Washington,
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
___
85-3460766 | ||||||||
| ||||||||
|
|
| |||||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
| ||||
|
|
|
|
|
|
Title of | Trading Symbol(s) | Name of | |||||||||||||
|
| The Nasdaq Stock Market LLC | |||||||||||||
Warrants, each whole warrant exercisable for one |
| The Nasdaq Stock Market LLC |
Large accelerated filer |
| Accelerated filer |
| |||||||||||
Non-accelerated filer |
| Smaller reporting company |
| |||||||||||
Emerging growth company |
|
March 31, 2021 December 31, 2020 Assets: (unaudited) Current assets: Cash $ 1,181,486 $ 16,110 Prepaid expenses 408,838 — Total current assets 1,590,324 16,110 Deferred offering costs — 275,140 Investments held in Trust Account 345,003,630 — Total Assets $ 346,593,954 $ 291,250 Liabilities and Stockholders' Equity: Current liabilities: Accounts payable $ 299,056 $ 724 Accrued expenses 545,000 136,250 Franchise tax payable 2,351 1,168 Note payable - related party — 130,000 Total current liabilities 846,407 268,142 Deferred underwriting commissions 12,075,000 — Derivative warrant liabilities 8,913,000 — Total liabilities 21,834,407 268,142 Commitments and Contingencies (Note 6) Class A common stock, $0.0001 par value; 31,975,954 shares subject to possible redemption at $10.00 per share 319,759,540 — Stockholders' Equity: Preferred stock, $0.0001 par value; 10,000,000 shares authorized; NaN issued and outstanding — — Class A common stock, $0.0001 par value; 300,000,000 shares authorized; 2,524,046 shares issued and outstanding (excluding 31,975,954 shares subject to possible redemption) 252 — Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 8,625,000 shares issued and outstanding 863 863 Additional paid-in capital 1,888,023 24,137 Retained Earnings (Accumulated Deficit) 3,110,869 (1,892) Total stockholders’ equity 5,000,007 23,108 Total Liabilities and Stockholders' Equity $ 346,593,954 $ 291,250March 31, 2024 December 31, 2023 ASSETS Cash and cash equivalents $ 28,650,147 $ 56,671,471 Accounts receivable, net 784,723 1,661,206 Inventories: Homes under construction and finished homes 150,387,674 147,582,130 Developed lots and land under development 20,209,347 35,227,572 Real estate inventory not owned 17,819,132 — Due from related party 77,318 88,000 Related party note receivable 591,171 610,189 Lot purchase agreement deposits 38,736,582 33,015,812 Investment in joint venture 1,692,126 1,430,177 Property and equipment, net 1,052,014 1,073,961 Operating right-of-use assets 5,044,452 5,411,192 Deferred tax asset 3,662,013 2,405,417 Prepaid expenses and other assets 9,227,601 7,763,565 Goodwill 9,279,676 5,706,636 Total Assets $ 287,213,976 $ 298,647,328 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 20,122,735 $ 38,680,764 Homebuilding debt and other affiliate debt 73,982,388 80,451,429 Liabilities from real estate inventory not owned 14,078,495 — Operating lease liabilities 5,349,033 5,565,320 Other accrued expenses and liabilities 7,488,235 8,353,824 Income tax payable 1,165,538 1,128,804 Derivative liabilities 101,228,477 127,610,943 Convertible note payable 68,526,995 68,038,780 Total Liabilities 291,941,896 329,829,864 Commitments and contingencies (Note 12) — — Class A common stock, $0.0001 par value; 350,000,000 shares authorized; 11,397,589 and 11,382,282 shares issued and outstanding on March 31, 2024, and December 31, 2023, respectively. 1,139 1,138 Class B common stock, $0.0001 par value; 60,000,000 shares authorized; 36,973,876 shares issued and outstanding on March 31, 2024, and December 31, 2023, respectively. 3,697 3,697 Additional paid-in capital 4,310,884 2,794,493 Accumulated deficit (9,043,640) (33,981,864) Total Stockholders' equity (4,727,920) (31,182,536) Total Liabilities and Stockholders' equity $ 287,213,976 $ 298,647,328 notesunaudited Notes to the Condensed Consolidated Financial Statements are an integral part of these unaudited condensed financial statements.1STATEMENTCONSOLIDATED STATEMENTS OF OPERATIONSThree Months Ended March 31, 2024 2023 Revenue, net of sales discounts $ 100,838,245 $ 94,826,702 Cost of sales 84,744,198 78,048,929 Gross profit 16,094,047 16,777,773 Selling, general and administrative expense 17,054,499 16,687,401 Net (loss) income from operations (960,452) 90,372 Other (expense) income, net (1,962,845) 202,715 Equity in net earnings from investment in joint venture 318,299 245,808 Change in fair value of derivative liabilities 26,379,710 (207,064,488) Income (loss) before taxes 23,774,712 (206,525,593) Income tax benefit (1,163,512) (2,021,265) Net income (loss) $ 24,938,224 $ (204,504,328) Basic and diluted earnings (loss) per share Basic $ 0.52 $ (5.44) Diluted $ 0.44 $ (5.44) Basic 48,362,589 37,575,074 Diluted 63,111,404 37,575,074
General and administrative expenses $ 642,360 Franchise tax expense 48,269 Loss from operations (690,629) Change in fair value of derivative warrant liabilities 4,248,830 Financing costs - derivative warrant liabilities (449,070) Income from investments held in Trust Account 3,630 Net income $ 3,112,761 Weighted average shares outstanding of Class A redeemable common stock 31,621,444 Basic and diluted net income per share, Class A redeemable common stock $ 0.00 Basic and diluted weighted average shares outstanding of non-redeemable common stock $ 10,302,489 Basic and diluted net income per share, non-redeemable common stock $ 0.30FOR THE THREE MONTHS ENDED MARCH20212023 for the Reverse Recapitalization as a result of the Business Combination as described in Note 1.notesunaudited Notes to the Condensed Consolidated Financial Statements are an integral part of these unaudited condensed financial statements.2STATEMENTCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(1)Common stock Additional paid-in capital Retained Earnings (Accumulated Deficit) Total Stockholders' Equity Class A Class B Shares Amount Shares Amount Balance as of December 31, 2023 11,382,282 $ 1,138 36,973,876 $ 3,697 $ 2,794,493 $ (33,981,864) $ (31,182,536) Exercise of employee stock options 1,307 — — — 6,427 — 6,427 Stock-based compensation expense — — — — 1,509,965 — 1,509,965 Issuance of shares related to restricted stock units 14,000 1 — — (1) — — Net income — — — — — 24,938,224 24,938,224 Balance as of March 31, 2024 11,397,589 $ 1,139 36,973,876 $ 3,697 $ 4,310,884 $ (9,043,640) $ (4,727,920) Common stock Additional paid-in capital Retained Earnings (Accumulated Deficit) Total Stockholders' Equity Class A Class B Shares Amount Shares Amount 373,471 $ 37 36,973,876 $ 3,697 $ 1,422,630 $ 57,577,672 $ 59,004,036 Distributions and net transfer to shareholders and other affiliates — — — — — (4,193,093) (4,193,093) Stock-based compensation expense — — — — 51,079 — 51,079 Forfeiture of private placement warrants — — — — 890,001 — 890,001 Issuance of common stock upon the reverse recapitalization, net of transaction costs 8,492,528 850 — — 17,869,735 — 17,870,585 Issuance of common stock related to PIPE Investment 1,333,962 133 — — 9,501,782 — 9,501,915 Issuance of common stock related to lock-up agreement 421,009 42 — — 4,194 — 4,236 Recognition of derivative liability related to earnout — — — — (242,211,404) — (242,211,404) Recognition of derivative liability related equity incentive plan — — — — (1,189,685) — (1,189,685) Earnout stock-based compensation expense for UHG employee options — — — — 4,448,077 — 4,448,077 Transaction costs related to reverse recapitalization — — — — (2,932,426) — (2,932,426) Reclassification of negative APIC related to the reverse recapitalization — — — — 212,146,017 (212,146,017) — Net loss — — — — — (204,504,328) (204,504,328) Balance as of March 31, 2023 10,620,970 $ 1,062 36,973,876 $ 3,697 $ — $ (363,265,766) $ (363,261,007)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
| | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional | | | | | Total | ||||||||||
| | Class A | | Class B | | Paid-In | | Retained Earnings | | Stockholders’ | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| (Accumulated Deficit) |
| Equity | |||||
Balance - December 31, 2020 | | — | | $ | — | | 8,625,000 | | $ | 863 | | $ | 24,137 | | $ | (1,892) | | $ | 23,108 |
Sale of shares in initial public offering, gross | | 34,500,000 | | | 3,450 | | — | | | — | | | 337,234,050 | | | 0 | | | 337,237,500 |
Offering costs | | — | | | — | | — | | | — | | | (19,114,492) | | | — | | | (19,114,492) |
Excess of cash received over fair value of private placement warrants | | — | | | — | | — | | | — | | | 3,500,670 | | | 0 | | | 3,500,670 |
Common stock subject to possible redemption | | (31,975,954) | | | (3,198) | | — | | | — | | | (319,756,342) | | | — | | | (319,759,540) |
Net income |
| — | |
| — | | — | | | — | |
| — | |
| 3,112,761 | |
| 3,112,761 |
Balance - March 31, 2021 (unaudited) |
| 2,524,046 | | $ | 252 | | 8,625,000 | | $ | 863 | | $ | 1,888,023 | | $ | 3,110,869 | | $ | 5,000,007 |
The shares of the Company’s common stock, prior to the Business Combination (as defined in Note 1) have been retroactively restated to reflect the exchange ratio of approximately 373.47:1 (“Exchange Ratio”) established in the Business Combination.
