The following discussion should be read in conjunction with the financial
statements and accompanying notes and the information contained in other
sections of this Form 10-K. It contains forward-looking statements that involve
risks and uncertainties, and is based on the beliefs of our management, as well
as assumptions made by, and information currently available to, our management.
Our actual results could differ materially from those anticipated by our
management in these forward-looking statements as a result of various factors,
including those discussed in this Form 10-K and in our Registration Statement on
Form S-1, particularly under the heading "Risk Factors."


Legacy Housing Corporation builds, sells and finances manufactured homes and
"tiny houses" that are distributed through a network of independent retailers
and company-owned stores and are sold directly to manufactured housing
communities. We are the sixth largest producer of manufactured homes in the
United States as ranked by number of homes manufactured based on information
available from the Manufactured Housing Institute and IBTS for the twelve month
period ending September 30, 2021. With current operations focused primarily in
the southern United States, we offer our customers an array of quality homes
ranging in size from approximately 395 to 2,667 square feet consisting of 1 to 5
bedrooms, with 1 to 31/2 bathrooms. Our homes range in price, at retail, from
approximately $33,000 to $180,000. During 2021, we sold 3,635 home sections
(which are entire homes or single floors that are combined to create complete
homes) and in 2020, we sold 3,814 home sections.

The Company has one reportable segment. All of our activities are interrelated,
and each activity is dependent and assessed based on how each of the activities
of Company supports the others. For example, the sale of manufactured homes
includes providing transportation and consignment arrangements with dealers. We
also provide financing options to the customers to facilitate such sale of
homes. In addition, the sale of homes is directly related to financing provided
by us. Accordingly, all significant operating and strategic decisions by the
chief operating decision-maker, the Executive Chairman of the Board, are based
upon analyses of our company as one segment or unit.

We believe our company is one of the most vertically integrated in the
manufactured housing industry, allowing us to offer a complete solution to our
customers, from manufacturing custom-made homes using quality materials and
distributing those homes through our expansive network of independent retailers
and company-owned distribution locations, to providing tailored financing
solutions for our customers. Our homes are constructed in the United States at
one of our three manufacturing facilities in accordance with the construction
and safety standards of the U.S. Department of Housing and Urban Development
("HUD"). Our factories employ high-volume production techniques that allow us to
produce, on average, approximately 75 home sections, or 62 fully-completed homes
depending on product mix, in total per week. We use quality materials and
operate our own component manufacturing facilities for many of the items used in
the construction of our homes. Each home can be configured according to a
variety of floor plans and equipped with such features as fireplaces, central
air conditioning and state-of-the-art kitchens.

Our homes are marketed under our premier "Legacy" brand name and currently are
sold primarily across 15 states through a network of 176 independent retail
locations, 13 company-owned retail locations and through direct sales to owners
of manufactured home communities. Our 13 company-owned retail locations,
including 11 Heritage Housing stores and two Tiny House Outlet stores
exclusively sell our homes. During 2021, approximately 50% of our manufactured
homes were sold in Texas, followed by 16% in Georgia, 8% in Louisiana and 5% in
Alabama. During 2020, 46% of our manufactured homes were sold in Texas, followed
by 8% in Georgia, 8% in Michigan, 5% in Kansas and 5% in North Carolina. We plan
to deepen our distribution channel by using cash from operations and borrowings
from our lines of credit to expand our company-owned retail locations in new and
existing markets.

We offer three types of financing solutions to our customers. We provide floor
plan financing for our independent retailers, which takes the form of a
consignment arrangement between the retailer and us. We also provide consumer
financing for our products which are sold to end-users through both independent
and company-owned retail locations, and we provide financing solutions to
manufactured housing community owners that buy our products for use in their
manufactured housing communities. Our ability to offer competitive financing
options at our retail locations



provides us with several competitive advantages and allows us to capture sales that might not otherwise have occurred without our ability to offer consumer financing.

