What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-12 compared with 2024-03-15 · 337 added, 381 removed, 636 unchanged (53% of the section changed)

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Reports of Frazier & Deeter, LLC, Independent Registered Public Accounting Firm (PCAOB ID:

Report of Daszkal Bolton, LLP, Independent Registered Public Accounting Firm (PCAOB ID:

Balance Sheets as of December 31, 2024 and 2023

Statements of Operations for the Years Ended December 31, 2023 and 2022

Statements of Income for the Years Ended December 31, 2024 and 2023

Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2024 and 2023

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Opinion on the Financial Statements

We have audited the accompanying balance sheet of Legacy Housing Corporation (the "Company") as of December 31, 2023, and the related statements of operations, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 15, 2024 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

Allowance for Loan Losses

As discussed in Note 2 of the financial statements, the Company changed its method of accounting for expected loan losses in fiscal year 2023 due to the adoption of ASU No.

2016-13 Financial Instruments – Credit Losses (Topic 326).

We have audited the accompanying balance sheets of Legacy Housing Corporation (the "Company") as of December 31, 2024 and 2023, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the Company's internal control over financial reporting as of December 31, 2024 and 2023, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2025 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB" and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses

Allowance for Loan Losses related to the New Note

As described in Note 2 to the financial statements, the allowance for loan losses represents management's estimate of the expected credit losses in the Company's loan portfolios.

As of December 31, 2023, the allowance for loan losses was

$2.2 million on total loans of $412.3 million.

The expected credit loss is typically estimated using quantitative methods that consider a variety of factors such as aging of the loan portfolios, collateral value, historical loss experience, the current credit quality of the portfolio as well as an economic outlook over the life of the loan.

Also included in the allowance for loan losses are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately reflected in the quantitative methods or the economic assumptions.

Factors that the Company considers includes changes in lending policies and procedures, business conditions, portfolio concentrations, collateral characteristics, volume and severity of past due loans, and legal and regulatory requirements, among others.

Further, the Company considers the inherent uncertainty in quantitative models that are built on historical data.

The principal considerations for our determination that performing procedures relating to the allowance for loan losses for the loan portfolios is a critical audit matter are the significant judgments and estimation used by management in developing loss rates and estimating collateral value which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained.

Additionally, the audit effort involved the use of professionals with specialized skills and knowledge.

Within the notes receivable from mobile home parks (“MHP”) portfolio balance, there is a $48.6 million loan (the “New Note” as disclosed).

As of December 31, 2024, there is no allowance for loan losses associated with the New Note.

The analysis for this estimate was made using quantitative methods that consider a variety of collateral based factors such as current replacement value of collateral, current value of collateral, and other precedent and comparable transactions.

The principal considerations for our determination that the allowance for loan losses on the New Note is a critical audit matter are the judgments and estimation used by management in estimating collateral value, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and in evaluating audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

We evaluated the process and controls, but we took no reliance on controls due to the material weaknesses identified as listed on our opinion on the Internal Control over Financial Reporting.

The procedures performed in testing management’s process for estimating the allowance for loan losses, included, among others, (i) evaluating the appropriateness of the loss forecast models and methodology, (ii) testing the completeness and accuracy of data used in the estimate, and (iii) evaluating the reasonableness of certain qualitative reserves made to the model output results to determine the overall allowance for loan losses.

These procedures also included the use of professionals with specialized skills and knowledge to assist in evaluating the appropriateness of certain models and methodologies.

The procedures performed in evaluating the reasonableness of management’s estimate for the allowance for loan losses related to the New Note, included, among others, (i) understanding management’s methodology to calculate the estimate, (ii) evaluating comparable transactions used to determine the value of the collateral associated with the loan, and (iii) calculating an independent estimate of the allowance for loan losses.