3
FOR THE THREE MONTHS ENDED March 31, 2021
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | 24,938,224 | $ | (204,504,328) | |||||||
Adjustments to reconcile net income to net cash flows from operating activities: | |||||||||||
Credit (benefit) loss | (21,030) | 85,502 | |||||||||
Investment earnings in joint venture | (318,299) | (245,808) | |||||||||
Depreciation expense | 50,565 | 93,942 | |||||||||
Loss (gain) on disposal of property and equipment | 20,000 | (56,543) | |||||||||
Amortization of intangible assets | 86,782 | — | |||||||||
Amortization of deferred financing costs | 314,082 | 120,988 | |||||||||
Amortization of discount on convertible notes | 488,215 | — | |||||||||
Amortization of discount on private investor debt | 55,719 | — | |||||||||
Stock compensation expense | 1,509,965 | 4,499,156 | |||||||||
Amortization of operating lease right-of-use assets | 414,580 | 204,138 | |||||||||
Change in fair value of contingent earnout liability | (26,439,827) | 203,418,892 | |||||||||
Change in fair value of warrant liabilities | 145,242 | 2,723,333 | |||||||||
Change in fair value of equity incentive plan | (85,125) | 922,263 | |||||||||
Change in fair value of contingent consideration | (875,000) | — | |||||||||
Deferred tax asset | (1,256,596) | (2,021,265) | |||||||||
Net change in operating assets and liabilities: | |||||||||||
Accounts receivable | 897,513 | 197,768 | |||||||||
Related party receivable | 10,682 | 1,251,423 | |||||||||
Inventories | 4,871,665 | 30,062,060 | |||||||||
Lot purchase agreement deposits | (2,665,270) | (1,787,241) | |||||||||
Prepaid expenses and other assets | (1,042,911) | (10,027) | |||||||||
Accounts payable | (18,835,126) | (11,443,196) | |||||||||
Operating lease liabilities | (264,128) | (204,138) | |||||||||
Income tax payable | 93,084 | — | |||||||||
Due to related parties | — | 59,825 | |||||||||
Other accrued expenses and liabilities | 9,411 | (314,908) | |||||||||
Net cash flows (used in) provided by operating activities | (17,897,583) | 23,051,836 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | (28,618) | (59,229) | |||||||||
Proceeds from the sale of property and equipment | — | 66,100 | |||||||||
Payments on business acquisitions | (12,742,895) | — | |||||||||
Proceeds from notes receivable | 19,018 | — | |||||||||
Net cash flows (used in) provided by investing activities | (12,752,495) | 6,871 | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from homebuilding debt | 24,000,000 | 40,000,000 | |||||||||
Repayments of homebuilding debt | (33,739,810) | (40,579,214) | |||||||||
Proceeds from sale of real estate not owned | 14,163,558 | — | |||||||||
Repayments on private investor loans | (1,335,000) | — | |||||||||
Payment of deferred financing costs | (463,665) | (469,585) |
| | | |
Cash Flows from Operating Activities: |
|
| |
Net income | | $ | 3,112,761 |
Adjustments to reconcile net income to net cash used in operating activities: | |
| |
Change in fair value of derivative warrant liabilities | | | (4,248,830) |
Financing costs - derivative warrant liabilities | | | 449,070 |
Income from investments held in Trust Account | | | (3,630) |
| | | |
Changes in operating assets and liabilities: | |
|
|
Prepaid expenses | | | (408,838) |
Accounts payable | |
| 298,332 |
Accrued expenses | | | 313,750 |
Franchise tax payable | | | 1,183 |
Net cash used in operating activities | |
| (486,202) |
| | | |
Cash Flows from Investing Activities | | | |
Cash deposited in Trust Account | | | (345,000,000) |
Net cash used in investing activities | | | (345,000,000) |
| |
|
|
Cash Flows from Financing Activities: | |
|
|
Repayment of note payable | |
| (130,000) |
Proceeds received from initial public offering, gross | | | 345,000,000 |
Proceeds received from private placement | | | 8,900,000 |
Offering costs paid | |
| (7,118,422) |
Net cash provided by financing activities | |
| 346,651,578 |
| |
|
|
Net increase in cash | |
| 1,165,376 |
| | | |
Cash - beginning of the period | |
| 16,110 |
Cash - end of the period | | $ | 1,181,486 |
| |
| |
Supplemental disclosure of noncash activities: | |
| |
Offering costs included in accrued expenses | | $ | 95,000 |
Deferred underwriting commissions | | $ | 12,075,000 |
Offering costs charged to additional paid-in capital in connection with the initial public offering | | $ | 588,562 |
Initial value of Class A common stock subject to possible redemption | | $ | 316,157,260 |
Change in value of Class A common stock subject to possible redemption | | $ | 3,602,280 |
Proceeds from exercise of employee stock options | 3,671 | — | |||||||||
Proceeds from other affiliate debt | — | 136,773 | |||||||||
Distributions and net transfer to shareholders and other affiliates | — | (17,896,302) | |||||||||
Proceeds from convertible note, net of transaction costs | — | 71,500,000 | |||||||||
Proceeds from PIPE investment and lock up | — | 4,720,427 | |||||||||
Proceeds from Business Combination, net of SPAC transaction costs | — | 30,336,068 | |||||||||
Payment of transaction costs | — | (12,134,293) | |||||||||
Net cash flows provided by financing activities | 2,628,754 | 75,613,874 | |||||||||
Net change in cash and cash equivalents | (28,021,324) | 98,672,581 | |||||||||
Cash and cash equivalents, beginning of year | 56,671,471 | 12,238,835 | |||||||||
Cash and cash equivalents, end of year | $ | 28,650,147 | $ | 110,911,416 | |||||||
Supplemental cash flow information: | |||||||||||
Cash paid for interest | $ | 5,677,165 | $ | 2,315,023 | |||||||
Non-cash investing and financing activities: | |||||||||||
Termination of existing lease | 81,666 | — | |||||||||
Noncash exercise of employee stock options | 2,756 | — | |||||||||
Settlement of RSUs | 1 | — | |||||||||
Promissory note issued for sale of property and equipment | — | 665,020 | |||||||||
Settlement of co-obligor debt to affiliates | — | 8,340,545 | |||||||||
Release of guarantor from GSH to shareholder | — | 2,841,034 | |||||||||
Noncash distribution to owners of Other Affiliates | — | 12,671,122 | |||||||||
Earnest money receivable from Other Affiliates | — | 2,521,626 | |||||||||
Recognition of previously capitalized deferred transaction costs | — | 2,932,426 | |||||||||
Modification to existing lease | — | 40,078 | |||||||||
Recognition of derivative liability related to earnout | — | 242,211,404 | |||||||||
Recognition of derivative liability related to equity incentive plan | — | 1,189,685 | |||||||||
Recognition of warrant liability upon Business Combination | — | 1,531,000 | |||||||||
Forfeiture of private placement warrants upon Business Combination | — | (890,001) | |||||||||
Issuance of common stock upon the reverse recapitalization | — | 39,933,707 | |||||||||
Recognition of deferred tax asset upon Business Combination | — | 1,870,310 | |||||||||
Recognition of income tax payable upon Business Combination | — | 701,871 | |||||||||
Recognition of assumed assets and liabilities upon Business Combination, net | — | 3,588,110 | |||||||||
Total non-cash financing activities | $ | 84,423 | $ | 320,147,937 |
4
DiamondHead Holdings Corp. (the
As of March 31, 2021, the Company had not commenced any operations. All activity for the period from January 1, 2021 to March 31, 2021 relatesLegacy UHG prior to the Company’s formationBusiness Combination; (ii) the combined results of UHG and DHHC following the Initial Public Offering (the “Initial Public Offering”)Closing; (iii) the assets and since the closingliabilities of the Initial Public Offering (as described below), the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination,UHG and DHHC, and Legacy UHG at the earliest. The Company generates non-operating income in the form of interest income on investments held in trust from the proceeds of its Initial Public Offeringtheir historical cost; and Private Placement described below.