Business Conversion

Prior to January 1, 2018, we were a Texas limited partnership named Legacy
Housing, Ltd. Effective January 1, 2018, we converted into a Delaware
corporation pursuant to a statutory conversion, or the Corporate Conversion, and
changed our name to Legacy Housing Corporation. All of our outstanding
partnership interests were converted on a proportional basis into shares of
common stock of Legacy Housing Corporation. Effective December 31, 2019, the
Company reincorporated from a Delaware corporation to a Texas corporation. For
more information, see "Corporate Conversion" in Note 1.

Following the Corporate Conversion, Legacy Housing Corporation continues to hold
all of the property and assets of Legacy Housing, Ltd. and all of the debts and
obligations of Legacy Housing, Ltd. continue as the debts and obligations of
Legacy Housing Corporation. The purpose of the Corporate Conversion was to
reorganize our corporate structure so that the top-tier entity in our corporate
structure is a corporation rather than a limited partnership and so that our
existing owners own shares of our common stock rather than partnership interests
in a limited partnership. Except as otherwise noted, the financial statements
included in this Form 10-K are those of Legacy Housing Corporation.

Factors affecting our performance

We believe that the growth of our business and our future success depends on various opportunities, challenges, trends and other factors, including:

We have purchased several properties in our market area with the aim of

? develop communities and prefabricated housing estates. From December

As of 31, 2021, these properties include the following (in thousands of dollars):

          Location              Description     Date of Acquisition     Land         Improvements     Total
Bastrop County, Texas           400 Acres       April 2018            $   4,400   $         1,001   $   5,401
Bexar County, Texas             100 Acres       November 2018             1,300               114       1,414
Horseshoe Bay, Texas            133 Acres       Various 2018-2019         2,431             1,970       4,401
Johnson County, Texas           91.5 Acres      July 2019                   445                16         461
Venus, Texas                    50 Acres        August 2019                 422                 7         429
Wise County, Texas              81.5 Acres      September 2020              889                 -         889
Bexar County, Texas             233 Acres       February 2021            
1,550               102       1,652
                                                                      $  11,437   $         3,210   $  14,647

We also plan to provide financing solutions to a select group of our

customer owners of the prefab housing community in a manner that includes

develop new sites for the products in or near urban areas where there is a

? lack of sites to place our products. These solutions will be structured to

give us an attractive return on investment when coupled with gross margin

we plan to do on products specifically for sale to these new

prefabricated house communities.

Finally, our financial performance will be impacted by our ability to fulfill

current orders for our prefabricated houses with dealers and customers.

Currently our two Texas manufacturing facilities are operating at or near maximum

capacity, with a limited ability to increase the volume of homes produced at

these plants. Our Georgia manufacturing plant has unused floor space

? available and with additional investment can add capacity to increase the

number of houses that can be made. We intend to increase production to

the Georgia facilitated over time, in particular in response to more and more orders

generated by new markets in Florida and the Carolinas. For

maintain our growth, we must be able to continue to estimate well

   anticipated future volumes when making commitments regarding


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the level of activity we will seek and accept, the range of products we

intend to manufacture, the schedule of production schedules and the levels and

the use of inventory, equipment and personnel.

The coronavirus pandemic is an evolving threat to the economy and all

? companies. Currently, both the duration of the pandemic and the magnitude of

the economic consequences are unknown. Risks to the Company include but are not

limited to:

increased loan losses or deferred loan repayments as loan debtors suffer from liquidity

o flow issues resulting from reduced employment, lower rental income or

sales or other factors;

reduced sales volume as potential customers cannot buy new homes or

o cannot qualify for a home purchase, retailer or company store discount or

stop operations, or MHP owners reduce future home purchases;

reduced production resulting from factors such as the spread of disease

o through the company’s workforce, reducing demand for products or

closures of our factories, company-owned stores or independent retail lots

resellers who sell our products;

delays in development projects as zoning, regulatory and permitting decisions

o are likely to be postponed and the expected negative impact of the pandemic on

the construction industry;

o Reduced raw material availability due to global supply chain disruption

the pandemic, including possible border closures;

o a decline in cash flow from operations which could negatively affect our


an outbreak of illness among our management and accounting staff could

o adversely affect our ability to maintain our operations, operate our

systems, delaying our statutory reports and reducing our internal control over

financial report.