/s/ Frazier & Deeter, LLC

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To the Shareholders and Board of Directors of Legacy Housing Corporation

Opinion on the Internal Control over Financial Reporting

Adverse Opinion on the Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Legacy Housing Corporation (the "Company") as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the balance sheet as of December 31, 2023, and the related statements of operations, changes in stockholders’ equity and cash flows for the period ended December 31, 2023, and the related notes (collectively referred to as the financial statements) of the Company and our report dated March 15, 2024 expressed an unqualified opinion on those financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management's assessment:

(i) control activities are not sufficiently designed, implemented, monitored or tested, and there is a lack of documentation, review and approval of certain of these control activities,

(ii) management does not have sufficient qualified accounting personnel to support the preparation of financial statements that comply with U.S.

GAAP and SEC reporting requirements, and

(iii) information technology general controls are not sufficiently designed, implemented or maintained over in-scope business processes and financial reporting systems.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the "PCAOB"), the balance sheets as of December 31, 2024 and 2023, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements) of the Company and our report dated March 12, 2025 expressed an unqualified opinion on those financial statements.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements as of and for the year ended December 31, 2024, of the Company, and this report does not affect our report on such financial statements.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment:

(i) control activities are not sufficiently or appropriately designed or implemented and have a lack of documentation, review and approval of certain control activities.

Additionally, those activities are not sufficiently monitored and tested, (ii) management does not have sufficient qualified accounting personnel to support the preparation of financial statements that are in compliance with U.S.

GAAP and SEC reporting requirements, and (iii) information technology general controls are not sufficiently or appropriately designed or implemented over in-scope business processes and financial reporting systems.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements as of and for the year ended December 31, 2023, of the Company, and this report does not affect our report on such financial statements.

/s/ Frazier & Deeter, LLC

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March 12, 2025

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Shareholders

LEGACY HOUSING CORPORATION

Bedford, Texas

Opinion on the financial statements

We have audited the accompanying balance sheet of Legacy Housing Corporation (the Company) as of December 31, 2022, and the related statements of income, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (Unites States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide a reasonable basis for our opinion .

/s/ Daszkal Bolton, LLP

Sunrise, Florida

March 15, 2023

We served as the Company’s auditor from 2022 to March 2023.

LEGACY HOUSING CORPORATION

BALANCE SHEETS (in thousands, except share data)

Current assets:

Held to maturity securities

Accounts receivable, net

Current portion of contracts - dealer financed

Current portion of consumer loans receivable

Current portion of notes receivable from mobile home parks (“MHP”)

Current portion of other notes receivable

Dealer financed receivables, net

Consumer loans receivable, current

Notes receivable from mobile home parks (“MHP”), current

Other notes receivable, current

Prepaid expenses and other current assets

Total current assets

Contracts - dealer financed

Consumer loans receivable, net

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Other notes receivable, net

Inventories, net

Other assets - leased mobile homes

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

Treasury stock at cost, 445,065 shares at December 31, 2023 and 2022, respectively

Treasury stock at cost, 707,595 and 445,065 shares at December 31, 2024 and 2023, respectively

Additional paid-in-capital

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StatementS of Income (in thousands, except share and per share data)

Year ended December 31,

Product sales

Consumer, MHP and dealer loans interest

Other revenue

Total net revenue

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Cost of product sales

Cost of other sales

Selling, general and administrative expenses

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Interest expense

Total other income

Income before income tax expense

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Balances, December 31, 2022

Cumulative change in accounting principle, net of taxes

Balances, January 1, 2023 (as adjusted for change in accounting principle)

Share based compensation

Balances, December 31, 2023

Cumulative change in accounting principle, net of taxes (Note 2)

Share based compensation

Proceeds from exercise of stock options

Purchase of treasury stock

Balances, December 31, 2024

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STATEMENTS OF CASH FLOWS (in thousands)

Year ended December 31,

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

Amortization of deferred revenue

Amortization of Treasury Note Discount

Amortization of other costs

Amortization of lines of credit cost

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Provision for long term inventory

Gain from sale of leased property

Gain from sale of assets

Gain from loan settlements

Non-cash operating lease expense

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Share based payment expense

Gain on disposal of treasury note

Other non cash items

Changes in operating assets and liabilities:

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Prepaid expenses and other current assets

