What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 237 added, 186 removed, 584 unchanged (42% of the section changed)

11 unchanged sentences

Total current assets

Contracts - dealer financed

Consumer loans receivable, net

24 unchanged sentences

Common stock, $ .001 par value, 90,000,000 shares authorized;

24,852,740 and 24,843,494 issued and 24,316,488 and 24,398,429 outstanding at March 31, 2024 and December 31, 2023, respectively

Treasury stock at cost, 536,252 and 445,065 shares at March 31, 2024 and December 31, 2023, respectively

24,860,090 and 24,843,494 issued and 24,153,496 and 24,398,429 outstanding at June 30, 2024 and December 31, 2023, respectively

Treasury stock at cost, 706,594 and 445,065 shares at June 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital

6 unchanged sentences

(in thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Product sales

20 unchanged sentences

(unaudited, in thousands)

Three months ended March 31,

Six months ended June 30,

Operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization expense

2 unchanged sentences

Provision for long term inventory

Gain from sale of leased property

Gain from sale of assets

Non-cash operating lease expense

18 unchanged sentences

Proceeds from sale of property

Sale of investments - treasury notes

Issuance of notes receivable

1 unchanged sentence

Collections from purchased loans

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Financing activities:

4 unchanged sentences

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Net decrease in cash

Cash at beginning of period

13 unchanged sentences

Balances, March 31, 2023

Share based compensation

Proceeds from exercise of stock options

Balances, June 30, 2023

paid-in-capital

4 unchanged sentences

Balances, March 31, 2024

Share based compensation

Purchase of treasury stock

Balances, June 30, 2024

See accompanying notes to unaudited interim condensed financial statements.

15 unchanged sentences

In the opinion of management, the unaudited interim condensed financial statements have been prepared on the same basis as the audited annual 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 months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or any other period.

The results for the three months and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or any other period.

The accompanying balance sheet as of December 31, 2023 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), filed on March 15, 2024.

4 unchanged sentences

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 and valuation of accounts receivable, loans to mobile home parks, consumer loans receivable, other notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities.

Significant estimates made in connection with the accompanying condensed financial statements primarily relate to the determination and valuation of accounts receivable, loans to mobile home parks, consumer loans receivable, other notes receivable, loans to dealers, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities.

Actual results could differ from these estimates.

2 unchanged sentences

For example, the sale of manufactured homes includes providing transportation for dealers.

We also provide financing options to the customers to facilitate such sale of homes.

In addition, the sale of homes is directly related to financing provided by us.

We also provide financing options for customers to facilitate home sales.

Accordingly, all significant operating and strategic decisions by the chief operating decision maker, the Chief Executive Officer, are based upon analyses of our company as one operating segment.

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, Inventory Finance Sales, and Retail Store Sales.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

Revenue Recognition

Direct Sales include homes sold directly to independent retailers or customers that are not financed by the Company and are not sold under an inventory finance arrangement.

Sales include homes sold directly to independent retailers or customers that are not financed by the Company and are not sold under an inventory finance arrangement.

These types of homes are generally paid for prior to shipment.

4 unchanged sentences

Consumer, MHP and dealer loans interest includes interest income from the consumer, MHP and dealer finance loan portfolios.

Other revenue consists of consignment fees, commercial lease rents, service fees and other miscellaneous income.

Other revenue consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income.

Share-Based Compensation

13 unchanged sentences

“Accounts receivable, net” includes receivables from direct sales of mobile homes, sales of parts and supplies to customers, inventory finance fees and interest.

“Accounts receivable, net” related to inventory finance fees and interest generally are due upon receipt, and all other accounts receivable generally are due within 30 days .

Accounts receivable “net” are stated at amounts due from customers net of an allowance for doubtful accounts.

Accounts receivable related to inventory finance fees and interest generally are due upon receipt, and all other accounts receivable generally are due within 30 days .

Accounts receivable is 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.

1 unchanged sentence

The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible.

On March 31, 2024, December 31, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $ 757 , $ 651 and $ 279 , respectively.

On June 30, 2024, December 31, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $ 601 , $ 651 and $ 279 , 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, the title for the mobile homes remains with the Company, and the lease is accounted for as an operating lease.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

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, and the lease is accounted for as an operating lease.

Our typical lease agreement is for 96 months or 120 months .

3 unchanged sentences

Homes returned to the Company upon expiration of the lease or in the event of default are sold by the Company through its standard sales and distribution channels.

Depreciation expense for the leased property was $ 124 and $ 160 for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, the Company sold 120 leased mobile homes for $ 5.5 million to a mobile home park customer.

Future minimum lease income under all operating leases for each of the next five years at March 31, 2024, is as follows:

Depreciation expense for the leased property was $ 169 and $ 157 for the three months ended June 30, 2024 and 2023, respectively, and $ 294 and $ 317 for the six months ended June 30, 2024 and 2023, respectively.

Future minimum lease income under all operating leases for each of the next five years at June 30, 2024, is as follows:

Product Warranties

4 unchanged sentences

The accrued warranty liability is reduced as costs are incurred and the warranty liability balance is included as part of accrued liabilities in the Company’s balance sheet.