We continue to monitor government responses to support the economy and assess how these actions could mitigate the above risks.

Significant Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results
of operations is based upon our financial statements, which have been prepared
in accordance with U.S. generally accepted accounting principles ("GAAP"). The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

Management believes that the following accounting policies are material to our results of operations or may affect the significant judgments and estimates used in the preparation of our financial statements.

Allowance for loan losses – Consumer loan 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. A reserve is
calculated after considering, 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. Our 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
our company. Specific reserves are determined based on probable losses on
specific classified impaired loans.

Our 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 and 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 we will be unable to collect
all amounts due in accordance with the original contractual terms of the loan
agreement, including scheduled principal and interest payments. 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 fair value of underlying
collateral value, less estimated selling costs. We use certain 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 will reduce the value; (4) units located on private property present
additional value loss because it tends to be more expensive to remove units from
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 and
size, including 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.

Allowance for Loan Losses – MHP Notes

MHP Notes are stated at amounts due from customers net of allowance for loan
losses. We determine the allowance by considering several factors including the
aging of the past due balance, the customer's payment history, and our previous
loss history. We establish an allowance reserve composed of specific and general
reserve amounts that are deemed to be uncollectible. Historically we have not
experienced material losses on the MHP Notes.


Inventories consist of raw materials, work-in-process, and finished goods and
are stated at the lower of cost or net realizable value. Raw materials cost
approximates the first-in first-out method. Finished goods and work-in-process
are based on a standard cost system that approximates actual costs using the
specific identification method.

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

We evaluate inventory based on historical experience to estimate our inventory that is not expected to be sold in less than a year. We classify our inventory that is not expected to be sold within a year as non-current.



Fixed assets

Property, plant and equipment are carried at cost less accumulated depreciation.
Depreciation expense is calculated using the straight-line method over the
estimated useful lives of each asset. Estimated useful lives for significant
classes of assets are as follows: buildings and improvements, 30 to 39 years;
vehicles, 5 years; machinery and equipment, 7 years; and furniture and fixtures,
7 years. Repair and maintenance charges are expensed as incurred. Expenditures
for major renewals or betterments which extend the useful lives of existing
property, plant, and equipment are capitalized and depreciated. We periodically
evaluate the carrying value of long-lived assets to be held and used and when
events and circumstances warrant such a review. The carrying value of long-lived
assets is considered impaired when the anticipated undiscounted cash flow from
such assets is less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the fair value of the
long-lived assets. Fair value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Losses on
long-lived assets to be disposed of are determined in a similar manner, except
that the fair values are based primarily on independent appraisals and
preliminary or definitive contractual arrangements less costs to dispose.

Revenue recognition

direct sales

Revenue from homes sold to independent retailers that are not financed and not
under a consignment arrangement are generally recognized upon execution of a
sales contract and when the home is shipped, at which time title passes to the
independent retailer and collectability is reasonably assured. These types of
homes are generally either paid for prior to shipment or floor plan financed
through a third party lender by the independent retailer through standard
industry arrangements, which can include repurchase agreements.

Commercial sales

Revenue from homes sold to mobile home parks under commercial loan programs
involving funds provided by our company is recognized when the home is shipped,
at which time title passes to the customer and a sales and financing contract is
executed, down payment received, and collectability is reasonably assured.