Other assets - leased mobile homes

Accounts payable and accrued liabilities

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Dealer incentive liability

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities:

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Proceeds from sale of leased property

Purchase of investments - treasury notes

Proceeds from sale of property

Sale of investments - treasury notes

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Notes receivable collections

Purchases of loans

Collections from purchased loans

Net cash (used in) provided by investing activities

Net cash used in investing activities

Financing activities:

Proceeds from exercise of stock options

Purchases of treasury stock

Proceeds from lines of credit

Payments on lines of credit

Net cash provided by (used in) financing activities

Net (decrease) increase in cash

Cash at beginning of year

Cash at end of year

Net cash (used in) provided by financing activities

Net increase (decrease) in cash

Cash at beginning of period

Cash at end of period

Supplemental disclosure of cash flow information:

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Cash paid for taxes

Acquisition of property plant and equipment, included in accrued liabilities

See accompanying notes to financial statements

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NATURE OF OPERATIONS

Legacy Housing Corporation (referred herein as ”Legacy”, “we”, “our”, “us”, or the “Company”) was formed on January 1, 2018 as a Delaware corporation through a corporate conversion of Legacy Housing, Ltd., (the “Partnership”) a Texas limited partnership formed in May 2005.

(the “Partnership”), a Texas limited partnership formed in May 2005.

Effective December 31, 2019, the Company reincorporated from a Delaware corporation to a Texas corporation.

The Company is headquartered in Bedford, Texas.

The Company (1) manufactures and provides for the transport of mobile homes, (2) provides wholesale financing to dealers and mobile home parks and (3) provides retail financing to consumers and (4) is involved in financing and developing new manufactured home communities.

The Company (1) manufactures and provides for the transport of mobile homes, (2) provides wholesale financing to dealers and mobile home parks, (3) provides retail financing to consumers and (4) is involved in financing and developing new manufactured home communities.

The Company manufactures its mobile homes at plants located in Fort Worth, Texas, Commerce, Texas and Eatonton, Georgia.

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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.

Estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans and notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities.

Significant estimates made in connection with the accompanying financial statements primarily relate to the determination and valuation of notes receivable from mobile home parks, consumer loans receivable, other notes receivable, dealer financed receivables and fair value of financial instruments.

Actual results could differ from these estimates.

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The Company has one reportable segment.

All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others.

All of our activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others.

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.

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 segment or unit.

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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The Company has not incurred any losses from such accounts and management considers the risk of loss to be minimal.

As of December 31, 2023, the Company had one bank account that exceeded the FDIC limit by $ 105 .

We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

As of December 31, 2024, the Company had two bank accounts that exceeded the FDIC limit by $ 635 .

LEGACY HOUSING CORPORATION

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(Dollars in thousands, except per share amounts)

Held to Maturity Securities

Management determines the appropriate classification of its investment securities at the time of purchase.

The Company’s investments as of December 31, 2022 consisted of US Treasury Notes, and these treasury notes were sold prior to maturity on June 22, 2023.

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.

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.

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

Commercial Sales include homes sold to mobile home parks under commercial loan programs or paid for upfront.

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

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.

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, land sales, service fees and other miscellaneous income.

Accounts Receivable

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

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

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At December 31, 2024, 2023 and 2022, the allowance for doubtful accounts totaled $ 578 , $ 651 and $ 279 , respectively.

At December 31, 2024, 2023 and 2022, accounts receivable, net was $ 3,985 , $ 4,656 and $ 4,873 , respectively.

Consumer Loans Receivable

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The Company uses payment history to monitor the credit quality of the consumer loans on an ongoing basis.

The Company also may receive escrow payments for property taxes and insurance included in its consumer loan collections.

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 $ 11,623 and $ 10,104 as of December 31, 2024 and 2023, respectively, and are included in escrow liability in the accompanying balance sheets.

LEGACY HOUSING CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Allowance for Loan Losses—Consumer Loans Receivable

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Specific reserves are determined based on probable losses on specific classified impaired loans.