The following table summarizes activity within the warranty liability for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table summarizes activity within the warranty liability for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

Warranty liability, beginning of period

Product warranty accrued

Product warranty reserve accrued (released)

Warranty costs incurred

Warranty liability, end of period

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Recent Accounting Pronouncements

2 unchanged sentences

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.

The allowance for credit losses is a valuation account that is deducted from the amortized cost

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

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.

24 unchanged sentences

Inventory Finance Sales include sales of homes to independent retailers, or dealers, who then resell the homes to consumers.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Sales are homes sold through Company-owned retail locations.

Retail Store Sales are homes sold through Company-owned retail locations.

Inventory Finance Sales and Retail Store Sales of homes may be financed by the Company or a third party, or they may be paid in cash.

2 unchanged sentences

Interest income is recorded separately in the statement of income.

For other financed sales by the Company, the individual customer enters into a sales and financing contract and is required to make a down payment.

For other financed sales by the Company, the individual customer enters into a sales and financing contract and is required to

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

make a down payment.

These financed sales contain a significant financing component and any interest income is recorded separately in the statement of income.

6 unchanged sentences

Warranty costs and contract costs are included in selling, general and administrative expenses in the statements of income.

Warranty and contract costs were $ 537 and $ 627 for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024, mobile home park (“MHP”) sales to two independent third parties and their affiliates accounted for $ 5,450 or 17.7 % and $ 2,799 or 9.1 % of our product sales.

The $ 5,450 represents sales of 120 leased mobile homes to a mobile home park customer, and these sales are included in Commercial Sales in the Disaggregation of Revenue table below.

For the three months ended March 31, 2023, mobile home park (“MHP”) sales to an independent third party and its affiliates accounted for $ 5,647 or 13.0 % of our product sales.

No other customer accounted for more than 5.0% of our product sales.

For the three months ended March 31, 2024 and 2023, total cost of product sales included $ 1,408 and $ 2,623 of costs relating to subcontracted production for commercial sales, transportation and delivery costs, and certain other costs incurred for retail store and commercial sales.

Warranty and contract costs were $ 381 and $ 765 for the three months ended June 30, 2024 and 2023, respectively, and $ 813 and $ 1,394 for the six months ended June 30, 2024 and 2023, respectively.

For the three months ended June 30, 2024 and 2023, total cost of product sales included $ 1,340 and $ 3,949 of costs relating to subcontracted production for commercial sales, transportation and delivery costs, and certain other costs incurred for retail store and commercial sales.

For the six months ended June 30, 2024 and 2023, total cost of product sales included $ 2,748 and $ 6,573 of costs relating to subcontracted production for commercial sales, transportation and delivery costs, and certain other costs incurred for retail store and commercial sales.

Other revenue consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income.

2 unchanged sentences

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.

The Company transitioned most of its independent retailers from consignment arrangements to inventory finance arrangements in late 2022.

As a result, consignment fees transitioned to interest income for inventory finance arrangements, and this interest income is included in Consumer, MHP and dealer loans interest on the accompanying statement of income.

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.

Sales Concentration.

The following table presents mobile home park (“MHP”) sales to independent third parties and their affiliates that are greater than 5.0% of our total product sales for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30,

Six months ended June 30,

Independent 3rd party

No other MHP customer accounted for more than 5.0% of our total product sales.

LEGACY HOUSING CORPORATION

2 unchanged sentences

Disaggregation of Revenue.

The following table summarizes customer contract revenues disaggregated by the source of the revenue for the three months ended March 31, 2024 and 2023:

The following table summarizes customer contract revenues disaggregated by the source of the revenue for the three and six months ended June 30, 2024 and 2023:

Three months ended

Six months ended

Product sales:

15 unchanged sentences

Interest income is recognized monthly per the terms of the financing agreements.

The average contractual interest rate per loan was approximately 13.2 % as of March 31, 2024 and December 31, 2023.

The average contractual interest rate per loan was approximately 13.2 % as of June 30, 2024 and December 31, 2023.

Consumer loans receivable have maturities that range from 2 to 30 years .

2 unchanged sentences

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 $ 10,953 and $ 10,104 as of March 31, 2024 and December 31, 2023, respectively, and are included in escrow liability in the accompanying 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 balance sheet.

An allowance for loan losses is determined after giving consideration to, among other things, the loan characteristics,

The liabilities associated with these escrow collections totaled $ 11,785 and $ 10,104 as of June 30, 2024 and December 31, 2023, respectively, and are included in escrow liability in the accompanying balance sheets.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

including the financial condition of borrowers, the value and liquidity of collateral, delinquency and historical loss experience.

Allowance for Loan Losses—Consumer Loans Receivable

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:

23 unchanged sentences

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 $ 2,940 and $ 2,215 as of March 31, 2024 and December 31, 2023, respectively, and are included in other assets in the accompanying balance sheets.

