0001558370-23-014223 | 10-Q | XBRL Viewer

PROPERTY, PLANT AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2023

Schedule of property, plant and equipment


	As of June 30,		As of December 31,
	2023		2022
Land	$	14,953	$	14,953
Buildings and leasehold improvements		18,297		16,949
Vehicles		1,548		1,556
Machinery and equipment		5,918		5,750
Furniture and fixtures		329		300
Total		41,045		39,508
Less accumulated depreciation		(9,933)		(9,402)
Total property, plant and equipment	$	31,112	$	30,106

OTHER ASSETS

6 Months Ended

Jun. 30, 2023

OTHER ASSETS.

OTHER ASSETS

8. OTHER ASSETS

Other assets consists of the following:


	As of June 30,		As of December 31,
	2023		2022
Stadium license	$	349	$	349
Other		7		338
Repossessed homes		1,204		795
Total	$	1,560	$	1,482

EARNINGS PER SHARE- Tabular (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Numerator:
Net income (in 000's)	$ 15,020	$ 17,261	$ 31,296	$ 33,352
Denominator:
Basic weighted-average common shares outstanding	24,380,894	24,406,020	24,377,803	24,355,412
Effect of dilutive securities:
Diluted weighted-average common shares outstanding	25,101,937	24,922,125	25,085,158	24,773,345
Earnings per share attributable to Legacy Housing Corporation
Basic	$ 0.62	$ 0.71	$ 1.28	$ 1.37
Diluted	$ 0.60	$ 0.69	$ 1.25	$ 1.35
Restricted stock units
Effect of dilutive securities:
Dilutive securities	10,446	254,403	8,311	266,358
Stock options
Effect of dilutive securities:
Dilutive securities	710,597	261,702	699,044	151,575

NATURE OF OPERATIONS

6 Months Ended

Jun. 30, 2023

NATURE OF OPERATIONS

NATURE OF OPERATIONS

1. NATURE OF OPERATIONS

Legacy Housing Corporation (referred herein as ”Legacy”, “we”, “our”, “us”, or the “Company”) was formed on January 1, 2018 as a Delaware corporation through a corporate conversion of Legacy Housing, Ltd. (the “Partnership”), a Texas limited partnership formed in May 2005. Effective December 31, 2019, the Company reincorporated from a Delaware corporation to a Texas corporation. The Company is headquartered in Bedford, Texas.

The Company (1) manufactures and provides for the transport of mobile homes, (2) provides wholesale financing to dealers and mobile home parks, (3) provides retail financing to consumers and (4) is involved in financing and developing new manufactured home communities. The Company manufactures its mobile homes at plants located in Fort Worth, Texas, Commerce, Texas and Eatonton, Georgia. The Company relies on a network of dealers to market and sell its mobile homes. The Company also sells homes directly to dealers and mobile home parks.

Basis of Presentation

The accompanying unaudited interim condensed financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03. In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited 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 and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or any other period. The accompanying balance sheet as of December 31, 2022 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”), filed on March 15, 2023. The accompanying financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net income.

Use of Estimates

The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Material estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans, other notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities. Actual results could differ from these estimates.

Revenue Recognition

Product sales primarily consist of sales of mobile homes to consumers and mobile home parks through various sales channels, which include Direct Sales, Commercial Sales, Consignment Sales, and Retail Store Sales. Direct Sales include homes sold directly to independent retailers or customers that are not financed by the Company and are not sold under a consignment arrangement. These homes are generally paid for prior to shipment. Commercial Sales include homes sold to mobile home parks under commercial loan programs or paid for upfront. The Company provides floor plan financing for independent retailers, which can take the form of a consignment arrangement or an inventory financing arrangement. Consignment Sales under the consignment arrangement are considered sales of consigned homes from independent dealers to individual customers. Consignment Sales under the inventory financing arrangement are

considered sales of homes to the independent dealer. Retail Store Sales are homes sold through Company-owned retail locations. Consignment Sales and Retail Sales may be financed by the Company, by a third party, or paid in cash.

Revenue from product sales is recognized when the performance obligation under the terms of a contract with our customer is satisfied, which typically occurs upon delivery and transfer of title to the home, as this depicts when control of the promised good is transferred to our customers. For inventory financed sales, the independent dealer enters into a financing arrangement with the Company and is required to make monthly interest payments and an annual curtailment payment for the first two years. After three years, they are required to payoff any remaining principle balance. Interest income is separately recorded in the statement of income. For other financed sales by the Company, the individual customer enters into a sales and financing contract and is required to make a down payment. These financed sales contain a significant financing component and any interest income is separately recorded in the statement of income.

Revenue is measured as the amount of consideration expected to be received in exchange for transferring the homes to the customers. Sales and other similar taxes collected concurrently with revenue-producing activities are excluded from revenue.

The Company made an accounting policy election to account for any shipping and handling costs that occur after the transfer of control as a fulfillment cost that is accrued when control is transferred. Warranty obligations associated with the sale of a unit are assurance-type warranties for a period of twelve months that are a guarantee of the home’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. The Company has elected to use the practical expedient to expense the incremental costs of obtaining a contract if the amortization period of the asset that the Company would have otherwise recognized is one year or less. Contract costs, which include commissions incurred related to the sale of homes, are expensed at the point-in-time when the related revenue is recognized. Warranty costs and contract costs are included in selling, general and administrative expenses in the statements of income. Warranty costs were $764 and $1,392 for the three and six months ended June 30, 2023, respectively, and $538 and $1,108 for the three and six months ended June 30, 2022, respectively.

For the three months ended June 30, 2023 and 2022, mobile home park (“MHP”) sales to an independent third party and it’s affiliates accounted for $3,886 or 9.6% and $2,495 or 4.5% of our product sales, respectively, and sales to another independent third party and it’s affiliates accounted for $480 or 1.2% and $3,296 or 6.0% of our product sales, respectively. For the six months ended June 30, 2023 and 2022, MHP sales to an independent third party and it’s affiliates accounted for $9,534 or 11.8% and $4,471 or 4.2% of our product sales, respectively, and sales to another independent third party and it’s affiliates accounted for $2,449 or 3.0% and $6,194 or 5.8% of our product sales, respectively. No other customer accounted for more than 5.0% of our product sales.

For the three months ended June 30, 2023 and 2022, product sales included $3,949 and $3,253 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales. For the six months ended June 30, 2023 and 2022, product sales included $6,573 and $6,252 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales.

Other revenue consists of consignment fees, commercial lease rents, contract forfeitures, service fees and other miscellaneous income. Consignment fees are charged to independent retailers on a monthly basis for homes held by the independent retailers pursuant to a consignment arrangement until the home is sold to an individual customer. Consignment fees are determined as a percentage of the home’s wholesale price to the independent dealer. Revenue recognition for consignment fees is recognized over time using the output method as it provides a faithful depiction of the Company’s performance toward completion of the performance obligation under the contract and the value transferred to the independent retailer for the time the home is held under consignment. Revenue for commercial leases is recognized as earned monthly over a contractual period of 96 or 120 months. Revenue for contract forfeitures is

recognized when the deposit is forfeited by the customer. Revenue for service fees and miscellaneous income is recognized when the performance obligation is satisfied.

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, 2023 and 2022:


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Product sales:
Direct sales	$	3,752	$	11,745	$	11,178	$	22,608
Commercial sales		15,893		14,305		31,458		28,364
Inventory finance sales		15,675		20,247		29,290		40,287
Retail store sales		4,282		5,657		8,248		9,816
Other (1)		2,714		3,144		5,323		5,810
Total product sales		42,316		55,098		85,497		106,885
Consumer and MHP loans interest:
Interest - consumer installment notes		4,825		4,701		9,482		9,158
Interest - MHP notes		3,663		2,796		6,711		5,104
Total consumer and MHP loans interest		8,488		7,497		16,193		14,262
Other (2)		1,832		1,616		3,803		2,992
Total net revenue	$	52,636	$	64,211	$	105,493	$	124,139

(1)

Other product sales revenue from ancillary products and services including parts, freight and other services

(2)

Other revenue includes dealer finance charges, contract forfeitures, lease income and other miscellaneous income

Share-Based Compensation

The Company accounts for share-based compensation in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation. Share-based compensation expense is recognized based on the award’s estimated grant date fair value in order to recognize compensation cost for those shares expected to vest. The Company has elected to record forfeitures as they occur. Compensation cost is recognized on a straight-line basis over the vesting period of the awards and adjusted as forfeitures occur.

The fair value of each option grant with only service-based conditions is estimated using the Black-Scholes pricing model. The fair value of each restricted stock unit (the ”RSU”) with only service-based conditions is calculated based on the closing price of the Company’s common stock on the grant date. The fair value of each RSU with market based conditions is estimated using the Monte-Carlo Simulation valuation model.

The fair value of stock option awards on the date of grant is estimated using the Black-Scholes option pricing model, which requires the Company to make certain predictive assumptions. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the award. The volatility is based on the Company’s historical volatility calculated monthly over the most recent five year period prior to the applicable grant date. Management concluded that this group is more characteristic of the Company’s business than a broad industry index. The expected life of awards granted represents the period of time that the awards are expected to be outstanding based on the “simplified” method, which can be utilized by companies that cannot reasonably estimate

the expected life of options based on its historical award exercise experience. The Company does not expect to pay dividends on its common stock.

The fair value of RSU awards with market based conditions on the date of grant is estimated using the Monte-Carlo Simulation valuation model, and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the Company’s historic stock price volatility; the expected term of the awards is based on the performance measurement period; the risk-free interest rate is based on the U.S. Treasury bond yield issued with similar life terms to the expected life of the grant.

Accounts Receivable

Included in accounts receivable “net” are receivables from direct sales of mobile homes, sales of parts and supplies to customers, consignment fees and interest. Accounts receivable “dealer financed” are receivables for interest, fees and curtailments owed by dealers under their inventory finance agreements.

Accounts receivables “net” are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts receivables “dealer financed” are due upon receipt and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible. On June 30, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $333 and $279, respectively.

Leased Property

The Company offers mobile home park operators the opportunity to lease mobile homes for rent in lieu of purchasing the homes for cash or under a longer-term financing agreement. In this arrangement title to the mobile homes remains with the Company.