Consignment sales

We provide floor plan financing for independent retailers, which takes the form
of a consignment arrangement. Sales under a consignment agreement are recognized
as revenue when we enter into a sales contract and receive full payment for cash
sales, and title passes; or, upon execution of a sales and financing contract,
with a down payment received from and upon delivery of the home to the final
individual customer, at which time title passes and collectability is reasonably
assured. For homes sold to customers through independent retailers under
consignment arrangements and financed by us, a percentage of profit is paid to
the independent retailer up front as a commission for sale and also reimburses
certain direct expenses incurred by the independent retailer for each
transaction. Such payments are recorded as cost of product sales in our
statement of operations.

Retail sales

Revenue from direct retail sales through company-owned retail locations are
generally recognized when the customer has entered into a legally binding sales
contract, payment is received, the home is delivered at the customer's site,
title has transferred, and collection is reasonably assured. Retail sales
financed by us are recognized as revenue upon the execution of a sales and
financing contract with a down payment received and upon delivery of the home to
the final customer, at which time title passes and collectability is reasonably

Revenues are recognized net of sales taxes.


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Product Warranties

We provide retail home buyers with a one-year warranty from the date of purchase
on manufactured inventory. Product warranty costs are accrued when the covered
homes are sold to customers. Product warranty expense is recognized based on the
terms of the product warranty and the related estimated costs. Factors used to
determine the warranty liability include the number of homes under warranty and
the historical costs incurred in servicing the warranties. The accrued warranty
liability is reduced as costs are incurred and warranty liability balance is
included as part of accrued liabilities in our balance sheet.

Operating results

The following discussion should be read in conjunction with the information set
forth in the financial statements and the accompanying notes appearing elsewhere
in this Form 10-K.

Comparison of years ended December 31, 2021 and 2020 (in thousands)

                                                   Year ended
                                                 December 31,
                                               2021          2020        $ change     % change
Net revenue:
Product sales                               $  165,995    $  147,502    $   18,493        12.5 %
Consumer and MHP loans interest                 27,195        25,360       
 1,835         7.2 %
Other                                            4,317         3,862           455        11.8 %
Total net revenue                              197,507       176,724        20,783        11.8 %
Operating expenses:
Cost of product sales                          114,050       109,723         4,327         3.9 %
Selling, general administrative expenses        23,306        19,068       
 4,238        22.2 %
Dealer incentive                                 1,235           336           899       267.6 %
Income from operations                          58,916        47,597        11,319        23.8 %
Other income (expense)
Non­operating interest income                    2,095           915      
  1,180       129.0 %
Miscellaneous, net                                 503           288           215        74.7 %
Gain on settlement, net                              -         1,075       (1,075)             %
Interest expense                                 (887)       (1,053)           166      (15.8) %
Total other                                      1,711         1,225           486        39.7 %
Income before income tax expense                60,627        48,822       
11,805        24.2 %
Income tax expense                            (10,756)      (10,827)            71       (0.7) %
Net income                                  $   49,871    $   37,995    $   11,876        31.3 %

Product sales primarily consist of direct sales, commercial sales, consignment
sales and retail store sales. Product sales increased $18.5 million, or 12.5%,
in 2021 as compared to 2020. This change was driven by higher average sales
price partially offset by lower unit volumes.

Net revenue attributable to our factory-built housing consisted of the following
in 2021 and 2020:

                                      Year Ended
                                    December 31,
                                    (in thousands)
                                  2021         2020       $ Change     % Change
Net revenue:
Products sold                   $ 165,995    $ 147,502    $  18,493        12.5 %
Total products sold                 3,011        3,379        (368)      (10.9) %
Net revenue per product sold    $    55.1    $    43.7    $    11.5        26.3 %


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In 2021, our net revenue per product sold increased 26.3% because of increases
to our product prices due to rising material and labor costs, which resulted in
higher home sales prices and more revenue generated per home sold. We had
increases in consignment sales, direct sales, and sales through our
company-owned retail stores. These increases were partially offset by declines
in sales to manufactured home communities. Sales through our company-owned
retail stores and sales to manufactured home communities have higher margins
than our direct sales and consignment sales. Other product sales increased $5.6
million, or 115.0% and is primarily due to an increase in direct freight,
molding revenue and miscellaneous sales income partially offset by a decrease in
parts sales.