LEGACY HOUSING CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2023 and 2022

(Dollars in thousands, except per share amounts)

The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which generally is when either principal or interest is past due and remains unpaid for more than 90 days.

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The accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current.

As of December 31, 2023 and 2022, total principal outstanding for consumer loans on nonaccrual status was $ 1,565 and $ 1,610 , respectively.

Impaired loans are those loans for which it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments.

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Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell.

At repossession, the collateral is recorded at the same amount as the principal balance as the loan.

At repossession, the collateral is recorded at the same amount as the principal balance of the loan.

The fair value of the collateral is then computed based on the historical recovery rates of previously charged off loans, the loan is charged off and the loss is charged to the allowance for loan losses.

At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information.

Repossessed homes totaled $ 2,215 and $ 795 as of December 31, 2023 and 2022, respectively, and are included in other assets in the accompanying balance sheets.

Repossessed homes from the consumer loan portfolio totaled $ 3,931 and $ 2,215 as of December 31, 2024 and 2023, respectively, and are included in other assets in the accompanying balance sheets.

Notes Receivable from Mobile Home Parks

The notes receivable from mobile home parks (“MHP Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable.

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

The 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 4.9 % to 11.5 %.

The average interest rate per loan was approximately 8.0 % and 8.1 % as of December 31, 2023 and 2022, respectively, and 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 the borrowers with substantial financial resources.

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

As of December 31, 2022, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equaled 12.3 %, 16.6 % and 34.0 % of the principal balance outstanding, all of which was secured by the mobile homes.

Allowance for Loan Losses—MHP Notes

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

The Company determines the allowance by considering several factors including the aging of the past due balance, the customer’s

The average interest rate per loan was approximately 7.8 % as of December 31, 2024 and 8.0 % as of December 31, 2023, with maturities that range from 1 to 10 years .

The collateral underlying the MHP Notes are

LEGACY HOUSING CORPORATION

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(Dollars in thousands, except per share amounts)

payment history, and the Company’s previous loss history.

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

As of December 31, 2023 there were past due balances of $ 98 on the MHP Notes, and for the year ended December 31, 2023, there were no charge offs recorded for MHP Notes.

Allowance for loan loss for the MHP Notes was $ 735 as of December 31, 2023.

As of December 31, 2022 there were minimal past due balances on the MHP Notes, and for the year ended December 31, 2022, no charge offs were recorded for MHP Notes.

Allowance for loan loss was considered immaterial and accordingly no provision was recorded against the MHP Notes as of December 31, 2022.

As of December 31, 2023, there was a minimal impaired balance of MHP Notes and there was no repossessed home balance.

As of December 31, 2022 there was no impaired loan balance for MHP Notes and no repossessed homes balance.

individual mobile homes which can be repossessed and resold.

The MHP Notes are generally personally guaranteed by borrowers.

Allowance for Loan Losses—MHP Notes

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

The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history.

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

As of December 31, 2024 and December 31, 2023, the MHP Notes balance is presented net of unamortized finance fees of $ 1,057 and $ 1,565 , respectively.

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

As of December 31, 2024, there were past due balances of $ 17 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 in Note 5, Notes Receivable from Mobile Home Parks.

For the years ended December 31, 2024 and 2023, there were no charge offs recorded for MHP Notes.

Allowance for loan loss for the MHP Notes was $ 654 and $ 735 as of December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 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.

Other Notes Receivable

Other notes receivable relate to various notes issued to mobile home park owners and dealers and are not directly tied to the sale of mobile homes.

Other notes receivable relate to notes issued to mobile home park owners and dealers and are not directly tied to the sale of mobile homes.

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

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These notes typically are personally guaranteed by the borrowers.

The interest rates on the other notes are fixed and generally range from 5.0 % to 17.9 %.

The interest rates on the other notes generally are fixed and range from 5.00 % to 17.50 %.

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 December 31, 2023, the allowance for loan losses on other notes was $ 236 , the past due balance for other notes was $ 22 , and the impaired balance for other notes was $ 84 .

As of December 31, 2022, the allowance for loan losses on other notes was $ 0 .