The Company’s sponsor is DHP SPAC-II Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for(iv) the Company’s Initial Public Offering was declared effective on January 25, 2021. On January 28, 2021, the Company consummated its Initial Public Offering of 34,500,000 units (the “Units” and, with respectequity structure for all periods presented.
Simultaneouslyaccordance with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 5,933,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to our Sponsor and to certain qualified institutional buyers or institutional accredited investors, including certain funds and accounts managed by subsidiaries of BlackRock, Inc. and Millennium Management LLC (each an “Anchor Investor”), generating proceeds of $8.9 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”), locatedgenerally accepted accounting principles in the United States and invested onlyof America (“GAAP”). The Statements of Changes in U.S. government securities, withinStockholders’ Equity were adjusted for the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
The Company’s management has broad discretion with respect to the specificretroactive application of the net proceedsreverse recapitalization using the Exchange Ratio. After March 30, 2023, no carve-out amounts were included in UHG’s financial statements.
5
The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”)expenses directly associated with the opportunity to redeem all oractivity of Legacy UHG are included in these financial statements. In addition, a portion of their Public Shares uponLegacy UHG’s corporate expenses including stock-based compensation were allocated to Legacy UHG based on direct usage when identifiable or, when not directly identifiable, on the completionbasis of a Business Combination either (i)proportional cost of sales or employee headcount, as applicable. The corporate expense allocations include the cost of corporate functions and resources provided by or administered by GSH including, predominately, costs associated with executive management, finance, accounting, legal, human resources, and costs associated with operating GSH’s office buildings. The corporate expense allocation requires significant judgment and management believes the basis on which the corporate expenses have been allocated reasonably reflects the utilization of services provided to Legacy UHG during the periods presented.
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have 24 months from the closing of the Initial Public Offering, or January 28, 2023, to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
6
The Sponsor agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its affiliates acquire Public Shares after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriter agreed to waive its right to its deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets. This liability will not apply with respect to any claims (i) by a third party who executed a waiver of any and all rights to seek access to the trust account or (ii) under our indemnity of the underwriter of this offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
As of March 31, 2021, the Company had approximately $1.2 million in cash and working capital of approximately $746,000.
The Company’s liquidity needs to date have been satisfied through a payment of $25,000 from the Sponsor to pay for certain offering costs in exchange for issuance of the Founder Shares (as defined in Note 5), the loan under the Note of $130,000 (as defined in Note 5), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on February 1, 2021. In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Company’s officers, directors and initial stockholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 5). As of March 31, 2021, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a targetand cash flows would have been had it operated as an independent company during all the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
7
Note 2—Basis of Presentation and2 - Summary of Significant Accounting Policies
Basis of Presentation
significant accounting policies
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final prospectus filed by the Company with the SEC on February 3, 2021 and January 27, 2021, respectively.
In April 2021, the Company identified an error in its accounting treatment for both its public and private warrants (Warrants) as presented in its audited balance sheet as
Contents
This may make comparison of the Company’s unaudited condensed financial statements with another public company thatwhich is neither an emerging growth company nornot an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
8
Use of Estimates
– The preparation of unaudited condensed financial statementsthe accompanying Condensed Consolidated Financial Statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, andthe disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management continually evaluates the estimates used to prepare the Condensed Consolidated Financial Statements and updates those estimates as necessary. In general, UHG’s estimates are based on historical experience, on information from third party professionals, and other various assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ materially from those estimates made by management.
Asset Group | Estimated Useful Lives | ||||
Tradenames | 7 years | ||||
Architectural Designs | 3 to 7 years | ||||
Non-compete Agreement | 2 years |
Cashsell and Cash Equivalents
construct homes.
Investments Held in Trust Account
where applicable:
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Revenues (1): | |||||||||||
South Carolina | $ | 97,862,065 | $ | 94,826,702 | |||||||
Other | 3,294,479 | 245,808 | |||||||||
Total segment revenues | 101,156,544 | 95,072,510 | |||||||||
Reconciling items from equity method investments | (318,299) | (245,808) | |||||||||
Consolidated revenues | $ | 100,838,245 | $ | 94,826,702 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Income before taxes: | |||||||||||
South Carolina | $ | 7,318,965 | $ | 4,741,164 | |||||||
Other | (109,738) | 245,808 | |||||||||
Total segment income before taxes | 7,209,227 | 4,986,972 | |||||||||
Corporate reconciling items (2): | |||||||||||
Unallocated corporate overhead | (4,163,527) | — | |||||||||
Stock-based compensation expense | (1,509,964) | (4,448,077) | |||||||||
Corporate investment income | 87,640 | — | |||||||||
Corporate interest expense | (4,228,374) | — | |||||||||
Change in fair value of derivative liabilities | 26,379,710 | (207,064,488) | |||||||||
Consolidated income (loss) before taxes | $ | 23,774,712 | $ | (206,525,593) |
As of March 31, 2024 | As of December 31, 2023 | As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||||||
Assets | Goodwill(3) | ||||||||||||||||||||||
South Carolina | $ | 248,242,574 | $ | 255,633,338 | $ | 8,779,676 | $ | 5,206,636 | |||||||||||||||
Other | 19,441,186 | 16,985,564 | 500,000 | 500,000 | |||||||||||||||||||
Total segment assets | 267,683,760 | 272,618,902 | 9,279,676 | 5,706,636 | |||||||||||||||||||
Corporate reconciling items (2): | |||||||||||||||||||||||
Cash and cash equivalents | 6,580,611 | 13,958,645 | — | — | |||||||||||||||||||
Deferred tax asset | 4,451,690 | 3,568,601 | — | — | |||||||||||||||||||
Operating lease right-of-use assets | 4,623,058 | 4,907,617 | — | — | |||||||||||||||||||
Capitalized interest (4) | 1,193,288 | 1,933,447 | — | — | |||||||||||||||||||
Prepaid expenses and other assets | 2,570,973 | 1,547,267 | — | — | |||||||||||||||||||
Other | 110,596 | 112,849 | — | — | |||||||||||||||||||
Consolidated assets | $ | 287,213,976 | $ | 298,647,328 | $ | 9,279,676 | $ | 5,706,636 |
Concentrationvaluation of Credit Risk
Financial instruments that potentially subjectassets and liabilities acquired.
