities in inactive markets; (3) Inputs other than quoted prices that are observable; (4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability. Level III Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities. 23 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company has used derivatives to manage risks related to interest rate movements. The Company does not enter into derivative contracts for speculative purposes. Interest rate swap contracts are recognized as assets or liabilities on the balance sheets and are measured at fair value. The fair value was calculated and provided by the lender, a Level II valuation technique. Management reviewed the fair values for the instruments as provided by the lender and determined the related asset and liability to be an accurate estimate of future gains and losses to the Company. The Company is not a party to any interest rate swaps as of June 30, 2022. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, consumer loans, MHP Notes, other note receivables, accounts payable, lines of credit, notes payable, and dealer portion of consumer loans. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments. This is considered a Level I valuation technique. The lines of credit, notes payable, part of the MHP Notes and part of the other note receivables have variable interest rates that reflect market rates and their fair value approximates their carrying value. This is considered a Level II valuation technique. The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note receivables with fixed rates based on the discounted value of the remaining principal and interest cash flows. The Company determined that the fair value of the consumer loan portfolio was approximately $ 131,300 compared to the book value of $ 130,932 as of June 30, 2022, and a fair value of approximately $ 125,600 compared to the book value of $ 125,623 as of December 31, 2021. The Company determined that the fair value of the fixed rate MHP Notes was approximately $ 100,500 compared to the book value of $ 101,850 as of June 30, 2022, and a fair value of approximately $ 83,000 compared to the book value of $ 83,773 as of December 31, 2021. The Company determined that the fair value of the other notes was approximately $ 29,400 compared to the book value of $ 30,321 as of June 30, 2022, and a fair value of approximately $ 38,500 compared to the book value of $ 38,886 as of December 31, 2021. This is a Level III valuation technique. ​ 24 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ 15. EARNINGS PER SHARE Basic earnings per common share (“EPS”) is computed based on the weighted-average number of common shares outstanding during each reporting period. Diluted EPS is based on the weighted-average number of common shares outstanding plus the number of additional shares that would have been outstanding had the dilutive common shares been issued. The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Six months ended ​ ​ June 30, ​ June 30, ​ ​ 2022 2021 ​ 2022 2021 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (in 000's) ​ $ 17,261 ​ $ 12,649 ​ $ 33,352 ​ $ 23,349 Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding ​ ​ 24,406,020 ​ ​ 24,202,631 ​ ​ 24,355,412 ​ ​ 24,200,879 Effect of dilutive securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock grants ​ ​ 254,403 ​ ​ 11,819 ​ ​ 266,358 ​ ​ 8,951 Stock options ​ ​ 261,702 ​ ​ 20,463 ​ ​ 151,575 ​ ​ 19,435 Diluted weighted-average common shares outstanding ​ ​ 24,922,125 ​ ​ 24,234,913 ​ ​ 24,773,345 ​ ​ 24,229,265 Earnings per share attributable to Legacy Housing Corporation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.71 ​ $ 0.52 ​ $ 1.37 ​ $ 0.96 Diluted ​ $ 0.69 ​ $ 0.52 ​ $ 1.35 ​ $ 0.96 ​ ​ ​ 16. RELATED PARTY TRANSACTIONS Bell Mobile Homes, a retailer owned by one of the Company’s significant owners, purchases manufactured homes from the Company. Accounts receivable balances due from Bell Mobile Homes were $ 2 and $ 1 as of June 30, 2022 and December 31, 2021, respectively. Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $ 116 and $ 49 as of June 30, 2022 and December 31, 2021, respectively. Home sales to Bell Mobile Homes were $ 1,223 and $ 695 for the three months ended June 30, 2022 and 2021, respectively, and $ 1,855 and $ 1,393 for the six months ended June 30, 2022 and 2021, respectively. Shipley Bros., Ltd. (“Shipley Bros.”), a retailer owned by one of the Company’s significant shareholders, purchases manufactured homes from the Company. Home sales to Shipley Bros. were $ 1,018 and $ 524 for the three months ended June 30, 2022 and 2021, respectively, and $ 1,711 and $ 1,438 for the six months ended June 30, 2022 and 2021, respectively. There were no accounts receivable balances or accounts payable balances due from/to Shipley Bros. as of June 30, 2022 and December 31, 2021, respectively. 17. SUBSEQUENT EVENTS On July 28, 2022, the Company entered into a Limited Waiver and First Amendment to Credit Agreement (the “Amendment”) with Capital One, N.A. The Amendment replaces the LIBOR borrowing rate with a secured overnight financing rate and waives a default arising out of a monetary judgement against the Company that exceeded the amount allowed in the New Revolver. 25 Table of Contents LEGACY HOUSING CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollars in thousands) ​ On August 11, 2022, the Company received notice from Nasdaq regarding the Company’s failure to file timely Form 10-Q for the period ending June 30, 2022. As a result of this delinquency, the Company submitted an update to its original plan to regain compliance with the Rule. The updated plan was submitted to Nasdaq on September 12, 2022. On August 24, 2022, the Company received a Notice of Default and Partial Suspension of Loan Commitments from Capital One, N.A. The notice stated that the July 28, 2022 forbearance agreement had been terminated and that Capital One, N.A. was permitted to suspend $ 50,000 of the $ 70,000 loan commitment under the New Revolver. As a result, the available line of credit in the New Revolver has been limited to $ 20,000 . In connection with the preparation of these financial statements, an evaluation of subsequent events was performed through the date of filing. ​ ​ 26 Table of Contents