There were no past due balances for other notes as of December 31, 2022, and there were no impaired balances for other notes as of December 31, 2022.

As of December 31, 2024, there were past due balances of $ 1,357 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 defined in Note 5, Notes Receivable from Mobile Home Parks.

For the years ended December 31, 2024 and 2023, there were no charge offs recorded for other notes.

Allowance for loan loss for the other notes was $ 364 and $ 236 as of December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 2023, the impaired balance of other notes was $ 141 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.

Dealer Finance Receivable

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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.

Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of cost or net realizable value.

The cost of raw materials is based on the first-in first-out method.

Finished goods and work-in-process are based on a standard cost system that approximates actual costs using the specific identification method.

Estimates of the lower of cost and net realizable value of inventory are determined by comparing the actual cost of the product to the estimated selling prices in the ordinary course of business based on current market and economic conditions, less reasonably predictable costs of completion, disposal, and transportation of the inventory.

For the periods ending, December 31, 2023 and 2022, the Company recorded an insignificant amount of inventory write-down.

LEGACY HOUSING CORPORATION

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The Company evaluates finished goods inventory based on historical experience to estimate its inventory not expected to be sold in less than a year.

The Company classifies its inventory not expected to be sold in one year as non-current.

As of December 31, 2023 and 2022, non-current inventory was $ 7,793 and $ 6,987 , respectively.

Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of cost or net realizable value.

The cost of raw materials is based on the first-in first-out method.

Finished goods and work-in-process are based on a standard cost system that approximates actual costs using the specific identification method.

For the periods ending, December 31, 2024 and 2023, the Company recorded an insignificant amount of inventory write-downs.

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 has a term of 96 or 120 months .

In this arrangement, the 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 .

It requires the lessee to maintain the home and to return the home to us at the end of the lease in good condition.

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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 $ 632 and $ 582 for the years ended December 31, 2023 and 2022, respectively.

During the year ended December 31, 2024, the Company sold 128 leased mobile homes for $ 5,609 to two mobile home park customers which is included in Product sales on the accompanying statements of income.

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

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Expenditures for major renewals or betterments which extend the useful lives of existing property, plant and equipment are capitalized and depreciated.

LEGACY HOUSING CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

Impairment of Long-Lived Assets

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No impairment for long-lived assets was recorded for the years ended December 31, 2024 and 2023.

LEGACY HOUSING CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2023 and 2022

(Dollars in thousands, except per share amounts)

Dealer Incentive Liability

The Company has entered into agreements with qualifying independent retailers, or dealers, that provides incentives to retailers when their customers finance the purchase of a home with the Company.

The agreements provide for a portfolio for these consumer loans.

The agreements provide for a profit sharing arrangement between the Company and the dealer for these consumer loans.

The independent retailer is eligible to receive a dealer incentive, which is a portion of total collections expected on this consumer loan portfolio after the Company recovers its contribution (the collection thresholds are set per the terms of the dealer agreement, and the contribution includes the Company’s initial contribution, interest and fees).

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As of December 31, 2024 and 2023, the dealer incentive liability was $ 4,370 and $ 5,260 , respectively.

Dealer incentive expense for the years ended December 31, 2023 and 2022 totaled $ 586 and $ 1,315 , respectively, and is included in the Company’s statements of income.

Dealer incentive income for the year ended December 31, 2024 was $ 930 , dealer incentive expense for the year ended December 31, 2023 was $ 586 , and these amounts are included in the Company’s statements of income.

Product Warranties

The Company provides retail home buyers with a one-year warranty from the date of purchase on manufactured inventory.

At this time, we do not provide any warranties with respect to tiny houses.

Product warranty costs are accrued when the covered homes are sold to customers.

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The following table summarizes activity within the warranty liability for the years ended December 31, 2024 and 2023:

Warranty liability, beginning of year

Product warranty accrued

Year Ended December 31,

Warranty liability, beginning of period

Product warranty reserve accrued

Warranty costs incurred

Warranty liability, end of year

Advertising Costs

The Company expenses all advertising and marketing expenses in the period incurred.