Purchase Price Allocation | ||||||||
Inventories | $ | 10,478,116 | ||||||
Lot purchase agreement deposits | 3,055,500 | |||||||
Property and equipment, net | 20,000 | |||||||
Intangible assets | 442,000 | |||||||
Goodwill | 3,573,040 | |||||||
Liabilities | (4,825,761) | |||||||
Total purchase price | $ | 12,742,895 |
Purchase Price Allocation | ||||||||
Cash acquired | $ | 543,421 | ||||||
Inventories | 23,672,172 | |||||||
Lot purchase agreement deposits | 912,220 | |||||||
Other assets | 58,681 | |||||||
Property and equipment, net | 703,872 | |||||||
Intangible assets | 1,380,000 | |||||||
Goodwill | 5,206,636 | |||||||
Liabilities | (5,992,953) | |||||||
Total purchase price | $ | 26,484,049 |
Three Months Ended March 31, | |||||||||||
Unaudited Pro Forma | 2024 | 2023 | |||||||||
Total Revenue | $ | 102,137,350 | $ | 113,936,596 | |||||||
Net Income (Loss) | $ | 25,598,960 | $ | (203,761,722) |
Fair Value of Financial Instruments
Fair value is defined as the pricethree-level hierarchy that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuringthe valuation process. Categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value.
value measurement. The hierarchy givesis based on the highest priority to unadjusted quotedobservability and objectivity of the pricing inputs as follows:
9
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
As of March 31, 2021 and December 31, 2020, the carrying values of cash, prepaid expenses, accounts payable, accrued expenses, and franchise tax payable approximate their fair values dueDue to the short-term nature of the instruments.
Derivative warrant liabilities
The Company does not use derivativeCompany’s Cash and cash equivalents, Accounts receivable, and Accounts payable, the carrying amounts of these instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stockapproximate their fair value. Lot purchase warrants, to determine if such instrumentsagreement deposits are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the endagreed-upon contract value, which approximates fair value. The interest rates on the Homebuilding debt and other affiliate debt vary and are the greater of each reporting period.
The 8,625,000 warrants issuedeither a reference rate plus an applicable margin, or the base rate plus the aforementioned applicable margin. Refer to Note 8 - Homebuilding debt and other affiliate debt for additional detail on the determination of these instruments’ interest rate. As the reference rate of the Homebuilding debt and other affiliate debt at any point in connection withtime is reflective of the Initial Public Offering (the “Public Warrants”) and the 5,933,333 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly,current interest rate environment the Company recognizesoperates in, the warrantcarrying amount of these instruments as liabilitiesapproximates their fair value.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of the Initial Public Offering on January 28, 2021. For the three months ended March 31, 2021, of the total offering costs of the Initial Public Offering, approximately $449,000 is included in financing cost
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at March 31, 2021, 31,975,954 shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s audited condensed balance sheets.
10
Income Taxes
The Company’s taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative expenses are generally considered start-up costs and are not currently deductible. For the three months ended March 31, 2021, income tax expense for the period was deemed to be immaterial.
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of March 31, 2021, the Company had deferred tax assets of approximately $654,000 with a full valuation allowance against them. As of December 31, 2020, the deferred tax asset were deemed immaterial.
FASB ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the unaudited condensed financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. The Company’s currently taxable income primarily consists of interest and dividends earned and unrealized gains on investments held in the Trust Account. NaN amounts were accrued for the payment of interest and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income Per Share of Common Stock
Net income per common stock is computed by dividing net income by the weighted-average number of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 14,558,333 shares in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events.
The Company’s unaudited condensed statements of operations include a presentation of income per common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share for the three months ended March 31, 2021, basic and diluted for Class A common stock, was calculated by dividing the interest income earned on investments held in the Trust Account of approximately $4,000 less the portion available to pay taxes by the weighted average number of 31,621,444 Class A common stock outstanding for the period. Net income per share basic and diluted for Class B common stock, was calculated by dividing the net income (approximately $3.1 million less income attributable to Class A common stock in the amount of $0, resulting in income of approximately $3.1 million), by the weighted average number of 10,302,489 Class B common stock outstanding for the period.
At March 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings. As a result, diluted income per share is the same as basic income per share for the periods presented.
11
The following table reflects the calculation of basic and diluted net income per common stock:
| | | |
|
| FOR THE THREE | |
| | MONTHS ENDED | |
| | MARCH 31, 2021 | |
Class A Common stock subject to possible redemption | | | |
Numerator: Earnings allocable to Common stock subject to possible redemption | | | |
Income from investments held in Trust Account | | $ | 3,630 |
Less: Company's portion available to be withdrawn to pay taxes | | | (3,364) |
Net income attributable | | $ | 266 |
Denominator: Weighted average Class A common stock subject to possible redemption | | | |
Basic and diluted weighted average shares outstanding | | | 31,621,444 |
Basic and diluted net income per share | | $ | 0.00 |
| | | |
Non-Redeemable Common Stock | | | |
Numerator: Net income minus Net Earnings | | | |
Net income | | $ | 3,112,761 |
Net income allocable to Class A common stock subject to possible redemption | | | — |
Non-redeemable net income | | $ | 3,112,761 |
Denominator: weighted average Non-redeemable common stock | | | |
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | | | 10,302,489 |
Basic and diluted net income per share, Non-redeemable common stock | | $ | 0.30 |
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 3—Initial Public Offering
On January 28, 2021, the Company consummated its Initial Public Offering of 34,500,000 Units, including 4,500,000 Over-Allotment Units, at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.6 million, of which approximately $12.1 million in deferred underwriting commissions.
Each Unit consists of 1 share of Class A common stock and one-fourth of one redeemable warrant (“Public Warrant”). Each whole Public Warrant will entitle the holder to purchase 1 share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
12
Note 4 —Private Placement
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 5,933,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor and the Anchor Investor, generating proceeds of $8.9 million.
Each Private Placement Warrant will be exercisable to purchase 1 share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Placement Warrants.
Note 5—Related Party Transactions
Founder Shares
On October 21, 2020, the Sponsor paid $25,000 on behalf of the Company to cover certain offering costs in exchange for issuance of 8,625,000 shares of the Company’s Class B common stock (the “Founder Shares”). Additionally, upon consummation of the Business Combination, the Sponsor has agreed to transfer an aggregate of 1,250,625 Founder Shares to the Anchor Investors for the same price originally paid for such shares. The Founder Shares will automatically convert into Class A common stock upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments, as described in Note 7.
The Founder Shares included an aggregate of up 1,125,000 shares subject to forfeiture to the extent that the underwriter’s option to purchase additional units was not exercised in full, so that Sponsor would own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public. On January 28, 2021, the underwriters fully exercised the over-allotment option; thus, these 1,125,000 Founder Shares were no longer subject to forfeiture.
The Sponsor and the Anchor Investors agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note—Related Party
On October 21, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering (the "Promissory Note"). The Promissory Note was non-interest bearing and due upon the completion of the Initial Public Offering. As of March 31, 2021, the Company borrowed $130,000 under the Note. On February 1, 2021, the Company repaid the Note in full.
13
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
Administrative Support Agreement
The Company agreed, commencing on the effective date of the Initial Public Offering through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial and administrative support. The company has waived accruing these fees as of March 31, 2021.
Note 6—Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares) were entitled to registration rights pursuant to a registration rights agreement signed upon the effective date of Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities were entitled to make up to 3 demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option from the date of Initial Public Offering to purchase up to 4,500,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. On January 28, 2021, the underwriters fully exercised the over-allotment option.
The underwriter was entitled to a cash underwriting discount of $0.20 per Unit, or $6.9 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, the underwriter was entitled to a deferred fee of $0.35 per Unit, or approximately $12.1 million in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Consulting Agreement
The Company entered into a consulting agreement, pursuant to which the consultant will provide the Company, among other services, assistance in technical diligence of a potential target for a Business Combination. The Company expects to pay the consultant approximately $2.6 million in connection with the consummation of a Business Combination.
14
Note 7—Derivative warrant liabilities
As of March 31, 2021, the Company had 8,625,000 Public Warrants and 5,933,333 Private Warrants outstanding.
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its reasonable best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemptions of Warrants When the Price Per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the Public Warrants:
if, and only if, closing price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending 3 business days before the Company sends the notice of redemption to each warrant holder.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
15
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00 —Once the warrants become exercisable, the Company may redeem the outstanding warrants:
If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at a Newly Issued Price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to our initial stockholders or their respective affiliates, without taking into account any Founder Shares held by them, as applicable, prior to such issuance), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Newly Issued Price.
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees (except as set forth under “Redemption of Warrants when the Price per Share of Class A Common Stock Equals or Exceeds $10.00”). If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
16
Note 8—Stockholders’ Equity
Preferred Stock — The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 300,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to 1 vote for each share. At March 31, 2021, there were 2,524,046 shares of Class A common stock issued and outstanding, excluding 31,975,954 shares of Class A common stock subject to possible redemption.
Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to 1 vote for each share. As of March 31, 2021, there were 8,625,000 shares of Class B common stock issued and outstanding. Of the 8,625,000 shares of Class B common stock outstanding, up to 1,125,000 shares were subject to forfeiture to the extent that the underwriter’s option to purchase additional units was not exercised in full, so that the Sponsor would own 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On March 31, 2021, the underwriters fully exercised the over-allotment option; thus, these 1,125,000 Founder Shares were no longer subject to forfeiture.
Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Note 9—Fair Value Measurements
The following tables presentspresent information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level withinas of March 31, 2024 and December 31, 2023 and indicates the fair value hierarchy:
| | | | | | | | | | | | |
| | Fair Value Measured as of March 31, 2021 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets | | | | | | | | | | | | |
Investments held in Trust Account |
| $ | 345,003,630 | | $ | — |
| $ | — | | $ | 345,003,630 |
Liabilities: | | | | | | | | | | | | |
Derivative public warrant liabilities (Restated) | | $ | 5,175,000 | | $ | — | | $ | — | | $ | 5,175,000 |
Derivative private warrant liabilities (Restated) | | $ | — | | $ | — | | $ | 3,738,000 | | $ | 3,738,000 |
Total fair value | | $ | 350,178,630 | | $ | — | | $ | 3,738,000 | | $ | 353,916,630 |
17
Fair Value Measurements as of March 31, 2024 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Contingent earnout liability | $ | — | $ | — | $ | 89,126,935 | $ | 89,126,935 | |||||||||||||||
Derivative private placement warrant liability | — | — | 3,322,663 | 3,322,663 | |||||||||||||||||||
Derivative public warrant liability | 8,452,500 | — | — | 8,452,500 | |||||||||||||||||||
Derivative stock option liability | — | — | 326,379 | 326,379 | |||||||||||||||||||
Total derivative liability | 8,452,500 | — | 92,775,977 | 101,228,477 | |||||||||||||||||||
Contingent consideration | — | — | 1,013,000 | 1,013,000 | |||||||||||||||||||
Total fair value | $ | 8,452,500 | $ | — | $ | 93,788,977 | $ | 102,241,477 |
Fair Value Measurements as of December 31, 2023 Level 1 Level 2 Level 3 Total Contingent earnout liability $ — $ — $ 115,566,762 $ 115,566,762 Derivative private placement warrant liability — — 3,292,996 3,292,996 Derivative public warrant liability 8,336,925 — — 8,336,925 Derivative stock option liability — — 414,260 414,260 Total derivative liability 8,336,925 — 119,274,018 127,610,943 Contingent consideration — — 1,888,000 1,888,000 Total fair value $ 8,336,925 $ — $ 121,162,018 $ 129,498,943
Contingent earnout liability | Derivative private placement warrant liability | Derivative stock option liability | Contingent consideration | ||||||||||||||||||||
Liability at January 1, 2024 | $ | 115,566,762 | $ | 3,292,996 | $ | 414,260 | $ | 1,888,000 | |||||||||||||||
Exercise of liability awards | — | — | (2,756) | — | |||||||||||||||||||
Change in fair value | (26,439,827) | 29,667 | (85,125) | (875,000) | |||||||||||||||||||
Liability at March 31, 2024 | $ | 89,126,935 | $ | 3,322,663 | $ | 326,379 | $ | 1,013,000 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Capitalized interest at January 1: | $ | 3,026,083 | $ | 1,250,460 | |||||||
Interest incurred | 5,169,779 | 2,237,900 | |||||||||
Interest expensed: | |||||||||||
Included in cost of sales | (3,513,019) | (2,386,832) | |||||||||
Directly to interest expense | (2,142,192) | — | |||||||||
Capitalized interest at March 31: | $ | 2,540,651 | $ | 1,101,528 |
Asset Group | March 31, 2024 | December 31, 2023 | ||||||||||||
Buildings | $ | 170,867 | $ | 170,867 | ||||||||||
Furniture and fixtures | 507,972 | 507,972 | ||||||||||||
Land | 63,000 | 63,000 | ||||||||||||
Leasehold improvements | 96,667 | 81,605 | ||||||||||||
Machinery and equipment | 146,822 | 146,822 | ||||||||||||
Office equipment | 50,337 | 36,780 | ||||||||||||
Vehicles | 563,455 | 563,455 | ||||||||||||
Total Property and equipment | $ | 1,599,120 | $ | 1,570,501 | ||||||||||
Less: Accumulated depreciation | (547,106) | (496,540) | ||||||||||||
Property and equipment, net | $ | 1,052,014 | $ | 1,073,961 |
March 31, 2024 | ||||||||||||||||||||||||||||||||
Weighted average interest rate | Homebuilding Debt - Wells Fargo Syndication | Homebuilding Debt - Other | Private Investor Debt | Total | ||||||||||||||||||||||||||||
Wells Fargo Bank | 8.57 | % | $ | 18,740,639 | $ | — | $ | — | $ | 18,740,639 | ||||||||||||||||||||||
Regions Bank | 8.57 | % | 15,857,465 | — | — | 15,857,465 | ||||||||||||||||||||||||||
Flagstar Bank | 8.57 | % | 14,415,877 | — | — | 14,415,877 | ||||||||||||||||||||||||||
United Bank | 8.57 | % | 11,532,701 | — | — | 11,532,701 | ||||||||||||||||||||||||||
Third Coast Bank | 8.57 | % | 8,649,526 | — | — | 8,649,526 | ||||||||||||||||||||||||||
Other Notes Payable | — | 2,216,853 | 2,569,327 | 4,786,180 | ||||||||||||||||||||||||||||
Total debt on contracts | $ | 69,196,208 | $ | 2,216,853 | $ | 2,569,327 | $ | 73,982,388 |
December 31, 2023 | |||||||||||||||||||||||
Weighted average interest rate | Homebuilding Debt - Wells Fargo Syndication | Private Investor Debt | Total | ||||||||||||||||||||
Wells Fargo Bank | 8.13 | % | $ | 20,907,306 | $ | — | $ | 20,907,306 | |||||||||||||||
Regions Bank | 8.13 | % | 17,690,798 | — | 17,690,798 | ||||||||||||||||||
Flagstar Bank | 8.13 | % | 16,082,543 | — | 16,082,543 | ||||||||||||||||||
United Bank | 8.13 | % | 12,866,035 | — | 12,866,035 | ||||||||||||||||||
Third Coast Bank | 8.13 | % | 9,649,526 | — | 9,649,526 | ||||||||||||||||||
Other Notes Payable | — | 3,255,221 | 3,255,221 | ||||||||||||||||||||
Total debt on contracts | $ | 77,196,208 | $ | 3,255,221 | $ | 80,451,429 |
Level 1 instruments include investmentsthe maturity date was extended to August 10, 2026. In addition, Wells Fargo Bank and Regions Bank increased their participation in mutual funds invested in government securities.the Syndicated Line, three lenders exited the Syndicated Line, and three lenders joined as new participants of the Syndicated Line. An additional amendment (“Third Amendment”) was entered into on December 22, 2023 (“Third Amendment Date”) and amended two financial covenants that are described below. On January 26, 2024 (“Fourth Amendment Date”), the Company entered into a new amendment (“Fourth Amendment”). As a result of this amendment the Company established a process for the joinder of additional subsidiary borrowers of the Company, and Rosewood was joined, jointly and severally with the Company and GSH as a borrower to the Syndicated Line. No other significant terms of the arrangements were changed other than those relating to the financial covenants and interest rate terms described below.
