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SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

10. 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 September 30, 2021, 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 becoming 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 February 2019, the Company granted 2,936 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on February 7, 2019 and had a grant date fair value of $40. The shares became fully vested on December 13, 2019.

In August 2019, the Company granted 39,526 restricted shares of its common stock to a member of senior management. The shares were granted on August 2, 2019 and had a grant date fair value of $496. The shares vest at a rate of 20.0% annually, beginning on August 2, 2020, becoming fully vested on August 2, 2024. This grant was canceled during the second quarter of 2020 due to the departure of the member of senior management.

In March 2020, the Company granted 1,903 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on March 27, 2020 and had a grant date fair value of $18. The shares became fully vested on December 13, 2020.

In December 2020, the Company granted 2,022 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on December 2, 2020 and had a grant date fair value of $30. The shares become fully vested on October 4, 2021.

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, 2021	45	$	13.68
Granted	-	$	-
Vested	(9)	$	13.63
Nonvested, September 30, 2021	36	$	13.70

As of September 30, 2021, approximately 36,000 RSUs remained unvested. Unrecognized compensation expense related to these RSUs at September 30, 2021 was $392 and is expected to be recognized over 3.36 years.

The Company granted 58,694 incentive stock options to a member of senior management. The options were granted on February 7, 2019 at an exercise price of $13.63 per share. The options vest at a rate of 12.5% annually, beginning on February 7, 2019, and becoming fully vested on February 7, 2026. 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 2.41%; dividend yield of 0.00%; expected volatility of common stock of 65.0% and expected life of options of 7.9 years. During the second quarter of 2020, these options were forfeited due to the departure of the senior manager.

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 becoming 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.

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 becoming 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.

The following is a summary of option activity (in thousands, except per unit data):


	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, 2021, nonvested	35	$	14.44	$	8.67	8.86
Granted	55	$	18.02	$	14.07	9.98
Exercised	(7)	$	14.44	$	8.67	—
Outstanding, September 30, 2021, nonvested	83	$	16.83	$	12.27	9.61	$	98
Exercisable, September 30, 2021	—	$	—	$	—	—	$	—

As of September 30, 2021, approximately 83,000 options remained nonvested. Unrecognized compensation expense related to these options at September 30, 2021 was $1,011 and is expected to be recognized over 9.98 years.

On March 31, 2020, the Company filed a registration statement on Form S-8 to register with the SEC approximately 2.3 million shares of Legacy common stock available for issuance under the 2018 Incentive Compensation Plan. The registration statement became effective upon filing.