Advertising costs for the years ended December 31, 2023 and 2022 were $ 409 and $ 120 , respectively.

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.

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurement) and the lowest priority to unobservable inputs

Warranty liability, end of period

LEGACY HOUSING CORPORATION

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(Level III measurements).

Fair Value Measurements and Fair Value of Financial Instruments

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.

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurement) and the lowest priority to unobservable inputs (Level III measurements).

The three levels of fair value hierarchy under ASC 820 10, Fair Value Measurement, are as follows:

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.

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

Level I Quoted prices are available in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

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

(1) Quoted prices for similar assets or liabilities in active markets;

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(3) Inputs other than quoted prices that are observable;

(4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

and (4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.

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

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

The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash, investments in U.S.

Treasury Notes, accounts receivable, consumer loans, MHP Notes, other notes, accounts payable and lines of credit.

The Company’s financial instruments consist primarily of cash, accounts receivable, consumer loans, MHP Notes, other notes, accounts payable, and lines of credit.

The carrying amounts of cash, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments.

This is considered a Level I valuation technique.

The investment in US Treasury Notes has quoted prices available in active markets that the Company can access at measurement dates.

The US Treasury Notes were sold by the Company on June 22, 2023.

The Company determined that the fair value of the investment in US Treasury Notes was approximately $ 8,409 compared to the book value of $ 8,412 as of December 31, 2022.

This was considered a Level I valuation technique.

The lines of credit, notes payable, part of the MHP Notes and part of the other note receivables have variable interest rates that reflect market rates and their fair value approximates their carrying value.

The lines of credit, part of the MHP Notes and part of the other notes receivables have variable interest rates that reflect market rates and their fair value approximates their carrying value.

This is considered a Level II valuation technique.

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This is considered a Level III valuation technique.

The following table shows the fair market value and book value of these portfolios as of December 31, 2023 and December 31, 2022:

The following table shows the fair market value and book value of these portfolios, net of allowances, loan discount fees and deferred financing fees, as of December 31, 2024 and 2023:

As of December 31,

Consumer loan portfolio, fair value

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Fixed rate MHP Notes, book value

Variable rate MHP Notes, book value

Fixed rate other notes, fair value

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(Dollars in thousands, except per share amounts)

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 a inventory finance arrangement.

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

Commercial Sales include homes sold to mobile home parks under commercial loan programs or paid for upfront.

The Company provides inventory financing for independent retailers who purchase homes from us and then sell them to consumers.

Inventory Finance Sales are considered sales of homes to the independent dealer.

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

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

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.

Reserve for Repurchase Commitments

In accordance with customary business practice in the manufactured housing industry, the Company has entered into certain repurchase agreements with certain financial institutions and other credit sources who provide floor plan financing to industry retailers, which provided that the Company will be obligated, under certain circumstances, to repurchase homes sold to retailers in the event of a default by a retailer in its obligation to such credit sources.

In accordance with customary business practice in the manufactured housing industry, the Company has entered into certain repurchase agreements with certain financial institutions and other credit sources who provide floor plan financing to industry retailers, which provides that the Company will be obligated, under certain circumstances, to repurchase homes sold to retailers in the event of a default by a retailer in its obligation to such credit sources.

The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

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Share-Based Compensation

The Company accounts for share-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation .

The Company accounts for share-based compensation in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation .

Share-based compensation expense is recognized based on an award’s estimated grant date fair value in order to recognize compensation cost for those shares expected to vest.

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The fair value of stock option awards on the date of grant is estimated using the Black-Scholes option pricing model, which requires the Company to make certain predictive assumptions.

The risk-free interest rate is based on the

The risk-free interest rate is based on the implied yield of U.S.

Treasury zero-coupon securities that correspond to the expected life of the award.

The volatility is estimated based on the historical volatility of the Company’s common stock.

The expected life of awards granted represents the period of time that the awards are expected to be outstanding based on the “simplified” method, which is allowed for companies that cannot reasonably estimate the expected life of options based on its historical award exercise experience.