Repossessed homes from the consumer loan portfolio totaled $ 3,296 and $ 2,215 as of June 30, 2024 and December 31, 2023, respectively, and are included in other assets in the accompanying balance sheets.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consists of the following:

As of March 31,

As of June 30,

As of December 31,

3 unchanged sentences

Consumer loans receivable, net

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

The following table presents a detail of the activity in the allowance for loan losses:

Three Months Ended March 31,

Three months ended June 30,

Six Months Ended June 30,

Allowance for loan losses, beginning of period

Provision for loan losses

(Charge offs) recoveries

Allowance for loan losses, end of period

The following table presents impaired and general reserve for allowance for loan losses:

As of March 31,

As of June 30,

As of December 31,

5 unchanged sentences

General allowance for loan losses

As of March 31, 2024 and December 31, 2023, the total principal outstanding for consumer loans on nonaccrual status was $ 2,041 and $ 1,565 , respectively.

As of June 30, 2024 and December 31, 2023, the total principal outstanding for consumer loans on nonaccrual status was $ 2,250 and $ 1,565 , respectively.

A detailed aging of consumer loans receivable that are past due is as follows:

As of March 31,

As of June 30,

As of December 31,

7 unchanged sentences

We evaluate the credit quality of our consumer loan portfolio based on the aging status of the loan and by payment activity.

Loan delinquency reporting generally is based on borrower payment activity relative to the contractual terms of the loan.

Loan delinquency reporting generally is based on borrower payment activity relative to the contractual

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

terms of the loan.

The following table disaggregates the outstanding principal balance of consumer loans receivable by credit quality indicator based on delinquency status and fiscal year of origination:

4 unchanged sentences

> 90 days past due

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

NOTES RECEIVABLE FROM MOBILE HOME PARKS

2 unchanged sentences

The interest rate on the MHP Notes can be fixed or variable, and the interest rates range from 6.9 % to 12.5 %, excluding the Default Loans defined below.

The average interest rate per loan, excluding the Default Loans below, was approximately 8.0 % as of March 31, 2024 and December 31, 2023, with maturities that range from 1 to 10 years .

The average interest rate per loan, excluding the Default Loans below, was approximately 8.0 % as of June 30, 2024 and December 31, 2023, with maturities that range from 1 to 10 years .

The collateral underlying the MHP Notes are individual mobile homes which can be repossessed and resold.

The MHP Notes are generally personally guaranteed by borrowers with substantial financial resources.

As of March 31, 2024, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 24.0 %, 17.2 % and 13.4 % of the principal balance outstanding, all of which was secured by the mobile homes.

As of June 30, 2024, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 23.8 %, 14.9 % and 13.3 % of the principal balance outstanding, all of which was secured by the mobile homes.

As of December 31, 2023, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 24.5 %, 17.9 % and 14.0 % of the principal balance outstanding, all of which was secured by the mobile homes.

2 unchanged sentences

The Company establishes an allowance composed of specific and general reserve amounts.

As of March 31, 2024 and December 31, 2023, the MHP Notes balance is presented net of unamortized finance fees of $ 1 ,257 and $ 1,565 , respectively.

As of June 30, 2024 and December 31, 2023, the MHP Notes balance is presented net of unamortized finance fees of $ 1,232 and $ 1,565 , respectively.

The finance fees are amortized over the life of the MHP Notes.

As of March 31, 2024 and December 31, 2023 there were past due balances of $ 262 and $ 98 , respectively, on the MHP Notes excluding the Default Loans, as defined below.

For the three months ended March 31, 2024 and 2023, there were no charge offs recorded for MHP Notes.

Allowance for loan loss for the MHP Notes was $ 616 and $ 735 as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, there was a minimal impaired balance of MHP Notes.

As of June 30, 2024 and December 31, 2023 there were past due balances of $ 156 and $ 98 , respectively, on the MHP Notes excluding the Default Loans, as defined below.

For the three months ended June 30, 2024 and 2023, there were no charge offs recorded for MHP Notes.

For the six months ended June 30, 2024 and 2023, there were no charge offs recorded for MHP Notes.

Allowance for loan loss for the MHP Notes was $ 711 and $ 735 as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, there was a minimal impaired balance of MHP Notes.

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.

2 unchanged sentences

These notes are collateralized by mobile homes and land and are personally guaranteed by multiple borrowers.

The Company evaluated the recoverability of these notes as of March 31, 2024 and determined a provision for expected loan losses is not deemed necessary based on the analysis of the underlying collateral.

The Company evaluated the recoverability of these notes as of June 30, 2024 and determined a provision for expected loan losses is not necessary based on the analysis of the fair value of underlying collateral.

The Company accelerated the Default Loans at the end of January, 2024.

Upon acceleration, the loans accrue interest at a rate of 17.5 % and are due on demand.

At March 31, 2024 the Default Loans are presented on the accompanying balance sheets under the heading Current assets, with $ 26 million in Current portion of notes receivable from mobile home parks (“MHP”) and $ 10 million in Current portion of other notes receivable.

During the three months ended March 31, 2024, the Company foreclosed on property and homes of $ 2.3 million that is included on the accompanying balance sheets in Property, plant and equipment, net.