The standard lease agreement is typically for 96 months or 120 months. Under the lease agreement, the lessee (mobile home park operator) uses the mobile homes as personal property to be rented at the lessee's mobile home park. The lessee makes monthly, periodic lease payments to the Company over the term of the lease. The lessee is responsible for maintaining the homes during the term of the lease. The lessee is also responsible for repairing any damage caused by force majeure events. At the end of the lease term or in the event of default, the lessee is required to deliver the homes to the Company with all improvements and in substantially the same condition as existed at the commencement of the lease. The lessee may terminate the lease on 30 days written notice and pay a lease termination fee equal to 10% of the remaining lease payments or six months’ rent, whichever is greater. The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed determination of fair market value by both parties using comparable sales, recent appraisal, or National Automobile Dealers Association official guidance. The lessee must provide the Company with 30 days written notice prior to expiration of the lease of intent to purchase the property for fair market value. The lease also includes a renewal option whereby the lessee has the option to extend the lease for an additional 48 months (the extended term) at the same terms and conditions as the original lease. The lessee must notify the Company of the intent to exercise this renewal option not less than six months prior to expiration of the lease term. The leased mobile homes are included in other assets on the Company’s balance sheet, capitalized at manufactured cost and depreciated over a 15 year useful life. Homes returned to the Company upon expiration of the lease or in the event of default will be sold by the Company through its standard sales and distribution channels. Depreciation expense for the leased property was $157 and $180 for the three months ended June 30, 2023 and 2022, respectively, and $317 and $340 for the six months ended June 30, 2023 and 2022, respectively.

Future minimum lease income under all operating leases for each of the next five years at June 30, 2023, are as follows:


2023	$	912
2024		1,825
2025		1,825
2026		1,825
2027		1,653
Thereafter		2,264
Total	$	10,304

Recent Accounting Pronouncements

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

In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, requires an entity to instead reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP. However, Topic 326 requires that credit losses be presented as an allowance rather than a write-down and affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company used the longer phase-in period for adoption, and accordingly this ASU became effective for the Company’s fiscal year beginning January 1, 2023. The adoption of ASU 2016-13 resulted in an increase in portfolio allowances of $900 at transition. The $900 was comprised of a $225 increase for MHP notes, a $187 increase for dealer financed contracts and a $488 increase for other notes receivable. The cumulative effect of the adoption was a net decrease of $698 to beginning retained earnings at January 1, 2023.

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

DEBT SECURITIES (Details) - USD ($) $ in Thousands		6 Months Ended
DEBT SECURITIES (Details) - USD ($) $ in Thousands	Jun. 22, 2023	Jun. 30, 2023	Dec. 31, 2022
DEBT SECURITIES
Held to maturity securities			$ 8,412
percentage of discount on debt securities sold	99.00%
Gain on sale of debt securities	$ 12	$ 12

NATURE OF OPERATIONS - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Assets	$ 465,779	$ 436,813
Liabilities	52,590	54,709
Retained earnings	236,594	205,996
Cumulative effect, period of adoption, adjustment \| ASU 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for loan losses		900
Retained earnings		(698)
MHP Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for loan losses	358	0
MHP Notes \| Cumulative effect, period of adoption, adjustment \| ASU 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for loan losses		225
Dealer Financed Contracts [Member] \| Cumulative effect, period of adoption, adjustment \| ASU 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for loan losses		187
Other Note Receivable [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for loan losses	$ 231
Other Note Receivable [Member] \| Cumulative effect, period of adoption, adjustment \| ASU 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for loan losses		$ 488

FAIR VALUE MEASUREMENTS - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value \| Level 1 \| US Treasury Notes
Receivables, Fair Value Disclosure [Abstract]
Debt securities		$ 8,409
Fair Value \| Level 2 \| Consumer Loan
Receivables, Fair Value Disclosure [Abstract]
Loans	$ 145,700	138,800
Fair Value \| Level 2 \| Notes Receivable from Mobile Home Parks
Receivables, Fair Value Disclosure [Abstract]
Notes receivable	157,100	128,400
Fair Value \| Level 2 \| Other Note Receivable [Member]
Receivables, Fair Value Disclosure [Abstract]
Notes receivable	26,100	21,600
Book Value \| US Treasury Notes
Receivables, Fair Value Disclosure [Abstract]
Debt securities		8,412
Book Value \| Consumer Loan
Receivables, Fair Value Disclosure [Abstract]
Loans	146,010	139,009
Book Value \| Notes Receivable from Mobile Home Parks
Receivables, Fair Value Disclosure [Abstract]
Notes receivable	159,241	129,966
Book Value \| Other Note Receivable [Member]
Receivables, Fair Value Disclosure [Abstract]
Notes receivable	$ 26,740	$ 22,722

SHARE-BASED COMPENSATION - Restricted stock units (Details) - Restricted stock units $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($) $ / shares shares
Number of units
Nonvested at the beginning \| shares	42,000
Vested \| shares	(16,000)
Nonvested at the end \| shares	26,000
Weighted average grant date fair value
Nonvested at the beginning (in dollars per share) \| $ / shares	$ 14.61
Vested (in dollars per share) \| $ / shares	14.73
Nonvested at the end (in dollars per share) \| $ / shares	$ 14.54
Unrecognized compensation expense \| $	$ 309
Unrecognized compensation expense, recognition period	1 year 3 months 29 days

OTHER ASSETS (Tables)

6 Months Ended

Jun. 30, 2023

OTHER ASSETS.

Schedule of Other assets


	As of June 30,		As of December 31,
	2023		2022
Stadium license	$	349	$	349
Other		7		338
Repossessed homes		1,204		795
Total	$	1,560	$	1,482

SUBSEQUENT EVENTS (Details) - Subsequent event - Revolving Credit Agreement $ in Thousands	Jul. 28, 2023 USD ($)
SUBSEQUENT EVENTS
Term of facility	4 years
Maximum borrowing capacity	$ 50,000
Additional commitment accordion feature	$ 25,000
Interest rate based upon average quarterly borrowings	2.75%
SOFR
SUBSEQUENT EVENTS
Spread rate	2.50%
Base rate
SUBSEQUENT EVENTS
Spread rate	2.50%

NATURE OF OPERATIONS - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue
Product sales	$ 42,316	$ 55,098	$ 85,497	$ 106,885
Consumer and MHP loans interest:
Interest - consumer installments notes	4,825	4,701
Interest - MHP notes	3,663	2,796
Total consumer and MHP loans interest	8,488	7,497	16,193	14,262
Other	1,832	1,616	3,803	2,992
Total net revenue	52,636	64,211	$ 105,493	$ 124,139
Direct sales
Disaggregation of Revenue
Product sales	3,752	11,745
Commercial sales
Disaggregation of Revenue
Product sales	15,893	14,305
Inventory finance sales
Disaggregation of Revenue
Product sales	15,675	20,247
Retail store sales
Disaggregation of Revenue
Product sales	4,282	5,657
Other
Disaggregation of Revenue
Product sales	$ 2,714	$ 3,144

ACCRUED LIABILITIES

6 Months Ended

Jun. 30, 2023

ACCRUED LIABILITIES.

ACCRUED LIABILITIES

10. ACCRUED LIABILITIES

Accrued liabilities consist of the following:


	As of June 30,		As of December 31,
	2023		2022
Warranty reserve	$	2,829	$	3,049
Litigation reserve		515		753
Payroll		922		1,006
Portfolio taxes and title		1,781		1,610
Property tax		643		54
Dealer rebates		1,292		1,402
Sales tax		61		61
Federal and state income taxes		3,923		6,699
Other		3,613		2,261
Total accrued liabilities	$	15,579	$	16,895

DEBT - Lines of Credit (Details) - Revolver 1 - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Jul. 28, 2022	Mar. 30, 2020
Lines of Credit
Maximum borrowing capacity							$ 70,000
Effective interest rate	7.17%		7.17%		6.12%
Amount of available credit	$ 15,315		$ 15,315		$ 17,400
Interest expense	195	$ 182	286	$ 239
Outstanding balance	4,685		4,685		$ 2,545
Tangible net worth	120,000		$ 120,000
Debt to EBITDA ratio			4
Deferred debt issuance costs	$ 295		$ 295
Borrowing amount suspended						$ 50,000
Current borrowing capacity						$ 20,000
SOFR
Lines of Credit
Spread rate			2.00%

EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2023

EARNINGS PER SHARE

EARNINGS PER SHARE

16. EARNINGS PER SHARE

Basic earnings per common share (“EPS”) is computed based on the weighted-average number of common shares outstanding during each reporting period. Diluted EPS is based on the weighted-average number of common shares outstanding plus the number of additional shares that would have been outstanding had the dilutive common shares been issued. The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS.


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Numerator:
Net income (in 000's)	$	15,020	$	17,261	$	31,296	$	33,352
Denominator:
Basic weighted-average common shares outstanding		24,380,894		24,406,020		24,377,803		24,355,412
Effect of dilutive securities:
Restricted stock grants		10,446		254,403		8,311		266,358
Stock options		710,597		261,702		699,044		151,575
Diluted weighted-average common shares outstanding		25,101,937		24,922,125		25,085,158		24,773,345
Earnings per share attributable to Legacy Housing Corporation
Basic	$	0.62	$	0.71	$	1.28	$	1.37
Diluted	$	0.60	$	0.69	$	1.25	$	1.35

LEASES

6 Months Ended

Jun. 30, 2023

LEASES

LEASES

5. LEASES

The Company currently has 13 operating leases, eight of which are for the Company’s Heritage Housing and Tiny Homes retail locations, three which are subleased by the Company and two of which are for corporate and administrative offices in Bedford, TX and Norcross, GA. These leases typically have initial terms ranging from 5 to 10 years and include one or more options to renew.

We determine if an arrangement is a lease at inception. Operating leases are right-of-use (“ROU”) assets and are shown as ROU assets – operating leases on our condensed balance sheet. The lease liabilities are shown as operating lease obligations and operating lease obligations, less current portion on our condensed balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. We have elected the practical expedient to not separate lease and non-lease components. Therefore, lease payments included in the measurement of the lease liability include all fixed payments under the lease agreement. We record a ROU asset for an amount equal to the lease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and ROU asset when a change to our future minimum lease payments occurs. Key assumptions and judgments included in the determination of the lease liability include the discount rate used in the present value calculation and the exercise of renewal options.

Many of our leases contain renewal options. As the exercise of the renewal options is not certain at commencement of a lease, we generally do not include the option periods in the lease term when determining the lease liabilities and ROU assets. We remeasure the lease liability and ROU asset when we are reasonably certain that we will exercise a renewal option.

Our leases do not provide information about the rate implicit in the lease. Therefore, we utilize an incremental borrowing rate to calculate the present value of our future lease obligations. The incremental borrowing rate represents the rate of interest we would otherwise pay on a collateralized borrowing, for an amount equal to the lease payments, over a similar term and in a similar economic environment. The remaining weighted-average lease term is 4.19 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 three and six months ended June 30, 2023 and 2022.

Short-term leases, defined as those with a term of 12 months or less, are not recorded on our Condensed Balance Sheet. Our short-term lease costs were not material for the three and six months ended June 30, 2023 and 2022.