LEGACY HOUSING CORPORATION

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implied yield of U.S.

Treasury zero-coupon securities that correspond to the expected life of the award.

The volatility is estimated based on the historical volatility of the Company’s common stock.

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

As of December 31, 2024, approximately 1,013,000 options were outstanding, 189,000 options were exercisable, and 824,000 options remained nonvested.

Unrecognized compensation expense related to these options at December 31, 2024 was $ 4,220 and is expected to be recognized over 7.2 years.

Compensation expense for stock option awards for the years ended December 31, 2024 and 2023 was $ 630 and $ 535 , respectively.

The Company does not expect to pay dividends on its common stock.

Shipping and Handling Costs

Shipping and handling costs incurred to deliver product to our customers are included as a component of cost of product sales in the statements of income.

Shipping and handling costs for the years ended December 31, 2023 and 2022 were $ 621 and $ 1,804 , respectively.

Earnings Per Share

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Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable, consumer loans, MHP Notes, inventory finance loans and other notes receivable.

Management believes that its credit policies are adequate to minimize potential credit risk related to accounts receivable and other notes receivable.

Management believes that

LEGACY HOUSING CORPORATION

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its credit policies are adequate to minimize potential credit risk related to accounts receivable and other notes receivable.

The consumer loans and inventory finance loans are secured by the mobile homes that were financed through the loans.

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As of December 31, 2023 and 2022, the Company had concentration of other notes receivable with one independent third-party and its affiliates that equaled 64.4 % and 77.6 %, respectively, of the principal balance outstanding.

The other notes are secured by land and other assets and are personally guaranteed.

As of December 31, 2024, the Company had concentrations of other notes receivable with three independent third-parties and their respective affiliates that equaled 33.7 %, 22.7 % and 10.5 %, respectively, of the principal balance outstanding.

As of December 31, 2023, the Company had concentration of other notes receivable with one independent third-party and its affiliates that equaled 64.4 % of the principal balance outstanding.The other notes are secured by land and other assets and are personally guaranteed.

Reclassifications

For purposes of comparability, certain reclassifications have been made to amounts previously reported to conform with the current period presentation.

Recent Accounting Pronouncements

The Company elected to use longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act while it was an emerging growth company.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and an asset representing its right to use the underlying asset for the lease term.

ASU 2016-02 was effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within those years.

The Company adopted this standard in the first quarter of fiscal 2022 and elected certain practical expedients permitted under the transition guidance, including the package of practical expedients;

however, the Company did not elect the hindsight practical expedient.

Additionally, the Company elected the optional transition method that allowed for a cumulative-effect adjustment in the period of adoption and did not restate prior periods.

The adoption of ASU 2016-02 resulted in an increase in total assets and total liabilities of $ 3,258 at transition.

However, this standard did not have a material impact on the consolidated statement of income or the consolidated statement of cash flows.

See Note 8 for further discussion on leases.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326):

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The amendments in this update extend the transition relief period for reference rate reform from December 31, 2022 to December 31, 2024.

The amendments in ASU 2022-06 apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another

LEGACY HOUSING CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2023 and 2022

(Dollars in thousands, except per share amounts)

reference rate expected to be discontinued because of reference rate reform.

The amendments in ASU 2022-06 apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

ASU 2022-06 was effective upon issuance.

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Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

The update also requires disclosure regarding the chief operating decision maker and expands the interim segment disclosure requirements.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact of ASU 2023-07 on our financial statements.

ASU 2023-07 enhances current and interim annual reportable segment disclosures and requires additional disclosures about significant segment expenses.

Public entities with a single

LEGACY HOUSING CORPORATION

NOTES TO FINANCIAL STATEMENTS

December 31, 2024 and 2023

(Dollars in thousands, except per share amounts)

reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as existing segment disclosures and reconciliation requirements in ASC 280 – Segment Reporting on an interim and annual basis.

In 2024, we adopted ASU 2023-07 on a retrospective basis for annual periods starting with this Annual Report on Form 10-K.

For additional information, refer to “Note 18 Segment Information.”

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates.