Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒x No ☐o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒o No ☐x

As of ~~June 3, 2021, a total of 34,500,000 shares of~~May 6, 2024, 11,397,589 Class A ~~common stock,~~Common Shares, par value $0.0001 per share, and ~~a total of 8,625,000 shares of~~36,973,876 Class B ~~common stock,~~Common Shares, par value $0.0001 per share, were issued and outstanding.

~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~Quarterly Report on Form~~FORM 10-Q

~~Table of Contents~~

UNITED HOMES GROUP, INC.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “seek,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. We cannot guarantee the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information regarding risks and uncertainties associated with our business, and important factors that could cause our actual results to vary materially from those expressed or implied in such forward-looking statements, please refer to the factors listed and described in this report and in our other Securities and Exchange Commission (“SEC”) filings.

PART ~~I -~~I. FINANCIAL INFORMATION

Item 1. Financial ~~Statements.~~

~~DIAMONDHEAD HOLDINGS CORPORATION~~

Statements

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

$
291,250

March 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)
Preferred Stock, $0.0001 par value; 40,000,000 shares authorized; none issued or outstanding.
— —
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

The accompanying ~~notes~~unaudited Notes to the Condensed Consolidated Financial Statements are an integral part of these ~~unaudited condensed financial~~ statements.


	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

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 and diluted weighted-average number of shares (1)
Basic	48,362,589		37,575,074
Diluted	63,111,404		37,575,074

(1)Retroactively restated for the three months ended March 31, ~~2021~~

2023 for the Reverse Recapitalization as a result of the Business Combination as described in Note 1.

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

$
0.30

The accompanying ~~notes~~unaudited Notes to the Condensed Consolidated Financial Statements are an integral part of these ~~unaudited condensed financial~~ statements.


	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
Balance as of December 31, 2022(1)	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)

(1)

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.

The accompanying ~~notes~~unaudited Notes to the Condensed Consolidated Financial Statements are an integral part of these ~~unaudited condensed financial~~ statements.


	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)

Table of Contents

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

The accompanying ~~notes~~unaudited Notes to the Condensed Consolidated Financial Statements are an integral part of these ~~unaudited condensed financial~~ statements.

Table of Contents

~~DIAMONDHEAD HOLDINGS CORPORATION~~

Note ~~1—Description~~1 - Nature of ~~Organization~~operations and basis of presentation

The Company and Nature of Business ~~Operations~~

~~DiamondHead Holdings Corp. (the~~

United Homes Group, Inc. (“UHG” or the “Company”), a Delaware corporation, is a homebuilding business which operates with a land-light strategy. The Company is a former blank check company incorporated ~~in Delaware~~ on October 7, ~~2020. The Company was~~2020 under the name DiamondHead Holdings Corp. (“DHHC”) as a Delaware corporation formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more ~~businesses~~businesses.

UHG constructs single-family residential homes and has active operations in South Carolina, North Carolina, and Georgia offering a range of residential products including entry-level attached and detached homes, first-time move up attached and detached homes and second move-up detached homes. The constructed homes appeal to a wide range of buyer profiles, from first-time to lifestyle buyers. The Company’s primary objective is to provide customers with homes of exceptional quality and value while maximizing its return on investment. The Company has grown by expanding its market share in existing markets and by expanding into markets contiguous to the current active markets.

Business Combination

On September 10, 2022, DHHC entered into a Business Combination Agreement (the “Business Combination Agreement”) with Hestia Merger Sub, Inc., a South Carolina corporation and wholly owned subsidiary of DHHC (“Merger Sub”), and Great Southern Homes, Inc., a South Carolina corporation (“GSH”).

Upon the consummation of the transaction on March 30, 2023 (“Closing Date”), Merger Sub merged with and into GSH with GSH surviving the merger as a wholly owned subsidiary of the Company (“Business Combination”). ~~The Company~~As a result of the Business Combination, GSH is ~~not limited~~now a wholly owned subsidiary of DHHC, which has changed its name to ~~a particular~~United Homes Group, Inc.

GSH’s business historically consisted of both homebuilding operations and land development operations. In anticipation of the Business Combination, GSH separated its land development operations and its homebuilding operations across separate entities in an effort to adopt best practices in the homebuilding industry associated with ownership and control of land and lots and production efficiency. Unless otherwise indicated or ~~sector for purposes~~the context otherwise requires, references in this quarterly report on Form 10-Q to “Legacy UHG” refer to the homebuilding operations of ~~consummating a~~GSH prior to the consummation of the Business Combination.

Basis of Presentation

The ~~Company is an “emerging growth company,” as defined~~Condensed Consolidated Financial Statements included in ~~Section 2(a)~~this report reflect (i) the historical operating results of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

~~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 relates~~Legacy UHG prior to the ~~Company’s formation~~Business 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 closing~~liabilities 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 Offering~~their 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 respect~~equity structure for all periods presented.

Prior to the ~~Class A common stock included~~Closing Date, Legacy UHG’s historical financial records, including the historical financial position, results of operations, and cash flows of Legacy UHG were prepared on a carve-out basis 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 costs of approximately $19.6 million, of which approximately $12.1 million in deferred underwriting commissions (Note 6).

