What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-15 compared with 2022-08-03 · 83 added, 40 removed, 529 unchanged (19% of the section changed)

19 unchanged sentences

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.

As previously disclosed in our Annual report on Form 10-K filed with the SEC on August 3, 2022, we identified material weaknesses in our internal control over financial reporting during the preparation of our financial statements for the year ended December 31, 2021.

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.

5 unchanged sentences

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;

5 unchanged sentences

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.

Except for the remediation measures described above, 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 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations in Effectiveness of Controls

11 unchanged sentences

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.

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.

49 unchanged sentences

Accrued liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Investing activities:

3 unchanged sentences

Payments on lines of credit

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Restated Results of Operations

132 unchanged sentences

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.

Duncan Bates and Joseph P.

Stouder, Francisco J.

Coll 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.

36 unchanged sentences

The nominating and governance committee is composed of Messrs.

Coll (Chairman), Lane and Stouder.

Lane (Chairman) and Stouder.

Board Composition

In August 2021, the SEC approved a Nasdaq Stock Market proposal to adopt new listing rules relating to board diversity and disclosure.

As approved by the SEC, the new Nasdaq listing rules require all Nasdaq listed companies to disclose consistent, transparent diversity statistics regarding their boards of directors.

Because our Board consists of only five (5) directors, the Company is required to have at least one diverse director.

The Board Diversity Matrix below presents the board’s diversity statistics in the format prescribed by the Nasdaq rules.

Board Diversity Matrix (as of December 31, 2022)

Total Number of Directors

Gender Identity

Demographic Background

Code of Business Conduct and Ethics

14 unchanged sentences

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

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.

Any repeal of, or modification to, our certificate of 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.

10 unchanged sentences

(i) all persons serving as our principal executive officers during the years ended December 31, 2022 and 2021, and (ii) our three other most highly compensated executive officers who received compensation during the years ended December 31, 2022 and 2021 of at least $100,000 and who were executive officers on December 31, 2022 and 2021.

We refer to these persons as our “named executive officers” in this Form 10-K.

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:

1 unchanged sentence

Compensation ($)

Executive Chairman (former Co-Chief Executive Officer)

President and Chief Executive Officer (former Co‑Chief Executive Officer)

Executive Chairman

Executive Vice President (former President and Chief Executive Officer)

President and Chief Executive Officer (1)

Chief Accounting Officer

Chief Financial Officer (2)

Executive Vice President, General Counsel and Secretary (2)

Kerkaert joined the Company’s as Chief Financial Officer in August 2020 .

Suit left his position as the Company’s Executive Vice President and General Counsel in May 2020 .

Bates joined the Company as President and Chief Executive Officer in June 2022 .

Arrington joined the Company as Chief Financial Officer in May 2022 .

Hodgson and Mr.

18 unchanged sentences

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.

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.

7 unchanged sentences

Shipley became our sole Chief Executive Officer and President.

Effective in June 2022, Mr.

Shipley became the Executive Vice President and Duncan Bates was appointed President and Chief Executive Officer of the Company.

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.

3 unchanged sentences

Unvested Shares

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.

Duncan Bates (1)

Arrington (2)

Bates was awarded options to purchase 962,460 shares of common stock under our 2018 Incentive Compensation Plan.

The grant date of the options was June 7, 2022 and the options vest at a rate of 10.0% annually, beginning June 7, 2023, until fully vested on June 7, 2032.

The options expire on June 7, 2032.

The options were granted in three tranches;

(1) 62,460 options with a strike price of $16.01, (2) 300,000 options with a strike price of $36.00 and (3) 600,000 options with a strike price of $48.00.

Arrington was awarded options to purchase 62,460 shares of common stock under our 2018 Incentive Compensation Plan.

The grant date of the options was June 7, 2022 and the strike price is $16.01.

The options vest at a rate of 10.0% annually, beginning June 7, 2023, until fully vested on June 7, 2032.

The options expire on June 7, 2032.

2018 Incentive Compensation Plan

4 unchanged sentences

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.

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.

The persons eligible to receive awards under our Plan are the officers, directors, employees, consultants and other persons who provide services to us.

7 unchanged sentences

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

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.

37 unchanged sentences

Percentage of beneficial ownership is based on 24,380,224 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

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.

4 unchanged sentences

Directors and Executive Officers

Thomas Kerkaert (3)

Duncan Bates (3)

5% Stockholders

11 unchanged sentences

Shipley disclaims any beneficial interest.

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.

Bates’ beneficial ownership consists of 1,075 shares of common stock, representing 674 shares of common stock granted to him for service as a board member during 2021 and 401 shares of common stock granted to him for service as a board member during 2022 .

Burt’s beneficial ownership consists of 27,857 shares of common stock, representing 71.4% 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.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires that our directors and executive officers, and persons who own more than ten percent (10%) of our common stock, file with the SEC initial statements of beneficial ownership of common stock and statements of changes in beneficial ownership of common stock.

To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2022 and through the date of this filing, the following persons failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 2022 and through the date of this filing:

Name and Principal Position

Number Of Late Reports

Transactions Not Reported In A Timely Manner

Number Of Reports Not Filed

Hodgson, Executive Chairman of the Board

Shipley, Founder, Executive Vice President and Director

Kerkaert, Chief Financial Officer (former)

Burt, Chief Accounting Officer

Crawford, Director (former)

Stouder, Director

R Duncan Bates, President and Chief Executice Officer

Arrington, Chief Financial Officer

Coll, Director

Lane, Director

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

3 unchanged sentences

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $132,000 and $49,000 as of December 31, 2022 and 2021, respectively.

sales to Bell Mobile Homes were $3,724,000 and $2,631,000 for the years ended December 31, 2021 and 2020, respectively.

Home sales to Bell Mobile Homes were $4,499,000 and $3,724,000 for the years ended December 31, 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 $3,181,000 and $2,825,000 as of December 31, 2022 and 2021, respectively.

There were no accounts receivable balances or accounts payable balances due from/to Shipley Bros.

as of December 31, 2022 and 2021, respectively.

At December 31, 2022, the Company had a receivable of $68,000 from a principal shareholder.

This amount is included in the Company’s accounts receivable balance as of December 31, 2022.

Indemnification Agreements

18 unchanged sentences

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.

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.

Daszkal Bolton, LLP served as our independent registered public accountants for the year ended December 31, 2022 and Weaver, LLP served as our independent registered public accountants for the year ended December 31, 2021.

For our fiscal year ended December 31, 2022, we were billed approximately $142,500 for professional services rendered by Daszkal Bolton, LLP and for our fiscal year ended December 31, 2021, we were billed approximately $581,000 for professional services rendered by Weaver, 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.

73 unchanged sentences

President and Chief Executive Officer

August 3, 2022

March 15, 2023

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.

1 unchanged sentence

Executive Chairman of the Board

August 3, 2022

March 15, 2023

/s/ Kenneth E.

Executive Vice President and Director ( principal executive officer )

August 3, 2022

March 15, 2023

/s/ Ronald C.

Chief Financial Officer ( principal

August 3, 2022

March 15, 2023

financial officer )

1 unchanged sentence

Chief Accounting Officer ( principal accounting officer )

August 3, 2022

March 15, 2023

/s/ Jeffrey K.

August 3, 2022

March 15, 2023

/s/ Joseph P.

August 3, 2022

March 15, 2023

/s/ Francisco J.

August 3, 2022

March 15, 2023

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

What changed 10-K

Item 9A. Controls and Procedures