At June 30, 2024 the Default Loans are presented on the accompanying balance sheets under the heading Current assets, with $ 21 million in Current portion of notes receivable from mobile home parks (“MHP”) and $ 11 million in Current portion of other notes receivable.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

Notes receivable from mobile home parks, net of allowance for loan losses and deferred financing fees, consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

the three months ended March 31, 2024, the Company foreclosed on property of $ 1.1 million and homes of $ 1.2 million that are included on the accompanying balance sheets in Property, plant and equipment, net and Other assets, respectively.

During the three months ended June 30, 2024, the Company foreclosed on homes of $ 4.3 million that are included on the accompanying balance sheets in Other assets.

On July 27, 2024, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with the borrowers and guarantors.

This Settlement Agreement is described in more detail in Note 19, Subsequent Events, in these Notes to Condensed Financial Statements (Unaudited) for the quarter ended June 30, 2024.

Notes receivable from mobile home parks, net of allowance for loan losses and deferred financing fees, consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

2 unchanged sentences

Allowance for loan losses

The following table presents a detail of the activity in the allowance for loan losses for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

The following table presents a detail of the activity in the allowance for loan losses for the three and six months ended June 30, 2024 and 2023:

Three months ended

Six months ended

Allowance for loan losses, beginning of period

2 unchanged sentences

Allowance for loan losses, end of period

The following table presents impaired and general reserve for allowance for loan losses at March 31, 2024 and December 31, 2023:

As of March 31,

The following table presents impaired and general reserve for allowance for loan losses at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

6 unchanged sentences

We evaluate the credit quality of our MHP portfolio based on the aging status of the loan and by payment activity.

Loan delinquency reporting is generally based upon borrower payment activity relative to the contractual terms of the loan.

The following table disaggregates the outstanding principal balance of MHP receivable by credit quality indicator based on delinquency status and fiscal year of origination and is presented as of March 31, 2024:

Loan delinquency reporting is generally based upon borrower payment activity relative to the contractual terms

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Year of Origination

3 unchanged sentences

> 90 days past due

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

OTHER NOTES RECEIVABLE

5 unchanged sentences

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.

As of March 31, 2024 and December 31, 2023 there were past due balances of $ 286 and $ 22 , respectively, on the other notes excluding the Default Loans, as defined below.

For the three months ended March 31, 2024 and 2023, there were no charge offs recorded for other notes.

Allowance for loan loss for the other notes was $ 176 and $ 236 as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, the impaired balance of other notes was $ 76 and $ 84 , respectively.

As of June 30, 2024 and December 31, 2023 there were past due balances of $ 544 and $ 22 , respectively, on the other notes excluding the Default Loans, as defined below.

For the three months ended June 30, 2024 and 2023, there were no charge offs recorded for other notes.

For the six months ended June 30, 2024 and 2023, there were no charge offs recorded for other notes.

Allowance for loan loss for the other notes was $ 211 and $ 236 as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, the impaired balance of other notes was $ 104 and $ 84 , 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.

Approximately $ 49 million of MHP Notes and Other notes receivable is with borrowers either owned or operated by one individual.

Approximately $ 36 million of these notes currently is in default (the “Default Loans” as defined in Note 4 above) and is the subject of ongoing litigation in which the Company is the plaintiff.

Approximately $ 32 million of these notes currently is in default (the “Default Loans”) and is the subject of ongoing litigation in which the Company is the plaintiff.

These notes are collateralized by mobile homes and land and are personally guaranteed by multiple borrowers.

The Company accelerated the Default Loans at the end of January, 2024.

Upon acceleration, the loans accrue interest at a rate of 17.5 % and are due on demand.

During the three months ended March 31, 2024, the Company foreclosed on property and homes of $ 2.3 million that is included on the accompanying balance sheets in Property, plant and equipment, net.

Other notes receivable, net of allowance for loan losses and deferred financing fees, consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

During the three months ended March 31, 2024, the Company foreclosed on property of $ 1.1 million and homes of $ 1.2 million that are included on the accompanying balance sheets in Property, plant and equipment, net and Other assets, respectively.

During the three months ended June 30, 2024, the Company foreclosed on homes of $ 4.3 million that are included on the accompanying balance sheets in Other assets.

On July 27, 2024, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with the borrowers and guarantors.

This Settlement Agreement is

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

described in more detail in Note 19, Subsequent Events, in these Notes to Condensed Financial Statements (Unaudited) for the quarter ended June 30, 2024.

Other notes receivable, net of allowance for loan losses and deferred financing fees, consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

2 unchanged sentences

Allowance for loan losses

The following table presents a detail of the activity in the allowance for loan losses for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

The following table presents a detail of the activity in the allowance for loan losses for the three and six months ended June 30, 2024 and 2023:

Three months ended

Six months ended

Allowance for loan losses, beginning of period

2 unchanged sentences

Allowance for loan losses, end of period

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

The following table presents impaired and general reserve for allowance for loan losses at March 31, 2024 and December 31, 2023:

As of March 31,

The following table presents impaired and general reserve for allowance for loan losses at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

7 unchanged sentences

Loan delinquency reporting is generally based upon borrower payment activity, relative to the contractual terms of the loan.