Consumer and MHP loans interest income grew $1.8 million, or 7.2%, in 2021 as
compared to 2020 and is related to our average increase in outstanding consumer
loan portfolio and MHP Note portfolio. Between December 31, 2021 and
December 31, 2020 our consumer loan portfolio increased by $13.7 million.
Between September 29, 2021 and December 31, 2020 our MHP Note
portfolio increased by $19.4 million. On September 30, 2021, we collected $44.9
million in principal payment from one of our MHP borrowers. As a result of this
payment, MHP loan interest income is expected to decrease during 2022 as
compared to 2021.

Other revenue primarily consists of commercial lease rents, consignment fees and
servicer fee revenue. Other revenue increased $0.5 million or 11.8% primarily
due to a $0.4 million increase in commercial lease rents and a $0.1 million
increase in miscellaneous other revenue, net.

The cost of product sales increased $4.3 million, or 3.9%, in 2021 as compared
to 2020. The increase in costs is primarily related to increases in the cost of
materials and labor in 2021 and was materially passed along to our end-customer.

Selling, general and administrative expenses increased $4.2 million, or 22.2%,
in 2021 as compared to 2020. This increase was primarily due to $2.4 million
increase in salaries and incentive costs, a $0.3 million increase in rent and
facility costs, a $0.3 million increase in consulting and professional fees, a
$0.3 million increase in depreciation & amortization expense, a $0.2 million
increase in warranty costs, a $1.0 million increase in legal expenses. and a net
$0.1 million increase in other miscellaneous costs. These increases were
partially offset by a $0.4 million decrease in advertising and promotions.

Increased Dealer Incentive Spending $0.9 millioni.e. 267.6% in 2021 compared to 2020.

Other income (expense), net increased $0.5 million, or 39.7%, in 2021, as
compared to 2020.  This increase was primarily due to an increase of $1.2
million in non-operating interest income, an increase of $0.2 million in
miscellaneous income, net, and a decrease of $0.2 million in interest expense.
These increases were partially offset by a $1.1 million gain in the second
quarter of 2020 due to the settlement of a lawsuit with a previous vendor for
the Company.

Income tax expense was $10.8 million for 2021 and 2020. The effective tax rate
for the year ended December 31, 2021 was 17.7% and primarily differs from the
federal statutory rate of 21% primarily due to a federal tax credit for energy
efficient construction and partially offset by state income taxes. The effective
tax rate for the year ended December 31, 2020 was 22.2% and primarily differs
from the federal statutory rate of 21% primarily due to state income taxes net
of a federal tax credit for energy efficient construction.

Cash and capital resources

Cash and cash equivalents

We consider all cash and highly liquid investments with an original maturity of
three months or less to be cash equivalents. We maintain cash balances in bank
accounts that may, at times, exceed federally insured limits. We have not
incurred any losses from such accounts and management considers the risk of loss
to be minimal. We believe that cash flow from operations, cash and cash
equivalents at December 31, 2021, and availability on our lines of credit will
be sufficient to fund our operations and provide for growth for the next 12 to
18 months and into the foreseeable future. In 2020, we negotiated a new credit
agreement with Capital One, N.A. that expanded and extended our credit


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(see Indebtedness - Capital One Revolver, below). As of December 31, 2021, we
had approximately $1.0 million in cash and cash equivalents, compared to $0.8
million as of December 31, 2020.