The fair valueunused amount of the Public Warrants issuedSyndicated Line. The fee is computed on a daily basis and paid quarterly in arrears.
Three Months ended March 31, 2023 | |||||||||||||||||
Land Development Affiliates | Other Operating Affiliates | Total | |||||||||||||||
Financing cash flows: | |||||||||||||||||
Land development expense | $ | (384,349) | $ | — | $ | (384,349) | |||||||||||
Other activities | (225,392) | (422,342) | (647,734) | ||||||||||||||
Total financing cash flows | $ | (609,741) | $ | (422,342) | $ | (1,032,083) | |||||||||||
Non-cash activities | |||||||||||||||||
Settlement of co-obligor debt to other affiliates | $ | 8,340,545 | $ | — | $ | 8,340,545 | |||||||||||
Release of guarantor from GSH to shareholder | 2,841,034 | — | 2,841,034 | ||||||||||||||
Credit for earnest money deposits | 2,521,626 | — | 2,521,626 | ||||||||||||||
Total non-cash activity | $ | 13,703,205 | $ | — | $ | 13,703,205 |
March 31, 2024 | December 31, 2023 | ||||||||||
Lot purchase agreement deposits | $ | 38,736,582 | $ | 33,015,812 | |||||||
Remaining purchase price | 286,472,386 | 231,333,171 | |||||||||
Total contract value | $ | 325,208,968 | $ | 264,348,983 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Warranty reserves at beginning of the period | $ | 1,301,796 | $ | 1,371,412 | |||||||
Reserves provided | 271,276 | 242,720 | |||||||||
Payments for warranty costs and other | (210,220) | (204,713) | |||||||||
Warranty reserves at end of the period | $ | 1,362,852 | $ | 1,409,419 |
up to five years, some of which include options to extend on a month-to-month basis, and some of which include options to terminate the lease. These options are excluded from the calculation of the ROU asset and lease liability until it is reasonably certain that the option will be exercised. The Company recognized an operating lease expense of $428,369 and $201,439 within Selling, general, and administrative expense on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023, respectively.
Lease Payment | |||||
2024 | $ | 1,091,329 | |||
2025 | 1,513,016 | ||||
2026 | 1,438,929 | ||||
2027 | 1,437,794 | ||||
2028 and thereafter | 1,105,286 | ||||
Total undiscounted operating lease liabilities | $ | 6,586,354 | |||
Interest on operating lease liabilities | (1,237,321) | ||||
Total present value of operating lease liabilities | $ | 5,349,033 |
March 31, 2024 | December 31, 2023 | ||||||||||
Beginning Balance - Par | $ | 80,000,000 | $ | 80,000,000 | |||||||
Unamortized Discount | (11,473,005) | (11,961,220) | |||||||||
Carrying Value | $ | 68,526,995 | $ | 68,038,780 |
March 31, 2024 | December 31, 2023 | ||||||||||
Risk-free interest rate | 4.39 | % | 3.97 | % | |||||||
Expected volatility | 48 | % | 40 | % | |||||||
Expected dividend yield | — | % | — | % |
Stock options | Weighted-Average Per share Exercise price | ||||||||||
Outstanding, December 31, 2023 | 3,886,248 | $ | 9.72 | ||||||||
Granted | 1,756,000 | 3.56 | |||||||||
Exercised | (747) | 2.81 | |||||||||
Forfeited | (56,534) | 6.48 | |||||||||
Outstanding, March 31, 2024 | 5,584,967 | $ | 8.90 | ||||||||
Options exercisable at March 31, 2024 | 371,749 | $ | 2.81 |
recognized over a weighted-average period of 3.65 years.
Units Outstanding | Weighted-Average Grant Date Fair Value Per Unit | ||||||||||
Outstanding, December 31, 2023 | 64,593 | $ | 6.59 | ||||||||
Granted | 65,700 | 7.02 | |||||||||
Exercised | (14,000) | 7.16 | |||||||||
Forfeited | (6,033) | 6.74 | |||||||||
Outstanding, March 31, 2024 | 110,260 | $ | 6.76 |
Units Outstanding | Weighted-Average Grant Date Fair Value Per Unit | ||||||||||
Outstanding, December 31, 2023 | — | $ | — | ||||||||
Granted | 478,000 | 3.45 | |||||||||
Outstanding, March 31, 2024 | 478,000 | $ | 3.45 |
used in the valuation of the Earnout Shares.
| | | | | |
| | As of January 12, 2021 |
| As of March 31, 2021 | |
Exercise price |
| 11.50 | | 11.50 | |
Stock Price | | 9.79 | | 9.76 | |
Option term (in years) | | 5.00 | | 5.00 | |
Volatility | | 19 | % | 14 | % |
Risk-free interest rate | | 0.7 | % | 1.0 | % |
Triggering Event I | Triggering Event II | Triggering Event III | |||||||||||||||
Derivative liability | 8,060,923 | 8,060,923 | 5,373,948 | ||||||||||||||
Stock compensation | 146,469 | 146,469 | 97,647 | ||||||||||||||
Total Earnout Shares | 8,207,392 | 8,207,392 | 5,471,595 |
Inputs | March 31, 2024 | December 31, 2023 | |||||||||||||||
Current stock price | $ | 6.99 | $ | 8.43 | |||||||||||||
Stock price targets | $12.50, $15.00, $17.50 | $12.50, $15.00, $17.50 | |||||||||||||||
Expected life (in years) | 4.00 | 4.25 | |||||||||||||||
Earnout period (in years) | 4.00 | 4.25 | |||||||||||||||
Risk-free interest rate | 4.30 | % | 4.00 | % | |||||||||||||
Expected volatility | 48 | % | 40 | % | |||||||||||||
Expected dividend yield | — | % | — | % |
Inputs | March 31, 2024 | December 31, 2023 | |||||||||
Current stock price | $ | 6.99 | $ | 8.43 | |||||||
Exercise price | $ | 11.50 | $ | 11.50 | |||||||
Expected life (in years) | 4.00 | 4.25 | |||||||||
Risk-free interest rate | 4.30 | % | 4.00 | % | |||||||
Expected volatility | 48 | % | 40 | % | |||||||
Expected dividend yield | — | — |
a derivative liability and marked to market at each reporting period end. The change in fair value of the public warrant liability for the three months ended March 31, 2024 and March 31, 2023 resulted in a loss of $0.1 million and gain of $0.2 million, respectively. These changes are included in Change in fair value of derivative liabilities on the Condensed Consolidated Statement of Operations.
| | | |
Derivative warrant liabilities at January 1, 2021 |
| $ | — |
Issuance of Public Warrants (level 1) | |
| 7,762,500 |
Issuance of Private Warrants (level 3) | | | 5,399,330 |
Change in fair value of derivative warrant liabilities | | | (4,248,830) |
Derivative warrant liabilities at March 31, 2021 | | $ | 8,913,000 |
17 - Income taxes
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Net income (loss) | $ | 24,938,224 | $ | (204,504,328) | |||||||
Basic income (loss) available to common shareholders | $ | 24,938,224 | $ | (204,504,328) | |||||||
Effect of dilutive securities: | |||||||||||
Add back: | |||||||||||
Interest on Convertible note, net of tax | 2,816,097 | — | |||||||||
Change in fair value of stock options - liability classified, net of tax | (56,693) | — | |||||||||
Diluted income available to common shareholders | $ | 27,697,628 | $ | (204,504,328) | |||||||
Weighted-average number of common shares outstanding - basic | 48,362,589 | 37,575,074 | |||||||||
Effect of dilutive securities: | |||||||||||
Convertible notes | 14,336,918 | — | |||||||||
Stock options - liability classified | 41,598 | — | |||||||||
Stock warrants | 342,492 | — | |||||||||
Restricted stock units | 27,807 | — | |||||||||
Weighted-average number of common shares outstanding - diluted | 63,111,404 | 37,575,074 | |||||||||
Net earnings per common share: | |||||||||||
Basic | $ | 0.52 | $ | (5.44) | |||||||
Diluted | $ | 0.44 | $ | (5.44) |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Stock warrants | — | 1,867,368 | |||||||||
Private placement warrants | 2,966,663 | 2,966,663 | |||||||||
Public warrants | 8,625,000 | 8,625,000 | |||||||||
Stock options - equity classified | 4,722,073 | 899,295 | |||||||||
Convertible notes | — | 8,000,000 | |||||||||
Total anti-dilutive features | 16,313,736 | 22,358,326 |
18
Operation
Cautionary See “Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements withinStatements.”
Overview
We are a blank check company incorporated in Delaware on October 7, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Initial Business Combination”). Our sponsor is DHP SPAC-II Sponsor LLC (“Sponsor”).
The registration statement for our Initial Public Offering was declared effective on January 25, 2021. On January 28, 2021, we consummated our Initial Public Offering of 34,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 4,500,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costsMarch 31, 2024 consists of approximately $19.6 million, of10,900 lots, which approximately $12.1 million in deferred underwriting commissions.
Simultaneously withincludes lots that are owned or controlled by Land Development Affiliates and which UHG expects to obtain the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 5,933,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to our Sponsor and to certain qualified institutional buyers or institutional accredited investors, including certain funds and accounts managed by subsidiaries of BlackRock, Inc. and Millennium Management LLC (each an “Anchor Investor”), generating proceeds of $8.9 million.
Upon the closing of the Initial Public Offering and the Private Placement, $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
19
If we are unable to complete a Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including thecontractual right to receive further liquidating distributions, if any), subjectacquire, in addition to applicable law,lots that UHG may acquire from third party lot option contracts.
Results of Operations
Our entire activity from January 1, 2021 through March 31, 2021, was in preparation for an Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination. We generate non-operating income in the form of investment income from our investments held in the Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
approximately $600,000. For the three months ended March 31, 2021, we2024 and 2023, UHG had income384 and 389 net new orders, and generated approximately $100.8 million and $94.8 million in revenue on 311 and 328 closings, respectively.
Liquidity and Capital Resources
As ofthe three months ended March 31, 2021, we had approximately $1.22023 to $100.8 million in cash and working capital of approximately $746,000.
Our liquidity needs to date have been satisfied through a payment of $25,000 from our Sponsor to pay for certain offering costs in exchange for issuance of the Founder Shares, the loan under the Note of $130,000, and the net proceeds from the consummation of the Private Placement not held in the Trust Account. We fully repaid the Note on February 1, 2021. In addition, in order to finance transaction costs in connection with an Initial Business Combination, our officers, directors and initial stockholders may, but are not obligated to, provide us Working Capital Loans. As ofthree months ended March 31, 2021, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
20
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe 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.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2021, 31,975,954 shares of Class A common stock subject to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.
Derivative warrant liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 8,625,000 warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the 5,933,333 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Public Warrants issued in connection with the Initial Public Offering have been measured at fair value using a Monte Carlo simulation model, and the Private Placement Warrants have been measured at fair value using a Black¬-Scholes model. As of March 31, 2021, the value of the Public Warrants were measured based on the trading price since being separately listed and traded.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to stockholders’ equity upon the completion of the Initial Public Offering.2024. For the three months ended March 31, 2021,2024, UHG generated net income of approximately $24.9 million, which included $26.4 million related to the change in fair value of derivative liabilities, gross profit of 16.0%, adjusted gross profit of 20.4%, and adjusted EBITDA margin of 7.2%, representing an increase of $229.4 million, a decrease of1.7%, an increase of 0.2%, and a decrease of 1.8%, respectively, from the three months ended March 31, 2023.
21
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | Amount Change | % Change | ||||||||||||||||||||
Statements of Operations | |||||||||||||||||||||||
Revenue, net of sales discounts | $ | 100,838,245 | $ | 94,826,702 | $ | 6,011,543 | 6.3 | % | |||||||||||||||
Cost of sales | 84,744,198 | 78,048,929 | 6,695,269 | 8.6 | % | ||||||||||||||||||
Selling, general and administrative expense | 17,054,499 | 16,687,401 | 367,098 | 2.4 | % | ||||||||||||||||||
Other (expense) income, net | (1,962,845) | 202,715 | (2,165,560) | (1,068.3) | % | ||||||||||||||||||
Equity in net earnings from investment in joint venture | 318,299 | 245,808 | 72,491 | 29.5 | % | ||||||||||||||||||
Change in fair value of derivative liabilities | 26,379,710 | (207,064,488) | 233,444,198 | (112.7) | % | ||||||||||||||||||
Income (loss) before taxes | $ | 23,774,712 | $ | (206,525,593) | $ | 230,300,305 | (111.5) | % | |||||||||||||||
Income tax benefit | (1,163,512) | (2,021,265) | (857,753) | 42.4 | % | ||||||||||||||||||
Net income (loss) | $ | 24,938,224 | $ | (204,504,328) | $ | 229,442,552 | (112.2) | % | |||||||||||||||
Other Financial and Operating Data: | |||||||||||||||||||||||
Active communities at end of period(a) | 63 | 52 | 11 | 21.2 | % | ||||||||||||||||||
Home closings | 311 | 328 | (17) | (5.2) | % | ||||||||||||||||||
Average sales price of homes closed(b) | $ | 335,057 | $ | 314,250 | $ | 20,807 | 6.6 | % | |||||||||||||||
Net new orders (units) | 384 | 389 | (5) | (1.3) | % | ||||||||||||||||||
Cancellation rate | 9.6 | % | 13.4 | % | (3.8) | % | (28.4) | % | |||||||||||||||
Backlog | 262 | 320 | (58) | (18.1) | % | ||||||||||||||||||
Gross profit | $ | 16,094,047 | $ | 16,777,773 | $ | (683,726) | (4.1) | % | |||||||||||||||
Gross profit %(c) | 16.0 | % | 17.7 | % | (1.7) | % | (9.6) | % | |||||||||||||||
Adjusted gross profit(d) | $ | 20,613,862 | $ | 19,164,605 | $ | 1,449,257 | 7.6 | % | |||||||||||||||
Adjusted gross profit %(c) | 20.4 | % | 20.2 | % | 0.2 | % | 1.0 | % | |||||||||||||||
EBITDA(d) | $ | 29,921,455 | $ | (204,010,458) | $ | 233,931,913 | (114.7) | % | |||||||||||||||
EBITDA margin %(c) | 29.7 | % | (215.1) | % | 244.8 | % | (113.8) | % | |||||||||||||||
Adjusted EBITDA(d) | $ | 7,283,518 | $ | 8,517,210 | $ | (1,233,692) | (14.5) | % | |||||||||||||||
Adjusted EBITDA margin %(c) | 7.2 | % | 9.0 | % | (1.8) | % | (20.0) | % |
Net Income per common stock is computed by dividing net income by the weighted-average number of common stock outstanding during the period. We have not considered the effect of the warrants sold
Our unaudited condensed statements of operations include a presentation of income per common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per sharecloseout for the three months ended March 31, 2021, basic2024 and diluted9 communities in closeout for Class A common stock, was calculated by dividing the income earned on investments heldthree months ended March 31, 2023. These communities are not included in the Trust Accountcount of approximately $4,000 less portion available“Active communities at end of period.”
Atthree months ended March 31, 2021, we did not have any dilutive securities2023. Under ASC 815, derivative liabilities are marked to market each reporting period with changes recognized on the Condensed Consolidated Statement of Operations. This change was primarily attributable to a gain of $26.4 million related to the Earnout Shares.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)March 31, 2024 is 33.4% as compared to 25.3% as of March 31, 2023.
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Revenue, net of sales discounts | $ | 100,838,245 | $ | 94,826,702 | |||||||
Cost of sales | 84,744,198 | 78,048,929 | |||||||||
Gross profit | $ | 16,094,047 | $ | 16,777,773 | |||||||
Interest expense in cost of sales | 3,513,019 | 2,386,832 | |||||||||
Amortization in homebuilding cost of sales(a) | 948,336 | — | |||||||||
Non-recurring remediation costs | 58,460 | — | |||||||||
Adjusted gross profit | $ | 20,613,862 | $ | 19,164,605 | |||||||
Gross profit %(b) | 16.0 | % | 17.7 | % | |||||||
Adjusted gross profit %(b) | 20.4 | % | 20.2 | % |
We doEBITDA, and adjusted EBITDA are supplemental non-GAAP financial measures used by management of the Company. The Company defines EBITDA as net income before (i) capitalized interest expensed in cost of sales, (ii) interest expensed in other (expense) income, net, (iii) depreciation and amortization, and (iv) taxes. UHG defines adjusted EBITDA as EBITDA before stock-based compensation expense, transaction cost expense, non-recurring loss on disposal of leasehold improvements, non-recurring remediation costs, amortization included in homebuilding cost of sales (adjustments resulting from the application of purchase accounting in connection with acquisitions), and change in fair value of derivative liabilities. Management of the Company believes EBITDA and adjusted EBITDA are useful because they provide a more effective evaluation of UHG’s operating performance and allow comparison of UHG’s results of operations from period to period without regard to UHG’s financing methods or capital structure or other items that impact comparability of financial results from period to period such as fluctuations in interest expense or effective tax rates, levels of depreciation or amortization, or unusual items. EBITDA and adjusted EBITDA should not believe thatbe considered as alternatives to, or more meaningful than, net income or any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on our financial statements.
Off-Balance Sheet Arrangements
Asmeasure as determined in accordance with GAAP. UHG’s computations of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company”EBITDA and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed financial statementsadjusted EBITDA may not be comparable to companies that comply with newEBITDA or revisedadjusted EBITDA of other companies.
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Net income (loss) | $ | 24,938,224 | $ | (204,504,328) | |||||||
Interest expense in cost of sales | 3,513,019 | 2,386,832 | |||||||||
Interest expense in other income, net | 2,142,192 | — | |||||||||
Depreciation and amortization | 450,042 | 214,930 | |||||||||
Taxes | (1,122,022) | (2,107,892) | |||||||||
EBITDA | $ | 29,921,455 | $ | (204,010,458) | |||||||
Stock-based compensation expense | 1,509,964 | 4,499,156 | |||||||||
Transaction cost expense | 1,225,013 | 964,024 | |||||||||
Non-recurring remediation costs | 58,460 | — | |||||||||
Amortization in homebuilding cost of sales(b) | 948,336 | — | |||||||||
Change in fair value of derivative liabilities | (26,379,710) | 207,064,488 | |||||||||
Adjusted EBITDA | $ | 7,283,518 | $ | 8,517,210 | |||||||
EBITDA margin(a) | 29.7 | % | (215.1) | % | |||||||
Adjusted EBITDA margin(a) | 7.2 | % | 9.0 | % |
Additionally, weDecember 31, 2023. As of the Closing Date, UHG received net proceeds from the business combination and the PIPE investments (“PIPE Investments”) of approximately $94.4 million. As of March 31, 2024 and December 31, 2023, UHG had approximately
March 31, 2024 | |||||||||||||||||||||||||||||
Weighted average interest rate | Homebuilding Debt - Wells Fargo Syndication | Homebuilding Debt - Other | Private Investor Debt | Total | |||||||||||||||||||||||||
Wells Fargo Bank | 8.57 | % | $ | 18,740,639 | $ | — | $ | — | $ | 18,740,639 | |||||||||||||||||||
Regions Bank | 8.57 | % | 15,857,465 | — | — | 15,857,465 | |||||||||||||||||||||||
Flagstar Bank | 8.57 | % | 14,415,877 | — | — | 14,415,877 | |||||||||||||||||||||||
United Bank | 8.57 | % | 11,532,701 | — | — | 11,532,701 | |||||||||||||||||||||||
Third Coast Bank | 8.57 | % | 8,649,526 | — | — | 8,649,526 | |||||||||||||||||||||||
Other Notes Payable | — | 2,216,853 | 2,569,327 | 4,786,180 | |||||||||||||||||||||||||
Total debt on contracts | $ | 69,196,208 | $ | 2,216,853 | $ | 2,569,327 | $ | 73,982,388 |
December 31, 2023 | |||||||||||||||||||||||
Weighted average interest rate | Homebuilding Debt - Wells Fargo Syndication | Private Investor Debt | Total | ||||||||||||||||||||
Wells Fargo Bank | 8.13 | % | $ | 20,907,306 | $ | — | $ | 20,907,306 | |||||||||||||||
Regions Bank | 8.13 | % | 17,690,798 | — | 17,690,798 | ||||||||||||||||||
Flagstar Bank | 8.13 | % | 16,082,543 | — | 16,082,543 | ||||||||||||||||||
United Bank | 8.13 | % | 12,866,035 | — | 12,866,035 | ||||||||||||||||||
Third Coast Bank | 8.13 | % | 9,649,526 | — | 9,649,526 | ||||||||||||||||||
Other Notes Payable | — | 3,255,221 | 3,255,221 | ||||||||||||||||||||
Total debt on contracts | $ | 77,196,208 | $ | 3,255,221 | $ | 80,451,429 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Net cash flows (used in) provided by operating activities | $ | (17,897,583) | $ | 23,051,836 | |||||||
Net cash flows (used in) provided by investing activities | (12,752,495) | 6,871 | |||||||||
Net cash flows provided by financing activities | 2,628,754 | 75,613,874 |
22
compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
We
Under
Disclosure controls and procedures are designeddepartments to ensure that financial statement line items and disclosures are addressed by sufficiently precise controls;
reporting.
There was
From timetime, we may be involvedNote 12 - Commitments and contingencies, incorporated herein by reference, to the Company’s Condensed Consolidated Financial Statements included elsewhere in legal proceedings in the ordinary course of business. We are currently not a party to any legal proceedings that we believe would have a material adverse effect on our business, financial condition, or results of operations.this report.
Factors that could cause our actual results to differ materially
23
ITEM
In October 2020, we issued 8,625,000 Founder Shares toProceeds
On January 28, 2021, we consummated our Initial Public Offering of 34,500,000 Units, including the exercise of the underwriters’ option to purchase 4,500,000 additional Units. The Unitssecurities that were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $345,000,000. Goldman Sachs & Co. LLC acted as the sole book running manager of the offering. The securities soldnot reported in the offering were registered under the Securities Act on a registration statementCurrent Report on Form S-1 (No. 333-251961). The SEC declared the registration statement effective on January 25, 2021.
Simultaneously with the consummation of the Initial Public Offering, we consummated a private placement of 5,933,333 Private Placement Warrants to our Sponsor and the Anchor Investors at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $8,900,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that Private Placement Warrants, so long as they are held by the Sponsor or the Anchor Investors or any of their permitted transferees, (i) are not redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of such Private Placement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by such holders until 30 days after the completion of a Business Combination, (iii) may be exercised on a cashless basis and (iv) are entitled to registration rights.
Of the gross proceeds received from the Initial Public Offering, the exercise of the underwriters’ option to purchase additional units and the Private Placement Warrants, $345,000,000 was placed in the Trust Account.
We paid a total of $6,900,000 underwriting discounts and commissions and $218,000 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $12,075,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
24
Exhibits
Exhibit No. | |||||||||
|
| ||||||||
| |||||||||
3.1 | |||||||||
| |||||||||
| |||||||||
|
| Warrant Agreement, dated January 25, 2021, by and between | |||||||
| |||||||||
|
| ||||||||
| |||||||||
|
| ||||||||
| |||||||||
10.2 | |||||||||
| |||||||||
31.1* | |||||||||
31.2* | |||||||||
32.1** | |||||||||
|
| ||||||||
| |||||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||
|
| ||||||||
|
| Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB* | Inline XBRL Taxonomy Extension | ||||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||
| Cover |
* | Filed or furnished herewith. |
|
|
|
|
|
|
25
|
| |||||||||
| ||||||||||
Dated: May 10, 2024 |
|
| ||||||||
|
| |||||||||
|
| |||||||||
|
|
26