The following table disaggregates the outstanding principal balance of Other notes receivable by credit quality indicator based on delinquency status and fiscal year of origination and is presented as of March 31, 2024:

The following table disaggregates the outstanding principal balance of Other notes

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

receivable by credit quality indicator based on delinquency status and fiscal year of origination and is presented as of June 30, 2024:

Year of Origination

8 unchanged sentences

The terms of the financing typically include a three year term, a monthly interest payment, an annual curtailment payment and require the retailer to pay the principal amount of the loan to the Company upon the earlier of the sale of the home by the retailer to its customer or the end of the term.

Dealer financed notes receivable, net of allowance for loan losses and deferred financing fees, consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

Dealer financed notes receivable, net of allowance for loan losses and deferred financing fees, consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

Outstanding principal balance

Loan discount and deferred financing fees

Allowance for loan losses

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

The following table presents a detail of the activity in the allowance for loan losses for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

The following table presents a detail of the activity in the allowance for loan losses for the three and six months ended June 30, 2024 and 2023:

Three months ended

Six months ended

Allowance for loan losses, beginning of period

6 unchanged sentences

These leases typically have initial terms ranging from 5 to 10 years and include one or more options to renew.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Under ASC 842, the Company elected the modified retrospective approach, applying the new standard to all leases at the date of initial application.

The Company adopted the new standard on January 1, 2022.

We determine if an arrangement is or contains a lease at inception.

14 unchanged sentences

The incremental borrowing rate represents the rate of interest we would otherwise pay on a collateralized borrowing, for an amount equal to the lease payments, over a similar term and in a similar economic environment.

As of March 31, 2024, the remaining weighted-average lease term is 3.80 years and the weighted-average discount rate is 2.10 %.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

As of June 30, 2024, the remaining weighted-average lease term is 3.57 years and the weighted-average discount rate is 2.10 %.

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 year ended March 31, 2024.

There were no variable lease costs for the year ended June 30, 2024.

Short-term leases, those with a term of 12 months or less, are not recorded on our balance sheet.

Our short-term lease costs were not material for the year ended March 31, 2024.

Our short-term lease costs were not material for the year ended June 30, 2024.

Lease expense for operating leases consists of fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred.

Amortization of the ROU asset for operating leases reflects amortization of the lease liability, any differences between straight-line expense and related lease payments during the accounting period, and any impairments.

As of March 31, 2024, present value of future lease payments under our operating lease liabilities were as follows:

Amortization of the ROU asset for operating leases reflects

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

amortization of the lease liability, any differences between straight-line expense and related lease payments during the accounting period, and any impairments.

As of June 30, 2024, present value of future lease payments under our operating lease liabilities were as follows:

Total lease payments

3 unchanged sentences

Total non-current lease liability

Inventories consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

Inventories consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

2 unchanged sentences

Finished goods

Finished goods expected to be held for more than twelve months is classified as long-term and represented $ 8,727 and $ 7,793 as of March 31, 2024 and December 31, 2023, respectively.

The Company has an inventory allowance of $ 527 and $ 439 as of March 31, 2024 and December 31, 2023, respectively, for finished goods expected to be held for more than twelve months.

Finished goods expected to be held for more than twelve months is classified as long-term and represented $ 9,650 and $ 7,793 as of June 30, 2024 and December 31, 2023, respectively.

The Company has an inventory allowance of $ 613 and $ 439 as of June 30, 2024 and December 31, 2023, respectively, for finished goods expected to be held for more than twelve months.

LEGACY HOUSING CORPORATION

2 unchanged sentences

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

Property, plant and equipment consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

5 unchanged sentences

Total property, plant and equipment

Depreciation expense was $ 403 with $ 158 included as a component of cost of product sales for the three months ended March 31, 2024, and $ 270 with $ 126 included as a component of cost of product sales for the three months ended March 31, 2023.

Other assets consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

Depreciation expense was $ 454 with $ 167 included as a component of cost of product sales for the three months ended June 30, 2024, and $ 269 with $ 124 included as a component of cost of product sales for the three months ended June 30, 2023.

Depreciation expense was $ 857 with $ 325 included as a component of cost of product sales for the six months ended June 30, 2024, and $ 540 with $ 249 included as a component of cost of product sales for the six months ended June 30, 2023.

Other assets consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

Repossessed homes

Repossessed homes balance as of June 30, 2024 includes $ 3,296 for homes repossessed from the consumer loan portfolio and $ 5,546 for homes repossessed from the MHP loan portfolio.

Repossessed homes balance as of December 31, 2023 includes $ 2,215 for homes repossessed from the consumer loan portfolio.

LEGACY HOUSING CORPORATION

2 unchanged sentences

ACCRUED LIABILITIES

Accrued liabilities consisted of the following at March 31, 2024 and December 31, 2023:

As of March 31,

Accrued liabilities consisted of the following at June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

14 unchanged sentences

The Revolver matures July 28, 2027.

For the three months ended March 31, 2024, interest expense for the under the Revolver was $ 2 76, and for the three months ended March 31, 2023, interest expense under the prior line of credit was $ 91 .

The outstanding balance of the Revolver as of March 31, 2024 and December 31, 2023 was $ 11,797 and $ 23,680 , respectively.