Cash Flow Activities

                                                             Year Ended
                                                            December 31,
                                                           (in thousands)
                                                          2021         2020

Net cash provided by (used in) operating activities $60,296 $(1,838)
Net cash used in investing activities

                  $ (31,942)    $ 


Net cash used in financing activities                  $ (28,080)    $   


Net change in cash and cash equivalents                $      274    $   


Cash and cash equivalents at the beginning of the period $768 $1,724
Cash and cash equivalents at the end of the period

             $    1,042    $     


Comparison of treasury activities from 2021 to 2020

Net cash provided by operating activities increased $62.1 million during the
year ended December 31, 2021, compared to 2020, primarily as a result of
increased MHP principal collections, decreased MHP originations, and increased
customer deposits and escrow. The increase in cash used in operating activities
was partially offset by increased volume of consumer loan originations net of
principal collections, increased inventories, increased accounts receivable and
decreased payables.

Net cash used in investing activities of $31.9 million in 2021 was primarily
attributable to $ $36.8 million used for loans to third parties for the
development of manufactured housing parks and $6.0 million used for the
acquisition of property plant and equipment. These were offset by collections of
$9.0 million of loans we made to third parties for the development of
manufactured housing parks and collections of $1.8 million from our purchased
consumer loans.

Net cash used in financing activities of $28.1 million in 2021 was attributable
to net payments of $28.2 million on our lines of credit offset by $0.1 million
received from the exercise of stock options.


Capital One Revolver. At December 31, 2019, we had a revolving line of credit
("Revolver 1") with Capital One, N.A. with a maximum credit limit of $45,000,000
and a maturity date of May 11, 2020. On March 30, 2020, we entered into an
agreement with Capital One, N.A. to replace Revolver 1 with a new revolving line
of credit ("New Revolver"). The New Revolver has a maximum credit limit of
$70,000,000 and a maturity date of March 30, 2024. For the period January 1,
2020 through March 30, 2020, Revolver 1 accrued interest at one-month LIBOR plus
2.40%. Amounts available under Revolver 1 were subject to a formula based on
eligible consumer loans and MHP Notes and were secured by all accounts
receivable and the consumer loans receivable and MHP Notes.

The New Revolver accrues interest at one-month LIBOR plus 2.00%. The interest
rates in effect as of December 31, 2021 and 2020 were 2.10% and 2.15%,
respectively. As with Revolver 1, amounts available under the New Revolver are
subject to a formula based on eligible consumer loans and MHP Notes and are
secured by all accounts receivable and the consumer loans receivable and MHP
Notes. The amount of available credit under the New Revolver was $61,841,000 as
of December 31, 2021. In connection with the New Revolver, we paid certain
arrangement fees and other fees of approximately $0.3 million, which were
capitalized as unamortized debt issuance costs and will be amortized to interest
expense over the life of the New Revolver.

For the years ended December 31, 2021 and 2020, interest expense under the
Capital One Revolvers was $887,000 and $1,020,000, respectively. The outstanding
balance as of December 31, 2021 and 2020 was $8,159,000 and $36,174,000,
respectively. We were in compliance with all financial covenants as of December
31, 2021, including that we maintain a tangible net worth of at least
$120,000,000 and that we maintain a ratio of debt to EBITDA of 4-to-1, or less.


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On June 21, 2022, we received a Reservation of Rights notice from Capital One,
N.A. The letter stated that the New Revolver was in default. The default
condition occurred due to our failure to timely file the 10K and deliver certain
financial statements to Capital One, N.A. On July 28, 2022, we executed a
forbearance agreement with Capital One, N.A.

Veritex Community Bank Revolver. In April 2016, we entered into an agreement
with Veritex Community Bank to secure an additional revolving line of credit of
$15,000,000 ("Revolver 2"). Revolver 2 accrues interest at one-month LIBOR plus
2.50% and all unpaid principal and interest is due at maturity on April 4, 2021.
Revolver 2 is secured by all finished goods inventory excluding repossessed
homes. Amounts available under Revolver 2 are subject to a formula based on
eligible inventory. On May 12, 2017, we entered into an agreement to increase
the maximum borrowing availability under Revolver 2 to $20,000,000. On
October 15, 2018, Revolver 2 was amended to extend the maturity date from
April 4, 2019 to April 4, 2021. In April 2020, this note was paid in full and
the facility was terminated. The amount of available credit under Revolver 2 was
$12,028,000 and the interest rates in effect as of March 31, 2020 was 4.17%. For
the year ended December 31, 2020 interest expense was $17,000. The outstanding
balance as of March 31, 2020 was $2,001,000. We were in compliance with all
financial covenants as of March 31, 2020 including that we maintain a tangible
net worth of at least $80,000,000.