As of June 30, 2023, future minimum lease payments under our operating lease liabilities were as follows:


2023	$	305
2024		534
2025		509
2026		446
2027		297
Thereafter		113
Total lease payments	$	2,204
Less amount representing interest		(28)
Total lease liability	$	2,176
Less current lease liability		(561)
Total non-current lease liability	$	1,615

OTHER NOTES RECEIVABLE (Details) - Other note receivable - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Notes Receivable
Impaired loans individually evaluated for impairment	$ 0	$ 0
Outstanding principal balance	26,971	22,722
Allowance for loan losses	(231)
Total	26,740	22,722
Financial Asset, Past Due [Member]
Notes Receivable
Outstanding principal balance	$ 0	$ 0
Minimum
Notes Receivable
Interest rate on the other notes	5.00%
Maximum
Notes Receivable
Interest rate on the other notes	17.90%

COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Commitment
Self-insured liability	$ 219	$ 149
Repurchase agreements \| Maximum
Commitment
Repurchase commitment	$ 6,740	$ 8,925

CONSUMER LOANS - Impaired and general reserve for allowance for loan losses (Details) - Consumer - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total consumer loans	$ 149,368		$ 142,340
Allowance for loan losses	867	$ 816	830	$ 763	$ 724	$ 884
Impaired loans individually evaluated for impairment	1,666		1,610
Specific reserve against impaired loans	699		612
Other loans collectively evaluated for allowance	147,702		140,730
General allowance for loan losses	$ 168		$ 218

- Definition

Amount of allowance for credit loss on financing receivable. Excludes allowance for financing receivable covered under loss sharing agreement.

+ References + Details

OTHER NOTES RECEIVABLE

6 Months Ended

Jun. 30, 2023

OTHER NOTES RECEIVABLE

OTHER NOTES RECEIVABLE

4. OTHER NOTES RECEIVABLE

Other notes receivable relate to various notes issued to mobile home park owners and dealers, which are not directly tied to the sale of mobile homes. The other notes have varying maturity dates and call for monthly principal and interest payments. The other notes are collateralized by mortgages on real estate, units being financed and used as offices, as well as vehicles, and are typically personally guaranteed by the borrowers. The interest rate on the other notes are fixed and range from 5.00% to 17.90%. The Company reserves for estimated losses on the other notes based on current economic conditions that may affect the borrower’s ability to pay, the borrower’s financial strength, and historical loss experience. There were no past due balances for other notes as of June 30, 2023 and December 31, 2022, and there were no impaired balances for other notes as of June 30, 2023 and December 31, 2022.

The balance outstanding on the other notes receivable were as follows:


	As of June 30,		As of December 31,
	2023		2022
Outstanding principal balance	$	26,971	$	22,722
Allowance for loan losses		(231)		—
Total	$	26,740	$	22,722

INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
INVENTORIES
Raw materials	$ 14,482	$ 17,442
Work in progress	562	592
Finished goods, net of allowance	25,783	21,028
Total	40,827	39,062
Inventories	$ 7,091	$ 6,987

LEASES (Tables)

6 Months Ended

Jun. 30, 2023

LEASES

Schedule of future minimum lease payments under operating lease liabilities


2023	$	305
2024		534
2025		509
2026		446
2027		297
Thereafter		113
Total lease payments	$	2,204
Less amount representing interest		(28)
Total lease liability	$	2,176
Less current lease liability		(561)
Total non-current lease liability	$	1,615

SHARE-BASED COMPENSATION - Stock options (Details) - $ / shares					3 Months Ended		6 Months Ended
	Jun. 22, 2023	Jun. 07, 2022	Sep. 23, 2021	Aug. 10, 2020	Dec. 31, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Stock options
SHARE-BASED COMPENSATION
Stock options granted (in shares)							22,000	1,025,000
Exercise price (in dollar per share)							$ 22.62	$ 40.59
Stock option forfeited (in shares)								28,000
Fair value assumptions for options granted
Expiration period							10 years
Stock options \| Management
SHARE-BASED COMPENSATION
Stock options granted (in shares)	22,104		55,490	34,626
Exercise price (in dollar per share)	$ 22.62		$ 18.02	$ 14.44
Vesting percentage	20.00%		10.00%	20.00%
Stock option forfeited (in shares)					55,490	27,701
Fair value assumptions for options granted
Risk free interest rate	4.03%		1.41%	0.24%
Dividend yield	0.00%		0.00%	0.00%
Expected volatility	85.00%		75.00%	75.00%
Expiration period	5 years		10 years	10 years
Expected life	4 years		7 years 9 months 18 days	6 years 6 months
Stock options \| Chief Executive Officer
SHARE-BASED COMPENSATION
Stock options granted (in shares)		900,000
Vesting percentage		10.00%
Fair value assumptions for options granted
Risk free interest rate		2.98%
Dividend yield		0.00%
Expected volatility		45.70%
Expiration period		10 years
Expected life		7 years 9 months 18 days
Stock options \| Chief Executive Officer \| Tranche One
SHARE-BASED COMPENSATION
Stock options granted (in shares)		300,000
Exercise price (in dollar per share)		$ 36.00
Stock options \| Chief Executive Officer \| Tranche Two
SHARE-BASED COMPENSATION
Stock options granted (in shares)		600,000
Exercise price (in dollar per share)		$ 48.00
Incentive stock options \| Chief Executive Officer
SHARE-BASED COMPENSATION
Stock options granted (in shares)		62,460
Exercise price (in dollar per share)		$ 16.01
Vesting percentage		10.00%
Fair value assumptions for options granted
Risk free interest rate		2.98%
Dividend yield		0.00%
Expected volatility		45.70%
Expiration period		10 years
Expected life		7 years 9 months 18 days
Incentive stock options \| Chief Financial Officer
SHARE-BASED COMPENSATION
Stock options granted (in shares)		62,460
Exercise price (in dollar per share)		$ 16.01
Vesting percentage		10.00%
Fair value assumptions for options granted
Risk free interest rate		2.98%
Dividend yield		0.00%
Expected volatility		45.70%
Expiration period		10 years
Expected life		7 years 9 months 18 days

CONSUMER LOANS

6 Months Ended

Jun. 30, 2023

CONSUMER LOANS

CONSUMER LOANS

2. CONSUMER LOANS

Consumer loans result from financing transactions entered into with retail consumers of mobile homes sold through independent retailers and company-owned retail locations. Consumer loans receivable generally consist of the sales price and any additional financing fees, less the buyer’s down payment. Interest income is recognized monthly per the terms of the financing agreements. The average contractual interest rate per loan was approximately 13.3% and 13.4% as of June 30, 2023 and December 31, 2022, respectively. Consumer loans receivable have maturities that range from 2 to 30 years.

Loan applications go through an underwriting process that considers credit history to evaluate the credit risk of the consumer. Interest rates on approved loans are determined based on consumer credit score, payment ability and down payment amount.

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

The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections. The liabilities associated with these escrow collections totaled $10,022 and $9,653 as of June 30, 2023 and December 31, 2022, respectively, and are included in escrow liability in the condensed balance sheets.

Allowance for Loan Losses—Consumer Loans Receivable

The allowance for loan losses reflects management’s estimate of losses inherent in the consumer loans that may be uncollectible based upon review and evaluation of the consumer loan portfolio as of the date of the balance sheet. An allowance for loan losses is determined after giving consideration to, among other things, the loan characteristics, including the financial condition of borrowers, the value and liquidity of collateral, delinquency and historical loss experience.

The allowance for loan losses is comprised of two components: the general reserve and specific reserves. The Company’s calculation of the general reserve considers the historical loss rate for the last three years, adjusted for the estimated loss discovery period and any qualitative factors both internal and external to the Company. Specific reserves are determined based on probable losses on specific classified impaired loans.

The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is normally when either principal or interest is past due and remains unpaid for more than 90 days. Management implemented this policy based on an analysis of historical data, current performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days. Payments received on nonaccrual loans are accounted for on a cash basis, first to interest and then to principal, as long as the remaining book balance of the asset is deemed to be collectible. The accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current.

Impaired loans are those loans where it is probable the Company will be unable to collect all amounts due under the terms of the loan agreement, including scheduled principal and interest payments. Impaired loans, or portions thereof, are charged off when deemed uncollectible. A loan is generally deemed impaired if it is more than 90 days past due on principal or interest, is in bankruptcy proceedings, or is in the process of repossession. A specific reserve is created for impaired loans based on the fair value of the underlying collateral, less estimated selling costs. The Company uses various factors to determine the value of the underlying collateral for impaired loans. These factors are: (1) the length of time the unit was unsold after construction; (2) the amount of time the house was occupied; (3) the cooperation level of the borrowers, i.e., loans requiring legal action or extensive field collection efforts; (4) units located on private property as opposed to a manufactured home park; (5) the length of time the borrower has lived in the house without making payments; (6) location, size, and market conditions; and (7) the experience and expertise of the particular dealer assisting in collection efforts.

Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is computed based on the historical recovery rates of previously charged off loans; the loan is charged off and the loss is charged to the allowance for loan losses. At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes totaled $1,204 and $795 as of June 30, 2023 and December 31, 2022, respectively, and are included in other assets in the condensed balance sheets.

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


	As of June 30,		As of December 31,
	2023		2022
Consumer loans receivable	$	149,368	$	142,340
Loan discount and deferred financing fees		(2,491)		(2,501)
Allowance for loan losses		(867)		(830)
Consumer loans receivable, net	$	146,010	$	139,009

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,
	2023		2022		2023		2022
Allowance for loan losses, beginning of period	$	816	$	724	$	830	$	884
Provision for loan losses		7		55		(63)		(257)
Charge offs (recoveries)		44		(16)		100		136
Allowance for loan losses	$	867	$	763	$	867	$	763

The following table presents loan loss and impairment detail for the consumer loans receivable portfolio:


	As of June 30,		As of December 31,
	2023		2022
Total consumer loans	$	149,368	$	142,340
Allowance for loan losses	$	867	$	830
Impaired loans individually evaluated for impairment	$	1,666	$	1,610
Specific reserve against impaired loans	$	699	$	612
Other loans collectively evaluated for allowance	$	147,702	$	140,730
General allowance for loan losses	$	168	$	218

As of June 30, 2023 and December 31, 2022, the total principal outstanding for consumer loans on nonaccrual status was $1,666 and $1,610, respectively. A detailed aging of consumer loans receivable that are past due as of June 30, 2023 and December 31, 2022 were as follows:


	As of June 30,			As of December 31,
	2023		%	2022		%
Total consumer loans receivable	$	149,368	100.0	$	142,340	100.0
Past due consumer loans:
31 - 60 days past due	$	1,217	0.8	$	1,150	0.8
61 - 90 days past due		330	0.2		108	0.1
91 - 120 days past due		31	0.0		486	0.3
Greater than 120 days past due		1,635	1.1		1,255	0.9
Total past due	$	3,213	2.2	$	2,999	2.1

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Treasury stock Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury stock	Additional paid-in-capital Cumulative Effect, Period of Adoption, Adjusted Balance	Additional paid-in-capital	Retained earnings Cumulative effect, period of adoption, adjustment	Retained earnings Cumulative Effect, Period of Adoption, Adjusted Balance	Retained earnings	Cumulative effect, period of adoption, adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Total
Beginning Balance at Dec. 31, 2021		$ 25		$ (4,477)		$ 175,623			$ 138,223			$ 309,394
Beginning Balance (in shares) at Dec. 31, 2021		24,654,621
Share based compensation expense and stock units vested		$ 4				4,003						4,007
Share based compensation expense and stock units vested (in shares)		158,571
Net income									16,092			16,092
Ending Balance at Mar. 31, 2022		$ 29		(4,477)		179,626			154,315			329,493
Ending Balance (in shares) at Mar. 31, 2022		24,813,192
Beginning Balance at Dec. 31, 2021		$ 25		(4,477)		175,623			138,223			309,394
Beginning Balance (in shares) at Dec. 31, 2021		24,654,621
Net income												33,352
Ending Balance at Jun. 30, 2022		$ 29		(4,477)		179,932			171,576			347,060
Ending Balance (in shares) at Jun. 30, 2022		24,813,192
Beginning Balance at Mar. 31, 2022		$ 29		(4,477)		179,626			154,315			329,493
Beginning Balance (in shares) at Mar. 31, 2022		24,813,192
Share based compensation expense and stock units vested						306						306
Net income									17,261			17,261
Ending Balance at Jun. 30, 2022		$ 29		(4,477)		179,932			171,576			347,060
Ending Balance (in shares) at Jun. 30, 2022		24,813,192
Beginning Balance at Dec. 31, 2022	$ 30	$ 30	$ (4,477)	(4,477)	$ 180,555	180,555	$ (698)	$ 205,298	205,996	$ (698)	$ 381,406	$ 382,104
Beginning Balance (in shares) at Dec. 31, 2022	24,814,695	24,814,695										24,814,695
Share based compensation expense and stock units vested						191						$ 191
Share based compensation expense and stock units vested (in shares)		8,571
Net income									16,276			16,276
Ending Balance at Mar. 31, 2023		$ 30		(4,477)		180,746			221,574			397,873
Ending Balance (in shares) at Mar. 31, 2023		24,823,266
Beginning Balance at Dec. 31, 2022	$ 30	$ 30	$ (4,477)	(4,477)	$ 180,555	180,555	$ (698)	$ 205,298	205,996	$ (698)	$ 381,406	$ 382,104
Beginning Balance (in shares) at Dec. 31, 2022	24,814,695	24,814,695										24,814,695
Net income												$ 31,296
Ending Balance at Jun. 30, 2023		$ 30		(4,477)		181,042			236,594			$ 413,189
Ending Balance (in shares) at Jun. 30, 2023		24,836,862										24,836,862
Beginning Balance at Mar. 31, 2023		$ 30		(4,477)		180,746			221,574			$ 397,873
Beginning Balance (in shares) at Mar. 31, 2023		24,823,266
Share based compensation expense and stock units vested						196						196
Share based compensation expense and stock units vested (in shares)		7,350
Proceeds from exercise of stock options						100						100
Proceeds from exercise of stock options (in shares)		6,246
Net income									15,020			15,020
Ending Balance at Jun. 30, 2023		$ 30		$ (4,477)		$ 181,042			$ 236,594			$ 413,189
Ending Balance (in shares) at Jun. 30, 2023		24,836,862										24,836,862

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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Reference 34: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
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+ Details

LEASES - Future minimum lease payments (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
LEASES
2023	$ 305
2024	534
2025	509
2026	446
2027	297
Thereafter	113
Total lease payments	2,204
Less amount representing interest	(28)
Total lease liability	2,176
Less current lease liability	(561)	$ (650)
Total non-current lease liability	$ 1,615	$ 2,121

SHARE-BASED COMPENSATION

6 Months Ended

Jun. 30, 2023

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

12. SHARE-BASED COMPENSATION

Pursuant to the Legacy Housing Corporation 2018 Incentive Compensation Plan (the “Compensation Plan”), the Company may issue up to 10.0 million equity awards to employees, directors, consultants and nonemployee service providers in the form of stock options, stock and stock appreciation rights. Stock options may be granted with a contractual life of up to ten years. At June 30, 2023, the Company had 9.7 million shares available for grant under the Compensation Plan.

In February 2019, the Company granted 120,000 restricted shares of its common stock to members of senior management. The shares were granted on February 7, 2019 and had a grant date fair value of $1,636. The shares vest at a rate of 14.3% annually, beginning on February 7, 2019, and become fully vested on February 7, 2025. During the second quarter of 2020, 42,857 of these restricted shares were forfeited due to the departure of a member of senior management.

In November 2021, the Company granted 1,202 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on November 30, 2021 and had a grant date fair value of $30. The shares became fully vested on October 24, 2022.

In January 2022, the Company granted 150,000 restricted shares of its common stock to the Executive Chairman of the Company pursuant to an amended and restated employment agreement. The shares were granted on January 6, 2022 and had a grant date fair value of $3,741. The shares became fully vested upon grant.

On January 6, 2022, the Company gave contingent equity awards of 350,000 shares of the Company’s restricted stock to the Executive Chairman of the Company pursuant to an amended and restated employment agreement. An equity award of 175,000 shares will be granted if the Company’s stock price closes at $36 per share for a period of fifteen consecutive market days (the “$36 Equity Award”). The $36 Equity Awards had a grant date fair value of $1,412. Fifty percent of the shares shall be vested at grant and fifty percent shall vest on June 16, 2024, so long as the Executive Chairman is employed by the Company on that date. An additional equity award of 175,000 shares of the Company’s restricted stock will be granted if the Company’s stock price closes at $48 per share for a period of fifteen consecutive market days (the “$48 Equity Award”). The $48 Equity Awards had a grant date fair value of $683. Fifty percent of the shares shall be vested at grant and fifty percent shall vest on June 16, 2024, so long as the Executive Chairman is employed by the Company on that date.

On November 15, 2022, the Company entered into a rescission and relinquishment agreement (the “Rescission Agreement”) with the Executive Chairman. The Rescission Agreement allows the Executive Chairman to rescind and relinquish the $36 Equity Awards and the $48 Equity Awards granted under the amended and restated employment agreement and allows the Company to accept such rescission and relinquishment without penalty. The effective date of the Rescission Agreement was October 1, 2022.

On June 7, 2022, the Company granted 14,700 restricted shares of its common stock to the Chief Executive Officer of the Company pursuant to an employment agreement. The shares were granted on June 7, 2022 and had a grant date fair value of $235. One-half of the shares vested on June 7, 2023 and the remaining half vest on June 7, 2024.

On June 7, 2022, the Company granted 301 restricted shares of its common stock to an independent director on the Company’s Board of Directors. The shares were granted on June 7, 2022 and had a grant date fair value of $5. The shares became fully vested on October 24, 2022.

In November 2022, the Company granted 1,734 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on November 29, 2022 and had a grant date fair value of $30. The shares become fully vested on October 23, 2023.

The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data):


	Number of Units		Weighted Average Grant Date Fair Value Per Unit
Nonvested, January 1, 2023	42	$	14.61
Granted	—	$	—
Vested	(16)	$	14.73
Canceled	—	$	—
Nonvested, June 30, 2023	26	$	14.54

As of June 30, 2023, approximately 26,000 RSUs remained unvested. The unrecognized compensation expense related to these RSUs at June 30, 2023 was $309 and is expected to be recognized over 1.33 years.

The Company granted 34,626 incentive stock options to a member of senior management. The options were granted on August 10, 2020 at an exercise price of $14.44 per share. The options vest at a rate of 20.0% annually, beginning on August 10, 2021, and become fully vested on August 10, 2025. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 0.24%, dividend yield of 0.00%, expected volatility of common stock of 75.0% and

expected life of options of 6.5 years. During the first quarter of 2022, 27,701 of these options were forfeited due to the individual’s departure.

The Company granted 55,490 incentive stock options to a member of management. The options were granted on September 23, 2021 at an exercise price of $18.02 per share. The options vest at a rate of 10.0% annually, beginning on September 23, 2022, and become fully vested on September 23, 2031. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 1.41%, dividend yield of 0.00%, expected volatility of common stock of 75.0% and expected life of options of 7.8 years. During the fourth quarter of 2022, these options were forfeited due to the individual’s departure.

The Company granted 62,460 incentive stock options to the Chief Executive Officer. The options were granted on June 7, 2022 at an exercise price of $16.01 per share. The options vest at a rate of 10.0% annually, beginning on June 7, 2023, and become fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98%, dividend yield of 0.00%, expected volatility of common stock of 45.7% and expected life of options of 7.8 years.

The Company granted options to purchase 900,000 shares of the Company’s stock to the Chief Executive Officer. An option to purchase 300,000 shares of the Company’s stock was granted on June 7, 2022 at an exercise price of $36.00 per share and an option to purchase 600,000 shares of the Company’s stock was granted on June 7, 2022 at an exercise price of $48.00 per share. The options vest at a rate of 10.0% annually, beginning on June 7, 2023, and become fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98%, dividend yield of 0.00%, expected volatility of common stock of 45.7% and expected life of options of 7.8 years.

The Company granted 62,460 incentive stock options to the Chief Financial Officer. The options were granted on June 7, 2022 at an exercise price of $16.01 per share. The options vest at a rate of 10.0% annually, beginning on June 7, 2023, and become fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98%, dividend yield of 0.00%, expected volatility of common stock of 45.7% and expected life of options of 7.8 years.

The Company granted 22,104 incentive stock options to a member of management. The options were granted on June 22, 2023 at an exercise price of $22.62 per share. The options vest at a rate of 20.0% annually, beginning on June 22, 2023, and become fully vested on June 22, 2028. All options expire five years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 4.03%, dividend yield of 0.00%, expected volatility of common stock of 85.0% and expected life of options of 4.0 years.

The following is a summary of option activity (number of units in thousands):


	Number of Units	Weighted Average Exercise Price Per Unit		Weighted Average Grant Date Fair Value Per Unit		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2022	83	$	16.83	$	12.27	9.36
Granted	1,025	$	40.59	$	4.99	9.94
Exercised	—	$	—	$	—	—
Forfeited	(28)	$	14.44	$	8.67	—
Outstanding, June 30, 2022	1,080	$	39.43	$	5.46	9.91	$	—
Exercisable, June 30, 2022	—	$	—	$	—	—	$	—

Outstanding, January 1, 2023	1,025	$	40.59	$	4.99	9.44
Granted	22	$	22.62	$	14.39	4.98
Exercised	(6)	$	16.01	$	8.57	8.95
Forfeited	—	$	—	$	—	—
Outstanding, June 30, 2023	1,041	$	40.21	$	5.19	8.86	$	—
Exercisable, June 30, 2023	6	$	16.01	$	8.57	8.95	$	45

As of June 30, 2023, approximately 1,041,000 options remained nonvested. Unrecognized compensation expense related to these options at June 30, 2023 was $4,888 and is expected to be recognized over 8.86 years.

OTHER ASSETS (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
OTHER ASSETS.
Stadium License	$ 349	$ 349
Other	7	338
Repossessed homes	1,204	795
Total	$ 1,560	$ 1,482

SHARE-BASED COMPENSATION - Plan (Details) - USD ($) $ / shares in Units, $ in Thousands										3 Months Ended	6 Months Ended
	Jun. 22, 2023	Nov. 29, 2022	Nov. 15, 2022	Jun. 07, 2022	Jan. 06, 2022	Nov. 30, 2021	Sep. 23, 2021	Aug. 10, 2020	Feb. 07, 2019	Jun. 30, 2020	Jun. 30, 2023
SHARE-BASED COMPENSATION
Number of shares may be issued to employees, directors, consultants and nonemployee service providers in the form of stock options, stock and stock appreciation rights											10,000,000.0
Number of shares available for grant											9,700,000
Stock options
SHARE-BASED COMPENSATION
Contractual life											10 years
Stock options \| Management
SHARE-BASED COMPENSATION
Contractual life	5 years						10 years	10 years
Vesting percentage	20.00%						10.00%	20.00%
Stock options \| Chief Executive Officer
SHARE-BASED COMPENSATION
Contractual life				10 years
Vesting percentage				10.00%
Restricted shares \| Management
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)									120,000
Grant date fair value									$ 1,636
Vesting percentage									14.30%
Restricted shares forfeited (in shares)										42,857
Restricted shares \| Independent directors
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)		1,734		301		1,202
Grant date fair value		$ 30		$ 5		$ 30
Restricted shares \| Executive Chairman
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)					150,000
Grant date fair value					$ 3,741
Restricted shares \| Chief Executive Officer
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)				14,700
Grant date fair value				$ 235
Vesting percentage				50.00%
Contingent equity awards \| $36 Equity Award
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)					175,000
Threshold market days remained granted					15 days
Granted (in dollars per share)			$ 36		$ 36
Grant date fair value					$ 1,412
Contingent equity awards \| $36 Equity Award \| Vested on June 16, 2024
SHARE-BASED COMPENSATION
Vesting percentage					50.00%
Contingent equity awards \| $48 Equity Award
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)					175,000
Threshold market days remained granted					15 days
Granted (in dollars per share)			$ 48		$ 48
Grant date fair value					$ 683
Contingent equity awards \| $48 Equity Award \| Vested at granted
SHARE-BASED COMPENSATION
Vesting percentage					50.00%
Contingent equity awards \| Executive Chairman
SHARE-BASED COMPENSATION
Restricted shares granted (in shares)					350,000

NATURE OF OPERATIONS - Leased Property (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Lessor, Description Of Leases [Line Items]
Notice period for lease termination			30 days
Termination fees as a percentage of remaining lease payments			10.00%
Number of month's rent to be paid			6 months
Notice period for purchase of property			30 days
Extended term of lease	48 months		48 months
Notice period for exercise of renewal extension			6 months
Useful life			15 years
Depreciation expense on leased property	$ 157	$ 180	$ 317	$ 340
Minimum
Lessor, Description Of Leases [Line Items]
Term of lease agreement	96 months		96 months
Maximum
Lessor, Description Of Leases [Line Items]
Term of lease agreement	120 months		120 months

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2023

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

17. RELATED PARTY TRANSACTIONS

Bell Mobile Homes, a retailer owned by one of the Company’s significant owners, purchases manufactured homes from the Company. Accounts receivable balances due from Bell Mobile Homes were $0 as of June 30, 2023 and December 31, 2022. Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $222 and $132 as of June 30, 2023 and December 31, 2022, respectively. Home sales to Bell Mobile Homes were $1,507 and $1,223 for the three months ended June 30, 2023 and 2022, respectively, and $1,987 and $1,855 for the six months ended June 30, 2023 and 2022, respectively.

Shipley Bros., Ltd. (“Shipley Bros.”), a retailer owned by one of the Company’s significant shareholders, purchases manufactured homes from the Company. Home sales to Shipley Bros. were $252 and $1,018 for the three months ended June 30, 2023 and 2022, respectively, and $622 and $1,711 for the six months ended June 30, 2023 and 2022, respectively. Accounts receivable balances due from Shipley Bros. were $0 as of June 30, 2023 and December 31, 2022. There were no accounts payable balances due to Shipley Bros. as of June 30, 2023 and December 31, 2022.

At June 30, 2023, the Company had a payable of $5 to a principal shareholder. This amount is included in the Company’s accounts payable balance as of June 30, 2023.

INVENTORIES

6 Months Ended

Jun. 30, 2023

INVENTORIES

INVENTORIES

6. INVENTORIES

Inventories consists of the following:


	As of June 30,		As of December 31,
	2023		2022
Raw materials	$	14,482	$	17,442
Work in progress		562		592
Finished goods, net of allowance (1)		25,783		21,028
Total	$	40,827	$	39,062

(1)

Finished goods includes $7,091 and $6,987 as of June 30, 2023 and December 31, 2022, respectively, held for more than twelve months and classified as long-term.

CONDENSED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
CONDENSED STATEMENTS OF INCOME - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Net revenue:
Product sales	$ 42,316	$ 55,098	$ 85,497	$ 106,885
Consumer and MHP loans interest	8,488	7,497	16,193	14,262
Other	1,832	1,616	3,803	2,992
Total net revenue	52,636	64,211	105,493	124,139
Operating expenses:
Cost of product sales	29,709	37,411	58,670	71,138
Selling, general and administrative expenses	5,527	5,901	10,938	13,560
Dealer incentive	(100)	439	32	713
Income from operations	17,500	20,460	35,853	38,728
Other income (expense):
Nonoperating interest income	626	783	1,321	1,635
Miscellaneous, net	159	17	912	603
Interest expense	(195)	(183)	(285)	(239)
Total other	590	617	1,948	1,999
Income before income tax expense	18,090	21,077	37,801	40,727
Income tax expense	(3,070)	(3,816)	(6,505)	(7,375)
Net income	$ 15,020	$ 17,261	$ 31,296	$ 33,352
Weighted average shares outstanding:
Basic	24,380,894	24,406,020	24,377,803	24,355,412
Diluted	25,101,937	24,922,125	25,085,158	24,773,345
Net income per share:
Basic	$ 0.62	$ 0.71	$ 1.28	$ 1.37
Diluted	$ 0.60	$ 0.69	$ 1.25	$ 1.35

NATURE OF OPERATIONS - Leased Property - Future minimum lease income (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Operating Leases, Future Minimum Payments Receivable [Abstract]
2023	$ 912
2024	1,825
2025	1,825
2026	1,825
2027	1,653
Thereafter	2,264
Total	$ 10,304

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2023

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

18. SUBSEQUENT EVENTS

On July 28, 2023, the Company entered into a new Credit Agreement (the “New Revolving Credit Agreement”), by and among the Company as borrower, the financial institutions from time to time party thereto, as lenders, and Prosperity Bank as administrative agent. The New Revolving Credit Agreement provides for a four-year senior secured revolving credit facility with an initial commitment of $50,000,000 and an additional $25,000,000 commitment under an accordion feature. The New Revolving Credit Agreement is secured by the Company’s consumer loans receivables and all escrow accounts associated with the consumer loans receivables.

At the Company's option, borrowings will bear interest at a per annum rate equal to, (i) Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.5% or 2.75% based upon the Company's average quarterly borrowings under the New Revolving Credit Agreement or (ii) a base rate plus an applicable margin of 2.5% or 2.75% based upon the Company's average quarterly borrowings under the New Revolving Credit Agreement.

On July 28, 2023, upon entry into the New Revolving Credit Agreement described above, the Capital One, N.A. revolving credit agreement was repaid in full, and all commitments thereunder were terminated.

CONSUMER LOANS - Aging of consumer loans receivable (Details) - Consumer $ in Thousands	Jun. 30, 2023 USD ($)
Past due consumer loans:
Consumer loans receivable	$ 149,368
Financial Asset, Past Due
Past due consumer loans:
Consumer loans receivable	3,213
31 - 60 days past due
Past due consumer loans:
Consumer loans receivable	1,217
61 - 90 days past due
Past due consumer loans:
Consumer loans receivable	330
91 - 120 days past due
Past due consumer loans:
Consumer loans receivable	31
Greater than 120 days past due
Past due consumer loans:
Consumer loans receivable	$ 1,635

- Definition

Amortized cost, before allowance for credit loss, of financing receivable. Excludes financing receivable covered under loss sharing agreement and net investment in lease.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 7A
-URI https://asc.fasb.org/extlink&oid=123577603&loc=SL6953401-111524

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
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-Number 229
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Regulation S-K (SK)
-Number 229
-Section 1404
-Paragraph (a)

+ Details

NATURE OF OPERATIONS - Share-Based Compensation (Details)	6 Months Ended
	Jun. 30, 2023
NATURE OF OPERATIONS
Volatility period	5 years

NATURE OF OPERATIONS - Accounts Receivable (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Accounts Receivable
Credit period	30 days
Allowance for doubtful accounts	$ 333	$ 279

INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2023

INVENTORIES

Schedule of inventory


	As of June 30,		As of December 31,
	2023		2022
Raw materials	$	14,482	$	17,442
Work in progress		562		592
Finished goods, net of allowance (1)		25,783		21,028
Total	$	40,827	$	39,062

(1)

Finished goods includes $7,091 and $6,987 as of June 30, 2023 and December 31, 2022, respectively, held for more than twelve months and classified as long-term.

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
INCOME TAXES
Tax expense	$ 3,070	$ 3,816	$ 6,505	$ 7,375
Effective tax rate (as a percent)	17.00%	18.10%	17.20%	18.10%
Federal statutory rate	21.00%	21.00%	21.00%	21.00%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

CONSUMER LOANS (Tables)

6 Months Ended

Jun. 30, 2023

CONSUMER LOANS

Schedule of consumer loans, net of allowance for loan losses and deferred financing fees


	As of June 30,		As of December 31,
	2023		2022
Consumer loans receivable	$	149,368	$	142,340
Loan discount and deferred financing fees		(2,491)		(2,501)
Allowance for loan losses		(867)		(830)
Consumer loans receivable, net	$	146,010	$	139,009

Schedule of allowance for loan losses


	Three months ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Allowance for loan losses, beginning of period	$	816	$	724	$	830	$	884
Provision for loan losses		7		55		(63)		(257)
Charge offs (recoveries)		44		(16)		100		136
Allowance for loan losses	$	867	$	763	$	867	$	763

Schedule of impaired and general reserve for allowance for loan losses


	As of June 30,		As of December 31,
	2023		2022
Total consumer loans	$	149,368	$	142,340
Allowance for loan losses	$	867	$	830
Impaired loans individually evaluated for impairment	$	1,666	$	1,610
Specific reserve against impaired loans	$	699	$	612
Other loans collectively evaluated for allowance	$	147,702	$	140,730
General allowance for loan losses	$	168	$	218

Schedule of consumer loans receivable that are past due


	As of June 30,			As of December 31,
	2023		%	2022		%
Total consumer loans receivable	$	149,368	100.0	$	142,340	100.0
Past due consumer loans:
31 - 60 days past due	$	1,217	0.8	$	1,150	0.8
61 - 90 days past due		330	0.2		108	0.1
91 - 120 days past due		31	0.0		486	0.3
Greater than 120 days past due		1,635	1.1		1,255	0.9
Total past due	$	3,213	2.2	$	2,999	2.1

SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2023

SHARE-BASED COMPENSATION

Schedule of restricted stock units activity

The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data):


	Number of Units		Weighted Average Grant Date Fair Value Per Unit
Nonvested, January 1, 2023	42	$	14.61
Granted	—	$	—
Vested	(16)	$	14.73
Canceled	—	$	—
Nonvested, June 30, 2023	26	$	14.54

Schedule of stock option activity

The following is a summary of option activity (number of units in thousands):


	Number of Units	Weighted Average Exercise Price Per Unit		Weighted Average Grant Date Fair Value Per Unit		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2022	83	$	16.83	$	12.27	9.36
Granted	1,025	$	40.59	$	4.99	9.94
Exercised	—	$	—	$	—	—
Forfeited	(28)	$	14.44	$	8.67	—
Outstanding, June 30, 2022	1,080	$	39.43	$	5.46	9.91	$	—
Exercisable, June 30, 2022	—	$	—	$	—	—	$	—

Outstanding, January 1, 2023	1,025	$	40.59	$	4.99	9.44
Granted	22	$	22.62	$	14.39	4.98
Exercised	(6)	$	16.01	$	8.57	8.95
Forfeited	—	$	—	$	—	—
Outstanding, June 30, 2023	1,041	$	40.21	$	5.19	8.86	$	—
Exercisable, June 30, 2023	6	$	16.01	$	8.57	8.95	$	45

CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 1,531	$ 2,818
Held to maturity securities		8,412
Accounts receivable, net	5,514	4,873
Current portion of contracts - dealer financed	23,589	29,441
Current portion of consumer loans receivable	7,144	6,801
Current portion of notes receivable from mobile home parks ("MHP")	12,499	9,670
Current portion of other notes receivable	4,446	8,927
Inventories	33,735	32,075
Prepaid expenses and other current assets	4,238	4,064
Total current assets	92,696	107,081
Contracts - dealer financed, net	8,528	595
Consumer loans receivable, net	138,866	132,208
Notes receivable from MHP, net	153,643	133,072
Other notes receivable, net	22,294	13,795
Inventories	7,091	6,987
Other assets - leased mobile homes	7,916	8,824
ROU assets - operating leases	2,073	2,663
Other assets	1,560	1,482
Property, plant and equipment, net	31,112	30,106
Total assets	465,779	436,813
Current liabilities:
Accounts payable	3,972	4,549
Accrued liabilities	15,579	16,895
Customer deposits	8,274	9,715
Escrow liability	10,022	9,653
Operating lease obligations	561	650
Lines of credit	4,685
Total current liabilities	43,093	41,462
Longterm liabilities:
Operating lease obligations, less current portion	1,615	2,121
Lines of credit		2,545
Deferred income taxes, net	2,862	3,065
Dealer incentive liability	5,020	5,516
Total liabilities	52,590	54,709
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized: no shares issued or outstanding
Common stock, $.001 par value, 90,000,000 shares authorized; 24,836,862 and 24,814,695 issued and 24,391,797 and 24,369,630 outstanding at June 30, 2023 and December 31, 2022, respectively	30	30
Treasury stock at cost, 445,065 shares at June 30, 2023 and December 31, 2022	(4,477)	(4,477)
Additional paid-in-capital	181,042	180,555
Retained earnings	236,594	205,996
Total stockholders' equity	413,189	382,104
Total liabilities and stockholders' equity	$ 465,779	$ 436,813

PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

Jun. 30, 2023

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:


	As of June 30,		As of December 31,
	2023		2022
Land	$	14,953	$	14,953
Buildings and leasehold improvements		18,297		16,949
Vehicles		1,548		1,556
Machinery and equipment		5,918		5,750
Furniture and fixtures		329		300
Total		41,045		39,508
Less accumulated depreciation		(9,933)		(9,402)
Total property, plant and equipment	$	31,112	$	30,106

Depreciation expense was $269 with $124 included as a component of cost of product sales for the three months ended June 30, 2023, and $286 with $127 included as a component of cost of product sales for the three months ended June 30, 2022. Depreciation expense was $540 with $249 included as a component of cost of product sales for the six months ended June 30, 2023, and $563 with $248 included as a component of cost of product sales for the six months ended June 30, 2022.

LEASES (Details)	3 Months Ended		6 Months Ended
LEASES (Details)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($) lease	Jun. 30, 2022 USD ($)
LEASES
Number of operating leases			13
Number of operating leases subleased			3
Operating lease, term of contract (in years)	10 years		10 years
Options to renew			true
Operating lease weighted average remaining lease term1	4 years 2 months 8 days		4 years 2 months 8 days
Weighted Average Discount Rate	2.10%		2.10%
Variable lease cost \| $	$ 0	$ 0	$ 0	$ 0
Minimum
LEASES
Operating lease, term of contract (in years)	5 years		5 years
Maximum
LEASES
Operating lease, term of contract (in years)	10 years		10 years
Heritage Housing and Tiny Homes retail locations
LEASES
Number of operating leases			8
Corporate and administrative offices in Bedford, TX and Norcross, GA
LEASES
Number of operating leases subleased			2

ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
ACCRUED LIABILITIES.
Warranty reserve	$ 2,829	$ 3,049
Litigation reserve	515	753
Payroll	922	1,006
Portfolio taxes and title	1,781	1,610
Property tax	643	54
Dealer rebates	1,292	1,402
Sales tax	61	61
Federal and state income taxes	3,923	6,699
Other	3,613	2,261
Total accrued liabilities	$ 15,579	$ 16,895

COMMITMENTS AND CONTINGENCIES - Legal Matters (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
COMMITMENTS AND CONTINGENCIES
Legal reserves	$ 515	$ 753

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

14. 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 reserves estimated 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, 2023 and December 31, 2022, the Company had accrued a $219 and $149 liability for incurred but not reported claims, respectively. These accrued amounts are included in accrued liabilities on the condensed balance sheets.

The Company is contingently liable under the terms of repurchase agreements with financial institutions that provide inventory financing for independent retailers that sell the Company’s products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to retailers in the event of default by the retailer. The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail

customer. The maximum amount for which the Company was liable under such agreements totaled $6,740 and $8,925 at June 30, 2023 and December 31, 2022, respectively, without reduction for the resale value of the homes. The Company considers its obligations on current contracts to be insignificant and accordingly has not recorded any reserve for repurchase commitment as of June 30, 2023 and December 31, 2022.

Leases. The Company leases facilities under operating leases that typically have 10-year terms. These leases usually offer the Company a right of first refusal that affords the Company the option to purchase the leased premises under certain terms in the event the landlord attempts to sell the leased premises to a third party. Rent expense was $141 and $176 for the three months ended June 30, 2023 and 2022, respectively, and $323 and $339 for the six months ended June 30, 2023 and 2022, respectively. The Company also subleases properties to third parties, ranging from 3-year to 11-year terms with various renewal options. Rental income from the subleased properties was approximately $39 and $55 for the three months ended June 30, 2023 and 2022, respectively, and $95 and $110 for the six months ended June 30, 2023 and 2022, respectively. See Note 5 – Leases, for a schedule of the Company’s future minimum lease commitments.

Legal Matters

The Company is party to certain legal proceedings that arise in the ordinary course and are incidental to its business. Certain of the claims pending against the Company in these proceedings allege, among other things, breach of contract and warranty, product liability and personal injury. The Company has determined that it is probable that it has some liability related to some of these claims. The Company has included legal reserves of $515 and $753 as of June 30, 2023 and December 31, 2022, respectively, in accrued liabilities on the accompanying condensed balance sheets. Although litigation is inherently uncertain, based on past experience and the information currently available, management does not believe that pending or threatened litigation will have a material adverse effect on the Company’s financial position, liquidity or results of operations. However, future events or circumstances currently unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company’s financial position, liquidity or results of operations in any future reporting periods.

SHARE-BASED COMPENSATION - Summary of Stock options activity (Details) - Stock options - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Number of units
Outstanding	1,025,000	83,000	83,000
Granted	22,000	1,025,000
Exercised	(6,000)
Forfeited		(28,000)
Outstanding	1,041,000	1,080,000	1,025,000	83,000
Exercisable	6,000
Weighted Average Exercise Price Per Unit
Outstanding at the beginning (in dollars per share)	$ 40.59	$ 16.83	$ 16.83
Granted (in dollars per share)	22.62	40.59
Exercised (in dollars per share)	16.01
Forfeited (in dollars per share)		14.44
Outstanding at the end (in dollars per share)	40.21	39.43	40.59	$ 16.83
Exercisable (in dollars per share)	16.01
Weighted Average Grant Date Fair Value Per Unit
Outstanding at the beginning (in dollars per share)	4.99	12.27	12.27
Granted (in dollars per share)	14.39	4.99
Exercised (in dollars per share)	8.57
Forfeited (in dollars per share)		8.67
Outstanding at the end (in dollars per share)	5.19	$ 5.46	$ 4.99	$ 12.27
Exercisable (in dollars per share)	$ 8.57
Weighted Average Remaining Contractual Life and Aggregate Intrinsic Value
Outstanding (in years)	8 years 10 months 9 days	9 years 10 months 28 days	9 years 5 months 8 days	9 years 4 months 9 days
Granted (in years)	4 years 11 months 23 days	9 years 11 months 8 days
Exercisable (in years)	8 years 11 months 12 days
Exercisable (in dollars)	$ 45
Non-vested shares	1,041,000
Unrecognized compensation expense	$ 4,888
Unrecognized compensation expense, recognition period	8 years 10 months 9 days

CONSUMER LOANS - Allowance for loan losses (Details) - Consumer - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Allowance for loan losses, beginning of period	$ 816	$ 724	$ 830	$ 884
Provision for loan losses	7	55	(63)	(257)
Charge offs (recoveries)	44	(16)	100	136
Allowance for loan losses	$ 867	$ 763	$ 867	$ 763

- Definition

Amount of allowance for credit loss on financing receivable. Excludes allowance for financing receivable covered under loss sharing agreement.