The interest rate in effect as of March 31, 2024 and December 31, 2023 for the Revolver was 7.67 % and 7.95 %, respectively.

The amount of available credit under the Revolver was $ 38,203 and $ 26,320 as of March 31, 2024 and December 31, 2023, respectively.

For the three months ended June 30, 2024, interest expense under the Revolver was $ 235 , and for the three months ended June 30, 2023, interest expense under the prior line of credit was $ 195 .

For the six months ended June 30, 2024, interest expense under the Revolver was $ 511 , and for the six months ended June 30, 2023, interest expense under the prior line of credit was $ 285 .

The outstanding balance of the Revolver as of June 30, 2024 and December 31, 2023 was $ 11,861 and $ 23,680 , respectively.

The interest rate in effect as of June 30, 2024 and December 31, 2023 for the Revolver was 7.67 % and 7.95 %, respectively.

The amount of available credit under the Revolver was $ 38,139 and $ 26,320 as of June 30, 2024 and December 31, 2023, respectively.

The Revolver requires the Company to comply with certain financial and non-financial covenants.

As of March 31, 2024, the Company was in compliance with all financial covenants, including that it maintain a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00.

SHARE-BASED COMPENSATION

Pursuant to the Legacy Housing Corporation 2018 Incentive Compensation Plan (the “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, restricted stock and stock appreciation rights.

Stock options may be granted with a contractual life of up to ten years .

At March 31, 2024, the Company had 8.7 million shares available for grant under the Plan.

As of June 30, 2024, the Company was in compliance with all financial covenants, including that it maintain a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

SHARE-BASED COMPENSATION

Stock options may be granted with a contractual life of up to ten years .

At June 30, 2024, the Company had 8.7 million shares available for grant under the Plan.

Restricted Stock

The following is a summary of restricted stock award activity for the year ended December 31, 2023 and the three months ended March 31, 2024 (number of units in thousands except per unit data):

The following is a summary of restricted stock award activity for the year ended December 31, 2023 and the three and six months ended June 30, 2024 (number of units in thousands except per unit data):

Number of Units

4 unchanged sentences

Nonvested, March 31, 2024

As of March 31, 2024, approximately 8,000 shares of restricted stock remained unvested.

Unrecognized compensation expense related to these restricted stock awards at March 31, 2024 was $ 42 and is expected to be recognized over 0.4 years.

Compensation expense for restricted stock awards for the three months ended March 31, 2024 and 2023 was $ 37 and $ 66 , respectively.

Nonvested, March 31, 2024

Nonvested, June 30, 2024

As of June 30, 2024, approximately 1,000 shares of restricted stock remained unvested.

Unrecognized compensation expense related to these restricted stock awards at June 30, 2024 was $ 8 and is expected to be recognized over 0.21 years.

Compensation expense for restricted stock awards for the three months ended June 30, 2024 and 2023 was $ 27 and $ 67 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 64 and $ 133 , respectively.

LEGACY HOUSING CORPORATION

2 unchanged sentences

Stock Options

The following is a summary of option award activity for the year ended December 31, 2023 and the three months ended March 31, 2024 (number of units in thousands except per unit data):

The following is a summary of option award activity for the year ended December 31, 2023 and the three and six months ended June 30, 2024 (number of units in thousands except per unit data):

Number of Units

9 unchanged sentences

Exercisable, March 31, 2024

As of March 31, 2024, approximately 910,000 options remained nonvested.

Unrecognized compensation expense related to these options at March 31, 2024 was $ 4,332 and is expected to be recognized over 8.0 years.

Compensation expense for stock option awards for the three months ended March 31, 2024 and 2023 was $ 147 and $ 126 , respectively.

The provision for income tax expense for the three months ended March 31, 2024 and 2023 was $ 3,373 and $ 3,435 respectively.

The effective tax rate for the three months ended March 31, 2024 and 2023 was 18.2 % and 17.4 %, respectively.

Outstanding, March 31, 2024

Outstanding, June 30, 2024

Exercisable, June 30, 2024

As of June 30, 2024, approximately 809,000 options remained nonvested.

Unrecognized compensation expense related to these options at June 30, 2024 was $ 4,185 and is expected to be recognized over 7.8 years.

Compensation expense for stock option awards for the three months ended June 30, 2024 and 2023 was $ 147 and $ 129 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 295 and $ 255 , respectively.

The provision for income tax expense for the three months ended June 30, 2024 and 2023 was $ 3,607 and $ 3,070 respectively, and for the six months ended June 30, 2024 and 2023 was $ 6,980 and $ 6,505 respectively.

The effective tax rate for the three months ended June 30, 2024 and 2023 was 18.2 % and 17.0 %, respectively, and for the six months ended June 30, 2024 and 2023 was 18.2 % and 17.2 %, respectively.

These rates differ from the federal statutory rate of 21 % primarily due to a federal tax credit for the sale of energy efficient homes under the Internal Revenue Code §45L, partially offset by state income taxes.

2 unchanged sentences

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.

As of March 31, 2024 and December 31, 2023, the Company accrued a $ 253 and $ 242 liability for incurred but not reported claims, respectively.

These accrued amounts are included in accrued liabilities on the accompanying balance sheets.

The Company estimates and records costs for

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

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.

As of June 30, 2024 and December 31, 2023, the Company accrued a $ 222 and $ 242 liability for incurred but not reported claims, respectively.

These accrued amounts are included in accrued liabilities on the accompanying balance sheets.

The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent retailers of its products.

2 unchanged sentences

The Company believes that risk of loss is mitigated due to the resale value of the repurchased homes and the fact that the agreements are spread over many retailers.

The maximum amount for which the Company was liable under such agreements approximated $ 1,671 and $ 3,030 at March 31, 2024 and December 31, 2023, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be immaterial and accordingly has not recorded any reserve for repurchase commitment as of March 31, 2024 and December 31, 2023.

The maximum amount for which the Company was liable under such agreements approximated $ 1,040 and $ 3,030 at June 30, 2024 and December 31, 2023, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be immaterial and accordingly has not recorded any reserve for repurchase commitment as of June 30, 2024 and December 31, 2023.

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 $ 159 and $ 182 for the three months ended March 31, 2024 and 2023, respectively.

Rent expense for the three months ended June 30, 2024 and 2023 was $ 161 and $ 141 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 320 and $ 323 , 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 properties was approximately $ 54 and $ 67 for the three months ended March 31, 2024 and 2023, respectively.

Rental income from the subleased properties for the three months ended June 30, 2024 and 2023 was approximately $ 60 and $ 39 , respectively, and for the six months ended June 30, 2024 and 2023 was approximately $ 114 and $ 95 , respectively.

See Note 7 – Leases, for a schedule of the Company’s future minimum lease commitments.

3 unchanged sentences

The Company has determined that it is probable that it has some liability related to the claims.

The Company has included legal reserves of $ 610 and $ 990 as of March 31, 2024 and December 31, 2023, respectively, in accrued liabilities on the accompanying balance sheets.

The Company has included legal reserves of $ 550 and $ 990 as of June 30, 2024 and December 31, 2023, respectively, in accrued liabilities on the accompanying 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.

6 unchanged sentences

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.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Level II Significant observable inputs other than quoted prices in active markets for which inputs to the valuation methodology include:

4 unchanged sentences

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.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

Level III Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.

7 unchanged sentences

This is considered a Level III valuation technique.

The following table shows the fair market value and book value of these portfolios as of March 31, 2024 and December 31, 2023:

As of March 31,

The following table shows the fair market value and book value of these portfolios as of June 30, 2024 and December 31, 2023:

As of June 30,

As of December 31,

14 unchanged sentences

Three months ended

Six months ended

Net income (in 000's)

6 unchanged sentences

In November 2022, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $ 10.0 million of the Company’s common stock.

We repurchased 91,187 shares for $ 1.9 million in the open market during the three months ended March 31, 2024.

As of March 31, 2024, we had a remaining authorization of approximately $ 8.1 million.

Between April 1, 2024 and May 9, 2024, we repurchased 170,342 shares for $ 3.5 million in the open market.

We repurchased 170,342 shares for $ 3.5 million in the open market during the three months ended June 30, 2024, and we repurchased 261,529 shares for $ 5.4 million in the open market during the six months ended June 30, 2024.

As of June 30, 2024, we had a remaining authorization of approximately $ 4.6 million.

On August 6, 2024, our Board of Directors authorized the repurchase of an additional $ 10.0 million of the Company’s common stock under the share repurchase program.

RELATED PARTY TRANSACTIONS

Bell Mobile Homes (“Bell”), a retailer owned by one of the Company’s significant stockholders, purchases manufactured homes from the Company.

Accounts receivable balances due from Bell were $ 189 and $ 403 as of March 31, 2024 and December 31, 2023, respectively.

Accounts payable balances due to Bell were $ 43 and $ 18 as of March 31, 2024 and December 31, 2023, respectively.

Home sales to Bell were $ 1,119 and $ 479 for the three months ended March 31, 2024 and 2023, respectively.

Accounts receivable balances due from Bell were $ 325 and $ 403 as of June 30, 2024 and December 31, 2023, respectively.

Accounts payable balances due to Bell were $ 60 and $ 18 as of June 30, 2024 and December 31, 2023, respectively.

Home sales to Bell were $ 1,312 and $ 1,507 for the three months ended June 30, 2024 and 2023, respectively, and were $ 2,431 and $ 1,987 for the six months ended June 30, 2024 and 2023, respectively.

Shipley Bros., Ltd.

And Crazy Red’s Mobile Homes (together, “Shipley”), retailers owned by one of the Company’s significant shareholders, purchase manufactured homes from the Company.

Accounts receivable balances due from Shipley were $ 0 and $ 143 as of March 31, 2024 and December 31, 2023, respectively.

Accounts payable balances due to Shipley were $ 15 and $ 67 as of March 31, 2024 and December 31, 2023.

Home sales to Shipley were $ 299 and $ 632 for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, the Company had a receivable of $ 1 from a principal shareholder.

This amount is included in the Company’s accounts receivable balance as of March 31, 2024.

Accounts receivable balances due from Shipley were $ 349 and $ 143 as of June 30, 2024 and December 31, 2023, respectively.

Accounts payable balances due to Shipley were $ 68 and $ 67 as of June 30, 2024 and December 31, 2023.

Home sales to Shipley were $ 1,361 and $ 252 for the three months ended June 30, 2024 and 2023, respectively, and were $ 1,660 and $ 622 for the six months ended June 30, 2024 and 2023, respectively.

LEGACY HOUSING CORPORATION

2 unchanged sentences

SUBSEQUENT EVENTS

In connection with the preparation of these financial statements, we evaluated subsequent events after the balance sheet date of March 31, 2024 and through the date of this filing and determined that no events occurred that would require adjustments or disclosures in the financial statements except those listed below.

In November 2022, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $ 10.0 million of the Company’s common stock.

We repurchased 91,187 shares for $ 1.9 million in the open market during the three months ended March 31, 2024.

As of March 31, 2024, we had a remaining authorization of approximately $ 8.1 million.

Between April 1, 2024 and May 9, 2024, we repurchased 170,342 shares for $ 3.5 million in the open market.

In connection with the preparation of these financial statements, we evaluated subsequent events after the balance sheet date of June 30, 2024 and through the date of this filing and determined that no events occurred that would require adjustments or disclosures in the financial statements except those listed below.

As Legacy Housing Corporation (“Legacy” or the “Company”) previously disclosed, in a Form 10-K for the fiscal year ended December 31, 2023, and a Form 10-Q for the quarterly period ended March 31, 2024, Legacy and numerous entities owned or operated by one individual (the “Makers”) previously entered into several Promissory Notes (the “Notes”) valued at approximately $ 55 million.

In January 2024, the Makers defaulted on, and Legacy accelerated, a portion of the Notes valued at approximately $ 37 million.

The Notes were secured by mobile homes and mobile-home parks located in Texas, Mississippi, and Louisiana, and personally guaranteed by individuals (the “Personal Guarantors”).

In the first and second quarters of 2024, Legacy filed several lawsuits against the Makers and the Personal Guarantors and aggressively pursued the collateral.

On July 27, 2024, Legacy, the Makers, and the Personal Guarantors entered into a Settlement Agreement and Release (the “Agreement”).

The parties to the Agreement are Legacy, Legacy’s Executive Chairman, Curtis D.

Hodgson (collectively, the “Plaintiffs”), William Rodwell, Cynthia Rodwell, Tony Hartsgrove, Robert T.

Hutson II, Yakov Plotnikov, Eric D.

Wooten (collectively, the “Individual Defendants”), Cleveland MHC, LLC (“Cleveland”), Country Aire Homes of LA, LLC, Forest Hollow, LLC (“Forest Hollow”), Gulf Stream Homes of LA, LLC, Gulf Stream Homes of MS, LLC, Stellar GS Homes, LLC, SINOP GS Homes, LLC, Gulf Stream Manor Phase 2 Homes, LLC, Iowa Homes, LLC, Southern Pointe Homes, LLC, Southern Pointe Investments, LLC, Southern Pointe Investments II, LLC, Stellar GS Homes LLC, and Country Aire MHP LLC (collectively, the “Entity Defendants”).

As consideration for the mutual releases contained in the Agreement:

● Forest Hollow shall convey clear title, and the undisputed right to possess, all real and personal property located on or at the Forest Hollow Mobile Home Community, 6650 Broad Oak Street, Beaumont, TX 77713 (the “Forest Hollow Mobile Home Community”) to Legacy;

● Cleveland shall convey clear title, and the undisputed right to possess, all real and personal property located on or at the Cleveland Mobile Home Community, 110 Old Hwy 49 S.

Richland, MS 39218 (the “Cleveland Mobile Home Community”) to Legacy;

● Cleveland and Forest Hollow shall assign all intangible assets, including all leases, contracts, and goodwill applicable or related to the real and personal property located on or at the Forest Hollow Mobile Home Community and the Cleveland Mobile Home Community to Legacy;

● The Individual and Entity Defendants shall irrevocably waive any and all claims related to existing deposits;

● Legacy shall refinance the Entity and Individual Defendants’ remaining debt, pursuant to a new two-year , $ 48 million Promissory Note (the “New Note”), with the balance subject to change prior to closing.

The New Note shall be secured by a first priority interest in more than 1,000 mobile homes and two mobile-home parks located in Louisiana, and personal guarantees signed by the Individual Defendants.

Legacy evaluated the recoverability of the Notes as of December 31, 2023, March 31, 2024, and June 30, 2024 and determined that a provision for expected loan losses was not necessary based on an analysis of the value of the collateral.

The New Note is secured by the same Louisiana collateral as the old Notes, and while providing additional legal efficiencies.

The Individual Defendants shall personally guarantee the New Note to the same extent they have personally guaranteed the Entity Defendants’ existing debt.

On August 6, 2024, the Board of Directors adopted a motion, pursuant to which Curtis Hodgson will remain Executive Chairman until the 2024 Annual Shareholders’ Meeting.

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-Q

Item 1. Financial Statements