PPP Loan. On April 10, 2020, we Company entered into a loan with Peoples Bank as
the lender in an aggregate principal amount of $6,545,700 (the "Loan") pursuant
to the Paycheck Protection Program under the Coronavirus Aid, Relief, and
Economic Security Act. The Loan was evidenced by a promissory note (the "Note")
dated April 10, 2020 and had a maturity date of April 10, 2022. The Note had an
interest rate of 1.000% per annum, with the first six months of interest
deferred. Principal and interest were payable monthly commencing on November 10,
2020 and could be prepaid by us at any time prior to maturity with no prepayment
penalties. On May 1, 2020, this loan was paid in full.

PILOT Agreement. In December 2016, we entered into a Payment in Lieu of Taxes
("PILOT") agreement commonly offered in Georgia by local community development
programs to encourage industry development. The net effect of the PILOT
agreement is to provide us with incentives through the abatement of local, city
and county property taxes and to provide financing for improvements to our
Georgia plant (the "Project"). In connection with the PILOT agreement, the
Putman County Development Authority provides a credit facility for up to
$10,000,000, which can be drawn upon to fund Project improvements and capital
expenditures as defined in the agreement. If funds are drawn, we would pay
transactions costs and debt service payments. The PILOT agreement requires
interest payments of 6.00% per annum on outstanding balances, which were due
each December 1 through maturity on December 1, 2021, at which time all unpaid
principal and interest are due. The PILOT agreement is collateralized by the
assets of the Project. As of December 31, 2021, we had not drawn down on this
credit facility.

Contractual Obligations

The following table is a summary of contractual cash obligations as of
December 31, 2021:

                                                        Payments Due by Period (in thousands)

Contractual Obligations                     Total       2022     2023 - 2024    2025 - 2026     After 2026
Lines of credit                            $ 8,159          -          8,159              -              -
Operating lease obligations                $ 2,914        632          1,066            831            385

Off-balance sheet arrangements

We did not have any off-balance sheet arrangements that are reasonably likely to
have a current or future effect on our financial condition, net sales, results
of operations, liquidity or capital expenditures. However, we do have a
repurchase agreement with a financial institution providing inventory financing
for independent retailers of our products. Under this agreement, we have agreed
to repurchase homes at declining prices over the term of the agreement
(24 months). Our obligation under this repurchase agreement ceases upon the
purchase of the home by the retail customer. The maximum amount of our
contingent obligations under such repurchase agreements was approximately



$4,908,000 and $140,000 as of December 31, 2021 and 2020, respectively, without
reduction for the resale value of the homes. We may be required to honor
contingent repurchase obligations in the future and may incur additional expense
as a consequence of these repurchase agreements. We consider our obligations on
current contracts to be immaterial and accordingly we have not recorded any
reserve for repurchase commitment as of December 31, 2021.

Recent accounting pronouncements

For information regarding recently issued and adopted accounting pronouncements,
see Note 2, Summary of Significant Accounting Policies, to our December 31, 2021
financial statements included in Part II, Item 8, Financial Statements and
Supplementary Data, of this Form-10K.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the JOBS Act. Section 107 of
the JOBS Act provides that an "emerging growth company" can take advantage of
the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. In other words, an
"emerging growth company" can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. We have
elected to take advantage of these exemptions until we are no longer an emerging
growth company or until we affirmatively and irrevocably opt out of this

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