+ References + Details

OTHER NOTES RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2023

OTHER NOTES RECEIVABLE

Schedule of other notes receivable, net of allowance for loan losses and deferred financing fees


	As of June 30,		As of December 31,
	2023		2022
Outstanding principal balance	$	26,971	$	22,722
Allowance for loan losses		(231)		—
Total	$	26,740	$	22,722

CONSUMER LOANS - Narrative (Details) $ in Thousands	6 Months Ended	12 Months Ended
CONSUMER LOANS - Narrative (Details) $ in Thousands	Jun. 30, 2023 USD ($) item	Dec. 31, 2022 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Escrow liability	$ 10,022	$ 9,653
Repossessed assets	$ 1,204	$ 795
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average contractual interest rate	13.30%	13.40%
Escrow liability	$ 10,022	$ 9,653
Number of components comprising the allowance for loan losses \| item	2
Number of years historical loss rate considers for calculation	3 years
Repossessed assets	$ 1,204	795
Principal outstanding on consumer loans	$ 1,666	$ 1,610
Minimum \| Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Consumer loans receivable term	2 years
Maximum \| Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Consumer loans receivable term	30 years

DEBT SECURITIES

6 Months Ended

Jun. 30, 2023

DEBT SECURITIES

DEBT SECURITIES

9. DEBT SECURITIES

Debt Securities have been classified according to management’s intent. The Company purchased US Treasury Notes in November 2022 that were scheduled to mature in November 2023. The Debt Securities were classified as held-to-maturity and the amortized costs are $8,412 at December 31, 2022. The Debt Securities were sold prior to maturity on June 22, 2023 at a discount of 99.0% and the proceeds were used to pay down the credit line. The Company recognized a gain of $12 when the Debt Securities were sold.

CONSUMER LOANS - Consumer loans receivable, net (Details) - Consumer - USD ($) $ in Thousands	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Consumer loans receivable	$ 149,368		$ 142,340
Loan discount and deferred financing fees	(2,491)		(2,501)
Allowance for loan losses	(867)	$ (816)	(830)	$ (763)	$ (724)	$ (884)
Consumer loans receivable, net	$ 146,010		$ 139,009

- Definition

Amount of allowance for credit loss on financing receivable. Excludes allowance for financing receivable covered under loss sharing agreement.

+ References + Details

NATURE OF OPERATIONS - Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue
Warranty costs	$ 764	$ 538	$ 1,392	$ 1,108
Product sales	42,316	55,098	85,497	106,885
Dealer commission, reimbursed dealer expenses and other similar costs	3,949	3,253	$ 6,573	6,252
Annual curtail payment period			2 years
Period required to pay off remaining principle balance			3 years
Revenue from contract with customer product and service benchmark \| Customer concentration risk \| Pertaining to independent third parties
Disaggregation of Revenue
Product sales	$ 3,886	$ 2,495	$ 9,534	$ 4,471
Concentration risk percentage	9.60%	4.50%	11.80%	4.20%
Revenue from contract with customer product and service benchmark \| Customer concentration risk \| Another independent third party and affiliates
Disaggregation of Revenue
Product sales	$ 480	$ 3,296	$ 2,449	$ 6,194
Concentration risk percentage	1.20%	6.00%	3.00%	5.80%
Minimum
Disaggregation of Revenue
Term of lease agreement	96 months		96 months
Maximum
Disaggregation of Revenue
Term of lease agreement	120 months		120 months

NOTES RECEIVABLE FROM MOBILE HOME PARKS

6 Months Ended

Jun. 30, 2023

NOTES RECEIVABLE FROM MOBILE HOME PARKS

NOTES RECEIVABLE FROM MOBILE HOME PARKS

3. NOTES RECEIVABLE FROM MOBILE HOME PARKS

The notes receivable from mobile home parks (“MHP Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable. The MHP Notes have varying maturity dates and call for monthly principal

and interest payments. The interest rate on the MHP Notes can be fixed or variable. Approximately $159 million of the MHP Notes have a fixed interest rate ranging from 6.9% to 12.25%. The remaining MHP Notes have a variable rate typically set at 4.0% above prime with a minimum of 8.0%. The average interest rate per loan was approximately 8.1% as of June 30, 2023 and December 31, 2022, 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.

The Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 16.1%, 16.5% and 28.4% of the principal balance outstanding, all of which was secured by the mobile homes, as of June 30, 2023. As of December 31, 2022, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 12.3%, 16.6% and 34.0% of the principal balance outstanding, all of which was secured by the mobile homes.

MHP Notes are stated at amounts due from customers, net of allowance for loan losses. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance reserve composed of specific and general reserve amounts. As of June 30, 2023 and December 31, 2022, the MHP Notes balance is presented net of unamortized finance fees of $1,423 and $1,068, respectively. The finance fees are amortized over the life of the MHP Notes.

There were minimal past due balances on the MHP Notes as of June 30, 2023 and December 31, 2022 and no charge offs were recorded for MHP Notes during the three and six months ended June 30, 2023 and 2022. The allowance for loan loss is $358 and $0 at June 30, 2023 and December 31, 2022, respectively.

There were no impaired MHP Notes as of June 30, 2023 and December 31, 2022, and there was no repossessed homes balances as of June 30, 2023 and December 31, 2022. 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.

FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

15. FAIR VALUE MEASUREMENTS

The Company accounts for its investments and derivative instruments in accordance with ASC 820-10, Fair Value Measurement, which among other things provides the framework for measuring fair value. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurement) and the lowest priority to unobservable inputs (Level III measurements). The three levels of fair value hierarchy under ASC 820-10, Fair Value Measurement, are as follows:

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

Level II Significant observable inputs other than quoted prices in active markets for which inputs to the valuation methodology include: (1) Quoted prices for similar assets or liabilities in active markets; (2) Quoted prices for identical or similar assets or liabilities in inactive markets; (3) Inputs other than quoted prices that are observable; 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.

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 and cash equivalents, investments in US Treasury Notes, accounts receivable, consumer loans, MHP Notes, other notes, accounts payable, lines of credit, notes payable, and the dealer portion of consumer loans.

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments. This is considered a Level I valuation technique. The 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 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. The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note receivables with fixed rates based on the discounted value of the remaining principal and interest cash flows. The Company determined that the fair value of the consumer loan portfolio was approximately $145,700 compared to the book value of $146,010 as of June 30, 2023, and a fair value of approximately $138,800 compared to the book value of $139,009 as of December 31, 2022. The Company determined that the fair value of the fixed rate MHP Notes was approximately $157,100 compared to the book value of $159,241 as of June 30, 2023, and a fair value of approximately $128,400 compared to the book value of $129,966 as of December 31, 2022. The Company determined that the fair value of the fixed rate other notes was approximately $26,100 compared to the book value of $26,740 as of June 30, 2023, and a fair value of approximately $21,600 compared to the book value of $22,722 as of December 31, 2022. This is a Level II valuation technique.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2023

EARNINGS PER SHARE

Summary of reconciliation of the numerators and denominators used in the computations of both basic and diluted EPS


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Numerator:
Net income (in 000's)	$	15,020	$	17,261	$	31,296	$	33,352
Denominator:
Basic weighted-average common shares outstanding		24,380,894		24,406,020		24,377,803		24,355,412
Effect of dilutive securities:
Restricted stock grants		10,446		254,403		8,311		266,358
Stock options		710,597		261,702		699,044		151,575
Diluted weighted-average common shares outstanding		25,101,937		24,922,125		25,085,158		24,773,345
Earnings per share attributable to Legacy Housing Corporation
Basic	$	0.62	$	0.71	$	1.28	$	1.37
Diluted	$	0.60	$	0.69	$	1.25	$	1.35

COMMITMENTS AND CONTINGENCIES - Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating Leased Assets [Line Items]
Operating lease, term of contract (in years)	10 years		10 years
Rent expense	$ 141	$ 176	$ 323	$ 339
Sublease rental income	$ 39	$ 55	$ 95	$ 110
Minimum
Operating Leased Assets [Line Items]
Operating lease, term of contract (in years)	5 years		5 years
Sublease, term of contract (in years)			3 years
Maximum
Operating Leased Assets [Line Items]
Operating lease, term of contract (in years)	10 years		10 years
Sublease, term of contract (in years)			11 years

INCOME TAXES

6 Months Ended

Jun. 30, 2023

INCOME TAXES

INCOME TAXES

13. INCOME TAXES

The provision for income tax expense for the three months ended June 30, 2023 and 2022 was $3,070 and $3,816, respectively and $6,505 and $7,375 for the six months ended June 30, 2023 and 2022, respectively. The effective tax rate for the three and six months ended June 30, 2023 was 17.0% and 17.2%, respectively. These rate differ from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes. The effective tax rate for the three and six months ended June 30, 2022 was 18.1% and differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

NATURE OF OPERATIONS (Tables)

6 Months Ended

Jun. 30, 2023

NATURE OF OPERATIONS

Schedule of disaggregation of revenue


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Product sales:
Direct sales	$	3,752	$	11,745	$	11,178	$	22,608
Commercial sales		15,893		14,305		31,458		28,364
Inventory finance sales		15,675		20,247		29,290		40,287
Retail store sales		4,282		5,657		8,248		9,816
Other (1)		2,714		3,144		5,323		5,810
Total product sales		42,316		55,098		85,497		106,885
Consumer and MHP loans interest:
Interest - consumer installment notes		4,825		4,701		9,482		9,158
Interest - MHP notes		3,663		2,796		6,711		5,104
Total consumer and MHP loans interest		8,488		7,497		16,193		14,262
Other (2)		1,832		1,616		3,803		2,992
Total net revenue	$	52,636	$	64,211	$	105,493	$	124,139

(1)

Other product sales revenue from ancillary products and services including parts, freight and other services

(2)

Other revenue includes dealer finance charges, contract forfeitures, lease income and other miscellaneous income

Schedule of future minimum lease income

Future minimum lease income under all operating leases for each of the next five years at June 30, 2023, are as follows:


2023	$	912
2024		1,825
2025		1,825
2026		1,825
2027		1,653
Thereafter		2,264
Total	$	10,304

CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Operating activities:
Net income	$ 31,296	$ 33,352
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	849	880
Amortization of deferred revenue	(573)	(727)
Amortization of treasury note discount	(76)
Amortization of lines of credit cost	36
Provision for accounts and notes receivable	86	29
Provision for inventory	45	(117)
Gain from sale of leased property	(507)
Amortization of operating lease right of use asset	(26)
Gain on disposal of treasury note	(12)
Share-based payment expense	387	4,313
Changes in operating assets and liabilities:
Accounts receivable	(695)	(684)
Consumer loans activity, net	(7,000)	(5,205)
Notes receivable MHP activity, net	(23,339)	(19,169)
Dealer inventory loan activity, net	(2,386)	(6,937)
Inventories	(1,810)	(7,122)
Prepaid expenses and other current assets	(288)	146
Other assets	(10)	(4,265)
Accounts payable and accrued liabilities	(1,894)	(3,939)
Right of use activity, net	20
Customer deposits	(1,441)	4,185
Escrow liability	370	666
Dealer incentive liability	(496)	638
Net cash used in operating activities	(7,464)	(3,956)
Investing activities:
Purchases of property, plant and equipment	(1,537)	(1,506)
Proceeds from sale of leased property	1,108
Sale of investments - treasury notes	8,500
Issuance of notes receivable	(5,250)	(2,423)
Notes receivable collections	946	13,731
Collections from purchased loans	170	270
Net cash provided by investing activities	3,937	10,072
Financing activities:
Proceeds from exercise of stock options	100
Proceeds from other liabilities		2,525
Proceeds from lines of credit	42,242	62,863
Payments on lines of credit	(40,102)	(58,279)
Net cash provided by financing activities	2,240	7,109
Net (decrease) increase in cash and cash equivalents	(1,287)	13,225
Cash and cash equivalents at beginning of period	2,818	1,042
Cash and cash equivalents at end of period	1,531	14,267
Supplemental disclosure of cash flow information:
Cash paid for interest	209	204
Cash paid for taxes	$ 10,395	$ 9,601

RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Bell Mobile Homes
RELATED PARTY TRANSACTIONS
Accounts receivable related parties	$ 0		$ 0		$ 0
Accounts payable related parties	222		222		132
Home sales to related parties	1,507	$ 1,223	1,987	$ 1,855
Shipley Bros.
RELATED PARTY TRANSACTIONS
Accounts receivable related parties	0		0		0
Accounts payable related parties	0		0		$ 0
Home sales to related parties	252	$ 1,018	622	$ 1,711
Principal Shareholder
RELATED PARTY TRANSACTIONS
Accounts payable related parties	$ 5		$ 5

- Definition

Amount of revenue, fees and commissions earned from transactions between (a) a parent company and its subsidiaries; (b) subsidiaries of a common parent; (c) an entity and trusts for the benefit of employees, for example, but not limited to, pension and profit-sharing trusts that are managed by or under the trusteeship of the entity's management; (d) an entity and its principal, owners, management, or members of their immediate families; and (e) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
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+ Details

NATURE OF OPERATIONS (Policies)

6 Months Ended

Jun. 30, 2023

NATURE OF OPERATIONS

Basis of Presentation

Use of Estimates

Revenue Recognition

recognized when the deposit is forfeited by the customer. Revenue for service fees and miscellaneous income is recognized when the performance obligation is satisfied.

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, 2023 and 2022:


	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Product sales:
Direct sales	$	3,752	$	11,745	$	11,178	$	22,608
Commercial sales		15,893		14,305		31,458		28,364
Inventory finance sales		15,675		20,247		29,290		40,287
Retail store sales		4,282		5,657		8,248		9,816
Other (1)		2,714		3,144		5,323		5,810
Total product sales		42,316		55,098		85,497		106,885
Consumer and MHP loans interest:
Interest - consumer installment notes		4,825		4,701		9,482		9,158
Interest - MHP notes		3,663		2,796		6,711		5,104
Total consumer and MHP loans interest		8,488		7,497		16,193		14,262
Other (2)		1,832		1,616		3,803		2,992
Total net revenue	$	52,636	$	64,211	$	105,493	$	124,139

(1)

Other product sales revenue from ancillary products and services including parts, freight and other services

(2)

Other revenue includes dealer finance charges, contract forfeitures, lease income and other miscellaneous income

Share-Based Compensation

the expected life of options based on its historical award exercise experience. The Company does not expect to pay dividends on its common stock.

Accounts Receivable

Leased Property

Future minimum lease income under all operating leases for each of the next five years at June 30, 2023, are as follows:


2023	$	912
2024		1,825
2025		1,825
2026		1,825
2027		1,653
Thereafter		2,264
Total	$	10,304

Recent Accounting Pronouncements

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

Fair Value Measurements

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 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

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2023	Aug. 04, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity Registrant Name	Legacy Housing Corporation
Entity File Number	001-38761
Entity Incorporation, State or Country Code	TX
Entity Tax Identification Number	20-2897516
Entity Address, Address Line One	1600 Airport Freeway
Entity Address, Address Line Two	#100
Entity Address, City or Town	Bedford
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	76022
City Area Code	817
Local Phone Number	799-4900
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock ($0.001 par value)
Trading Symbol	LEGH
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		24,391,596
Entity Central Index Key	0001436208
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
CONDENSED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	24,836,862	24,814,695
Common stock, shares outstanding	24,391,797	24,369,630
Treasury stock, shares	445,065	445,065

ACCRUED LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2023

ACCRUED LIABILITIES.

Schedule of accrued liabilities


	As of June 30,		As of December 31,
	2023		2022
Warranty reserve	$	2,829	$	3,049
Litigation reserve		515		753
Payroll		922		1,006
Portfolio taxes and title		1,781		1,610
Property tax		643		54
Dealer rebates		1,292		1,402
Sales tax		61		61
Federal and state income taxes		3,923		6,699
Other		3,613		2,261
Total accrued liabilities	$	15,579	$	16,895

NOTES RECEIVABLE FROM MOBILE HOME PARKS (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($) item	Jun. 30, 2022 USD ($)	Dec. 31, 2022 USD ($) item
Notes Receivable
Repossessed Assets	$ 1,204		$ 1,204		$ 795
Notes Receivable from Mobile Home Parks
Notes Receivable
Note receivable with fixed rate of interest	$ 159,000		$ 159,000
Interest rate spread (as a percent)	4.00%		4.00%
Interest rate on the MHP Notes			8.10%		8.10%
Impaired loans individually evaluated for impairment	$ 0		$ 0		$ 0
Repossessed Assets	0		0		0
Unamortized finance fees	1,423		1,423		1,068
Charge offs	0	$ 0	0	$ 0
Allowance for loan losses	$ 358		$ 358		$ 0
Notes Receivable from Mobile Home Parks \| Credit concentration risk \| Pertaining to independent third parties
Notes Receivable
Number of Independent third parties \| item			3		3
Notes Receivable from Mobile Home Parks \| Credit concentration risk \| Independent third party and affiliates one
Notes Receivable
Concentration risk percentage			16.10%		12.30%
Notes Receivable from Mobile Home Parks \| Credit concentration risk \| Independent third party and affiliates two
Notes Receivable
Concentration risk percentage			16.50%		16.60%
Notes Receivable from Mobile Home Parks \| Credit concentration risk \| Independent third party and affiliates three
Notes Receivable
Concentration risk percentage			28.40%		34.00%
Minimum \| Notes Receivable from Mobile Home Parks
Notes Receivable
Fixed rate of interest (as a percent)			6.90%
Interest rate spread (as a percent)	8.00%		8.00%
Term Of Notes Receivables			1 year
Maximum \| Notes Receivable from Mobile Home Parks
Notes Receivable
Fixed rate of interest (as a percent)			12.25%
Term Of Notes Receivables			10 years

PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
PROPERTY, PLANT AND EQUIPMENT
Total	$ 41,045		$ 41,045		$ 39,508
Less accumulated depreciation	(9,933)		(9,933)		(9,402)
Total property, plant and equipment	31,112		31,112		30,106
Depreciation expense	269	$ 286	540	$ 563
Cost of product sales
PROPERTY, PLANT AND EQUIPMENT
Depreciation expense	124	$ 127	249	$ 248
Land
PROPERTY, PLANT AND EQUIPMENT
Total	14,953		14,953		14,953
Buildings and leasehold improvements
PROPERTY, PLANT AND EQUIPMENT
Total	18,297		18,297		16,949
Vehicles
PROPERTY, PLANT AND EQUIPMENT
Total	1,548		1,548		1,556
Machinery and equipment
PROPERTY, PLANT AND EQUIPMENT
Total	5,918		5,918		5,750
Furniture and fixtures
PROPERTY, PLANT AND EQUIPMENT
Total	$ 329		$ 329		$ 300

DEBT

6 Months Ended

Jun. 30, 2023

DEBT

DEBT

11. DEBT

Lines of Credit

Revolver 1

On March 30, 2020, the Company entered into an agreement with Capital One, N.A. for a revolving line of credit (“Revolver”). The Revolver had a maximum credit limit of $70,000 and a maturity date of March 30, 2024.

On June 21, 2022, the Company received a Reservation of Rights notice from Capital One, N.A. (“Capital One”). The letter stated that the Company’s Revolver was in default. The default condition occurred due to the Company’s failure to timely file the Form 10-K and deliver certain financial statements to Capital One. On July 28, 2022, the Company entered into a Limited Waiver and First Amendment to Credit Agreement (the “Amendment”) with Capital One. The Amendment replaced the LIBOR borrowing rate with a secured overnight financing rate (“SOFR”) and waived a default arising out of a monetary judgement against the Company that exceeded the amount allowed in the Revolver. On August 24, 2022, the Company received a Notice of Default and Partial Suspension of Loan Commitments from Capital One. The notice stated that the July 28, 2022 forbearance agreement had been terminated and that Capital One was suspending $50,000 of the $70,000 loan commitment under the Revolver. As a result, the available line of credit in the Revolver has been limited to $20,000. As of June 30, 2023, the Company was in compliance with all non-financial covenants.

The Revolver accrues interest at one-month SOFR plus 2.00%. The interest rates in effect as of June 30, 2023 and December 31, 2022 are 7.17% and 6.12%, respectively. Amounts available under the Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable, consumer loans and MHP Notes. The amount of available credit under the Revolver was $15,315 and $17,400 as of June 30, 2023 and December 31, 2022, respectively. In connection with the Revolver, the Company paid certain arrangement fees and other fees of approximately $295, which were capitalized as unamortized debt issuance costs and is being amortized to interest expense over the life of the Revolver.

For the three months ended June 30, 2023 and 2022, interest expense under the Revolver was $195 and $182, respectively. For the six months ended June 30, 2023 and 2022, interest expense under the Revolver was $286 and $239, respectively. The outstanding balance as of June 30, 2023 and December 31, 2022 was $4,685 and $2,545, respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of June 30, 2023, the Company was in compliance with all financial covenants, including that it maintain a tangible net worth of at least $120,000 and that it maintain a ratio of debt to EBITDA of 4 to 1 or less.

On July 28, 2023, the Company entered into a new Credit Agreement with Prosperity Bank and terminated the Revolver with Capital One. See Note 18 – Subsequent Events.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
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+ Details