What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 208 added, 196 removed, 625 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

32 unchanged sentences

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

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

24,865,906 and 24,843,494 issued and 24,158,311 and 24,398,429 outstanding at September 30, 2024 and December 31, 2023, respectively

Treasury stock at cost, 707,595 and 445,065 shares at September 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 June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Product sales

3 unchanged sentences

Cost of product sales

Cost of other sales

Selling, general and administrative expenses

15 unchanged sentences

(unaudited, in thousands)

Six months ended June 30,

Nine months ended September 30,

Operating activities:

5 unchanged sentences

Gain from sale of assets

Gain from loan settlements

Non-cash operating lease expense

22 unchanged sentences

Collections from purchased loans

Net cash provided by investing activities

Net cash (used in) investing activities

Financing activities:

23 unchanged sentences

Balances, June 30, 2023

Share based compensation

Balances, September 30, 2023

paid-in-capital

7 unchanged sentences

Balances, June 30, 2024

Share based compensation

Proceeds from exercise of stock options

Purchase of treasury stock

Balances, September 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 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 results for the three months and nine months ended September 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.

23 unchanged sentences

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

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

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

Share-Based Compensation

18 unchanged sentences

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

On June 30, 2024, December 31, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $ 601 , $ 651 and $ 279 , respectively.

On September 30, 2024, December 31, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $ 709 , $ 651 and $ 279 , respectively.

Leased Property

9 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 $ 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:

Future minimum lease income under all operating leases for each of the next five years at September 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 and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Warranty liability, beginning of period

6 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

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

LEGACY HOUSING CORPORATION

1 unchanged sentence

(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.

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.

41 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 $ 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.

Warranty and contract costs were $ 474 and $ 666 for the three months ended September 30, 2024 and 2023, respectively, and $ 1,287 and $ 2,024 for the nine months ended September 30, 2024 and 2023, respectively.

For the three months ended September 30, 2024 and 2023, total cost of product sales included $ 1,450 and $ 3,285 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 nine months ended September 30, 2024 and 2023, total cost of product sales included $ 4,198 and $ 9,857 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, land sales, 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.

4 unchanged sentences

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

Three months ended September 30,

Nine months ended September 30,

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

3 unchanged sentences

Disaggregation of Revenue.

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:

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

Three months ended

Six months ended

Nine months ended

September 30,

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 June 30, 2024 and December 31, 2023.

The average contractual interest rate per loan was approximately 13.1% and 13.2% as of September 30, 2024 and December 31, 2023, respectively.

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 $ 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.

The liabilities associated with these escrow collections totaled $ 12,700 and $ 10,104 as of September 30, 2024 and December 31, 2023, respectively, and are included in escrow liability in the accompanying balance sheets.

LEGACY HOUSING CORPORATION

29 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 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.

Repossessed homes from the consumer loan portfolio totaled $ 3,986 and $ 2,215 as of September 30, 2024 and December 31, 2023, respectively, and are included in other assets in the accompanying balance sheets.

LEGACY HOUSING CORPORATION

2 unchanged sentences

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

As of June 30,

As of September 30,

As of December 31,

4 unchanged sentences

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,

Three months ended September 30,

Nine Months Ended September 30,

Allowance for loan losses, beginning of period

3 unchanged sentences

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

As of June 30,

As of September 30,

As of December 31,

5 unchanged sentences

General allowance for loan losses

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.

As of September 30, 2024 and December 31, 2023, the total principal outstanding for consumer loans on nonaccrual status was $ 2,961 and $ 1,565 , respectively.

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

As of June 30,

As of September 30,

As of December 31,

21 unchanged sentences

The MHP Notes have varying maturity dates and require monthly principal and interest payments.

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 June 30, 2024 and December 31, 2023, with maturities that range from 1 to 10 years .

The interest rate on the MHP Notes can be fixed or variable, and the interest rates range from 6.9 % to 12.0 %.

The average interest rate per loan was approximately 7.9 % as of September 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 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.

As of September 30, 2024, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 24.1 %, 17.3 % and 12.0 % of the principal balance outstanding, all of which were 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 17.9 %, 24.5 % and 14.0 % of the principal balance outstanding, all of which were secured by the mobile homes.

MHP Notes are stated at amounts due from customers, net of allowance for loan losses.

1 unchanged sentence

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

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.

As of September 30, 2024 and December 31, 2023, the MHP Notes balance is presented net of unamortized finance fees of $ 1,137 and $ 1,565 , respectively.

The finance fees are amortized over the life of the 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.

As of September 30, 2024, there were past due balances of $ 220 on MHP Notes.

As of December 31, 2023, there were past due balances of $ 98 on the MHP Notes excluding any amounts attributed to the Notes, as defined below.

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

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

Allowance for loan loss for the MHP Notes was $ 753 and $ 735 as of September 30, 2024 and December 31, 2023, respectively.

As of September 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.

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

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 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 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.

Settlement Agreement

As the Company previously disclosed, in a Form 10-K for the fiscal year ended December 31, 2023, and Forms 10-Q for the quarterly periods ended March 31, 2024 and June 30, 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,

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

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,

second and third 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 conveyed 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 conveyed 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 assigned 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 irrevocably waived any and all claims related to existing deposits;

● Legacy refinanced the Entity and Individual Defendants’ remaining debt, pursuant to a new two-year , $ 48.6 million Promissory Note (the “New Note”).

The New Note is 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.

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

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

The Company presents the entire New Note on the accompanying balance sheets under the heading Notes receivable from mobile home parks (“MHP”), and interest income associated with the New Note is presented on the accompanying statement of income under the heading Consumer, MHP and dealer loans interest.

The prior debt was presented on Form 10-Q for the quarterly period ended June 30, 2024 on the balance sheets under the headings Current portion of notes receivable from mobile home parks (“MHP”), Notes receivable from mobile home parks, net, Current portion of other notes receivable and Other notes receivable, net.

Interest income associated with the prior debt was presented on Form 10-Q for the quarterly period ended June 30, 2024 on the statements of income under the headings Consumer, MHP and dealer loans interest and Non-operating interest income.

The Company recorded the fair value of the real property from Cleveland and Forest Hollow on the accompanying balance sheets under the heading Property, plant and equipment, net.

The Company recorded the fair value of the personal property from Cleveland and Forest Hollow on the accompanying balance sheets under the heading Other assets.

The Agreement resulted in a gain for the Company of $ 3.4 million that is shown on the accompanying statements of income under the heading Other income (expense) for the nine months ended September 30, 2024.

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

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

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

As of September 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 and six months ended June 30, 2024 and 2023:

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

Three months ended

Six months ended

Nine months ended

September 30,

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 June 30, 2024 and December 31, 2023:

As of June 30,

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

As of September 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

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

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 June 30, 2024:

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

Year of Origination

6 unchanged sentences

These other notes have varying maturity dates and generally require monthly principal and interest payments.

They are collateralized by mortgages on real estate, mobile homes that we have financed for which the borrower uses as offices, as well as vehicles.

They are collateralized by mortgages on real estate, mobile homes that we have financed for which

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

the borrower uses as offices, as well as vehicles.

These notes typically are personally guaranteed by the borrowers.

1 unchanged sentence

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 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.

As of September 30, 2024, there were past due balances of $ 569 on other notes.

As of December 31, 2023, there were past due balances of $ 22 on other notes, excluding any amounts attributable to the Notes, as described in Note 4, Notes Receivable from Mobile Home Parks, above.

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

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

Allowance for loan loss for the other notes was $ 208 and $ 236 as of September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, the impaired balance of other notes was $ 88 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 $ 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 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,

Note 4, Notes Receivable from Mobile Home Parks, in these Notes to Condensed Financial Statements (Unaudited) for the quarter ended September 30, 2024 provides details regarding a settlement agreement related to prior debt that was presented in Form 10-Q for the quarterly period ended June 30, 2024 on the balance sheets under the headings Current portion of notes receivable from mobile home parks (“MHP”), Notes receivable from mobile home parks, net, Current portion of other notes receivable and Other notes receivable, net.

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

As of September 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 and six months ended June 30, 2024 and 2023:

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

Three months ended

Six months ended

Nine months ended

September 30,

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 June 30, 2024 and December 31, 2023:

As of June 30,

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 September 30, 2024 and December 31, 2023:

As of September 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

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:

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 September 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 June 30, 2024 and December 31, 2023:

As of June 30,

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

As of September 30,

As of December 31,

1 unchanged sentence

Allowance for loan losses

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:

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 and nine months ended September 30, 2024 and 2023:

Three months ended

Six months ended

Nine months ended

September 30,

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.

15 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 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 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 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

As of September 30, 2024, the remaining weighted-average lease term is 3.34 years and the weighted-average discount rate is 2.80 %.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(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:

There were no variable lease costs for the three months ended September 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 three months ended September 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 September 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 June 30, 2024 and December 31, 2023:

As of June 30,

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

As of September 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 $ 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.

Finished goods expected to be held for more than twelve months are classified as long-term and represented $ 9,803 and $ 7,793 as of September 30, 2024 and December 31, 2023, respectively.

The Company has an inventory allowance of $ 673 and $ 439 as of September 30, 2024 and December 31, 2023, respectively, for finished goods classified as long-term.

LEGACY HOUSING CORPORATION

2 unchanged sentences

PROPERTY, PLANT AND EQUIPMENT

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

As of June 30,

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

As of September 30,

As of December 31,

5 unchanged sentences

Total property, plant and equipment

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,

Depreciation expense was $ 481 and $ 412 for the three months ended September 30, 2024 and 2023, respectively, and includes depreciation expense for leased mobile homes.

Depreciation expense also includes $ 168 and $ 127 as a component of cost of product sales for the three months ended September 30, 2024 and 2023, respectively.

Depreciation expense was $ 1,337 and 1,235 for the nine months ended September 30, 2024 and 2023, respectively, and includes depreciation expense for leased mobile homes.

Depreciation expense also includes $ 494 and $ 377 as a component of cost of product sales for the nine months ended September 30, 2024 and 2023, respectively.

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

As of September 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 September 30, 2024 includes $ 3,986 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.

3 unchanged sentences

ACCRUED LIABILITIES

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

As of June 30,

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

As of September 30,

As of December 31,

14 unchanged sentences

The Revolver matures July 28, 2027.

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.

For the three months ended September 30, 2024, interest expense under the Revolver was $ 175 , and for the three months ended September 30, 2023, interest expense under the Revolver and prior line of credit was $ 302 .

For the nine months ended September 30, 2024, interest expense under the Revolver was $ 686 , and for the nine months ended September 30, 2023, interest expense under the Revolver and prior line of credit was $ 588 .

The outstanding balance of the Revolver as of September 30, 2024 and December 31, 2023 was $ 2,111 and $ 23,680 , respectively.

The interest rate in effect as of September 30, 2024 and December 31, 2023 for the Revolver was 7.61 % and 7.95 %, respectively.

The amount of available credit under the Revolver was $ 47,889 and $ 26,320 as of September 30, 2024 and December 31, 2023, respectively.

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

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.

As of September 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

4 unchanged sentences

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.

At September 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 and six months ended June 30, 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 nine months ended September 30, 2024 (number of units in thousands except per unit data):

Number of Units

6 unchanged sentences

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.

Nonvested, June 30, 2024

Nonvested, September 30, 2024

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

Unrecognized compensation expense related to these restricted stock awards at September 30, 2024 was $ 3 and is expected to be recognized over 0.08 years.

Compensation expense for restricted stock awards for the three months ended September 30, 2024 and 2023 was $ 5 and $ 67 , respectively, and for the nine months ended September 30, 2024 and 2023 was $ 69 and $ 200 , 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 and six months ended June 30, 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 nine months ended September 30, 2024 (number of units in thousands except per unit data):

Number of Units

12 unchanged sentences

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.

The §45L tax credit was initially established under the Federal Energy Policy Act of 2005 and was extended through December 31, 2032 by the Inflation Reduction Act of 2022.

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

Outstanding, June 30, 2024

Outstanding, September 30, 2024

Exercisable, September 30, 2024

As of September 30, 2024, approximately 829,000 options remained nonvested.

Unrecognized compensation expense related to these options at September 30, 2024 was $ 4,387 and is expected to be recognized over 7.5 years.

Compensation expense for stock option awards for the three months ended September 30, 2024 and 2023 was $ 168 and $ 131 , respectively, and for the nine months ended September 30, 2024 and 2023 was $ 462 and $ 386 , respectively.

The provision for income tax expense for the three months ended September 30, 2024 and 2023 was $ 3,522 and $ 3,380 respectively, and for the nine months ended September 30, 2024 and 2023 was $ 10,502 and $ 9,885 respectively.

The effective tax rate for the three months ended September 30, 2024 and 2023 was 18.2 % and 17.4 %, respectively, and for the nine months ended September 30, 2024 and 2023 was 18.2 % and 17.3 %, 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

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

incurred but not reported medical claims and claim development.

Revenue Code §45L, partially offset by state income taxes.

The §45L tax credit was initially established under the Federal Energy Policy Act of 2005 and was extended through December 31, 2032 by the Inflation Reduction Act of 2022.

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.

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

As of September 30, 2024 and December 31, 2023, the Company accrued a $ 830 and $ 242 liability for incurred but not reported claims, respectively.

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

3 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 $ 1,040 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 maximum amount for which the Company was liable under such agreements approximated $ 856 and $ 3,030 at September 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 September 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 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.

Rent expense for the three months ended September 30, 2024 and 2023 was $ 160 and $ 159 , respectively, and for the nine months ended September 30, 2024 and 2023 was $ 480 and $ 482 , 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 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.

Rental income from the subleased properties for the three months ended September 30, 2024 and 2023 was approximately $ 17 and $ 59 , respectively, and for the nine months ended September 30, 2024 and 2023 was approximately $ 131 and $ 184 , 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 $ 550 and $ 990 as of June 30, 2024 and December 31, 2023, respectively, in accrued liabilities on the accompanying balance sheets.

The Company has included legal reserves of $ 564 and $ 990 as of September 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.

1 unchanged sentence

FAIR VALUE MEASUREMENTS

The Company accounts for its investments and derivative instruments in accordance with the provisions of Accounting Standards Codification (“ASC”) 820 10, Fair Value Measurement, which among other things provides the framework for measuring fair value.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

framework for measuring fair value.

That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

2 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:

13 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 June 30, 2024 and December 31, 2023:

As of June 30,

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

As of September 30,

As of December 31,

14 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

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 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.

We repurchased 1,001 shares for $ 0.02 million in the open market during the three months ended September 30, 2024, and we repurchased 262,530 shares for $ 5.4 million in the open market during the nine months ended September 30, 2024.

As of September 30, 2024, we had a remaining authorization of approximately $ 14.6 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.

1 unchanged sentence

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 $ 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.

Accounts receivable balances due from Bell were $ 153 and $ 403 as of September 30, 2024 and December 31, 2023, respectively.

Accounts payable balances due to Bell were $ 77 and $ 18 as of September 30, 2024 and December 31, 2023, respectively.

Home sales to Bell were $ 452 and $ 1,163 for the three months ended September 30, 2024 and 2023, respectively, and were $ 2,883 and $ 3,150 for the nine months ended September 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 $ 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.

Accounts receivable balances due from Shipley were $ 76 and $ 143 as of September 30, 2024 and December 31, 2023, respectively.

Accounts payable balances due to Shipley were $ 23 and $ 67 as of September 30, 2024 and December 31, 2023.

Home sales to Shipley were $ 1,708 and $ 207 for the three months ended September 30, 2024 and 2023, respectively, and were $ 3,368 and $ 830 for the nine months ended September 30, 2024 and 2023, respectively.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

At September 30, 2024, the Company had a receivable of $ 31 from a principal shareholder.

This amount is included in the Company’s accounts receivable balance as of September 30, 2024.

SUBSEQUENT EVENTS

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.

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.

In connection with the preparation of these financial statements, we evaluated subsequent events after the balance sheet date of September 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.

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