~~Simultaneously~~accordance 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 only~~of America (“GAAP”). The Statements of Changes in ~~U.S. government securities, within~~Stockholders’ 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 specific~~retroactive application of the ~~net proceeds~~reverse recapitalization using the Exchange Ratio. After March 30, 2023, no carve-out amounts were included in UHG’s financial statements.

Periods prior to the Business Combination

Prior to the Business Combination until the Closing Date, Legacy UHG had historically transacted with affiliates that were owned by the shareholders of GSH. Legacy UHG has categorized the various affiliates based on the nature of the ~~Initial Public Offering~~transactions with Legacy UHG and their primary operations. The categories are as follows:

Land Development Affiliates - Land development affiliates’ primary operations consist of acquiring and developing raw parcels of land for vertical home construction. Upon completion, the ~~sale~~land development affiliates transfer the developed lots to Legacy UHG in a non-cash transaction.

Other Operating Affiliates - Other operating affiliates’ operations consist of ~~Private Placement Warrants, although substantially all of the net proceeds are intended~~acquiring and developing land, purchasing constructed houses for rental properties, leasing activities, and purchasing model homes to be ~~applied generally toward consummating~~maintained during the sell down period of a ~~Business Combination. There is no assurance that the Company will be able~~community.

Collectively, these are referred to complete a Business Combination successfully. The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80% of theas “Other Affiliates” in these financial statements and represented as related parties (see Note 9 - Related party transactions).

All assets, ~~held in the Trust Account (excluding the deferred underwriting commissions~~liabilities, revenues, and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”)~~expenses directly associated with the ~~opportunity to redeem all or~~activity of Legacy UHG are included in these financial statements. In addition, a portion of ~~their Public Shares upon~~Legacy 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 ~~completion~~basis 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.

In addition, all significant transactions between Legacy UHG and GSH have been included in ~~connection with a stockholder meeting called~~these financial statements. The aggregated net effect of transactions between Legacy UHG and GSH are settled within Retained Earnings/ (Accumulated Deficit) on the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Changes in Stockholders’ Equity as they were not expected to ~~approve~~be settled in cash. These amounts were reflected in the Statements of Cash Flows within Distributions and net transfer to shareholders and other affiliates and, when transactions were historically not settled in cash, in Non-cash financing activities.

The results reported in these financial statements would not be indicative of Legacy UHG’s future performance, primarily because prior to the Business Combination, ~~or (ii)~~the lots developed by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account andaffiliates were not ~~previously released~~transferred to the Company to pay its tax obligations). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 6). There will be no redemption rights upon the completionhomebuilding operations of ~~a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption will be recorded~~GSH at a ~~redemption value and classified as temporary equity upon~~market rate. As such, these results do not necessarily reflect what the completion of the Initial Public Offering in accordance with the Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor, officers and directors agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

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.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

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 target~~and 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.

periods presented.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

Note ~~2—Basis of Presentation and~~2 - Summary of ~~Significant Accounting Policies~~

~~Basis of Presentation~~

significant accounting policies

Unaudited Interim Condensed Consolidated Financial Statements - The accompanying ~~unaudited condensed financial statements~~Condensed Consolidated Financial Statements of the Company have been prepared in accordance with ~~United States generally accepted accounting principles (“GAAP”)~~GAAP for interim financial information and ~~Article 8~~the rules and regulations of Regulation ~~S-X. Accordingly, they do not include all~~S-X of the Securities and Exchange Commission (“SEC”). Accordingly, certain information, notes, and ~~footnotes required by GAAP. In~~disclosures normally included in the annual financial statements prepared under GAAP have been condensed or omitted in accordance with SEC rules and regulations. Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying Condensed Consolidated Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, ~~(consisting of~~which include only normal ~~accruals) considered~~recurring adjustments, necessary for a fair ~~presentation~~statement of the Company’s financial position as of March 31, 2024, results of operations for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023. The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are also unaudited. The Condensed Consolidated Balance Sheet at December 31, 2023 was derived from audited annual financial statements but does not contain all of the note disclosures from the annual financial statements. Other than policies noted below in this Note, there have been ~~included. Operating~~no significant changes to the significant accounting policies disclosed since the Company’s previous annual financial statements. The results for the three months ended March 31, ~~2021~~2024 and 2023 are not necessarily indicative of ~~the~~ results ~~that may~~to be expected for the year ~~ending~~ended December 31, ~~2021~~2024, any other interim periods, or any future year or period.

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~~

Table of January 28, 2021 included in its Current Report on Form 8-K. The Warrants were reflected as a component of equity as opposed to liabilities on the balance sheet. Pursuant to Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections issued by the Financial Accounting Standards Board (“FASB”) and Staff Accounting Bulletin 99, "Materiality") ("SAB 99") issued by the SEC, the Company determined the impact of the error was immaterial. The impact of the error correction is reflected in the unaudited condensed financial statements contained herein which resulted in a $8.9 million increase to the derivative warrant liabilities line item and offsetting decrease to the Class A common stock subject to possible redemption mezzanine equity line item recorded as part of the activity in the period from October 7, 2020 (inception) through March 31, 2021 as reported herein. There would have been no change to total stockholders’ equity as reported.

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Emerging Growth Company

- The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the ~~auditor~~independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, ~~of 2002,~~ reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that ~~an emerging growth~~a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s ~~unaudited condensed~~ financial statements with another public company ~~that~~which is ~~neither an emerging growth company nor~~not 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.

Principles of Consolidation – The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation. The Company’s fiscal year end is December 31 and, unless otherwise stated, all years and dates refer to the fiscal year.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

Use of Estimates

– The preparation of ~~unaudited condensed financial statements~~the 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, ~~and~~the 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.

Inventories and Cost of Sales – The carrying value of inventory is stated at cost unless events and circumstances indicate the carrying value may not be recoverable. Inventory consists of land under development, developed lots, real estate inventories not owned, homes under construction, and finished homes.

–Land under development - On a limited basis, the Company acquires raw parcels of land already zoned for its intended use to develop into finished lots, and includes land acquisition costs, direct improvement costs, capitalized interest where applicable, and real estate taxes. As of March 31, 2024 and December 31, 2023, the amount of land under development was $3,668,423 and $8,846,666, respectively, which is included in Developed lots and land under construction on the Condensed Consolidated Balance Sheets

–Developed lots - This inventory consists of land that has been developed for or acquired by the Company and where vertical construction is imminent. Developed lot costs are typically allocated to individual residential lots on a per lot basis based on specific costs incurred for the acquisition of the lot. As of March 31, 2024 and December 31, 2023, the amount of developed lots included in inventory was $16,540,924 and $26,380,906, respectively. Developed lots purchased at fair value from third parties and related parties was $13,111,593 and $22,046,804 as of March 31, 2024 and December 31, 2023, respectively, which is included in Developed lots and land under construction on the Condensed Consolidated Balance Sheets.

–Real estate inventory not owned - In 2024, the Company entered into a land banking arrangement which resulted in the Company selling certain finished lots it owns to a land banker and simultaneously entering into option agreements to repurchase those finished lots. In accordance with ASC 606, Revenue from contracts with customers, these transactions are considered a financing arrangement rather than a sale because of the Company's options to repurchase these finished lots at a higher price. As of March 31, 2024, $17,819,132 was recorded to Real estate inventory not owned, with a corresponding amount of approximately $14,078,495 recorded to

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Liabilities from real estate inventory not owned on the Condensed Consolidated Balance Sheets. The amounts recognized as Liabilities from real estate inventory not owned represent the net cash received from the land banking arrangement, consistent with ASC 606. The Liabilities from real estate inventory not owned are excluded from the Company's debt covenant calculations.

–Homes under construction - At the time construction of the home begins, developed lots are transferred to homes under construction within inventory. This inventory represents costs associated with active homebuilding activities which include, predominately, field labor, materials and overhead costs related to home construction, capitalized interest, real estate taxes and land option fees. As of March 31, 2024 and December 31, 2023, the amount of inventory related to homes under construction included in homes under construction and finished homes was $107,586,474 and $125,623,133, respectively.

–Finished homes - This inventory represents completed but unsold homes at the end of the reporting period. ~~Making estimates requires~~Costs incurred in connection with completed homes including associated selling, general, and administrative costs are expensed as incurred. As of March 31, 2024 and December 31, 2023, the amount of inventory related to finished homes included in homes under construction and finished homes was $42,801,200 and $21,958,997, respectively.

Intangible Assets - Intangible assets are recorded within Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets, and consists of the estimated fair value of tradenames, architectural designs, and noncompete agreements acquired in connection with acquisitions. The identified finite-lived intangible assets are amortized over their respective estimated useful lives. Amortization expense associated with intangible assets is recorded to Selling, general and administrative expense in the Consolidated Statement of Operations. The estimated useful life of each asset group is summarized below:


Asset Group			Estimated Useful Lives
Tradenames			7 years
Architectural Designs			3 to 7 years
Non-compete Agreement			2 years

Unconsolidated Variable Interest Entities - Pursuant to ASC 810, Consolidation, and subtopics related to the consolidation of variable interest entities (“VIEs”), management analyzes the Company’s investments and transactions under the variable interest model to ~~exercise~~determine if they are VIEs and, if so, whether the Company is the primary beneficiary. Management determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion if changes to the Company’s involvement arise. To make this determination, management considers factors such as whether the Company could direct finance, determine or limit the scope of the entity, sell or transfer property, direct development or direct other operating decisions. The primary beneficiary is defined as the entity having both of the following characteristics: 1) the power to direct the activities that most significantly impact the VIE’s performance, and 2) the obligation to absorb losses and rights to receive the returns from the VIE that would be potentially significant ~~judgment. It~~to the VIE. Management consolidates the entity if the Company is the primary beneficiary or if a standalone primary beneficiary does not exist and the Company and its related parties collectively meet the definition of a primary beneficiary. If the investment does not qualify as a VIE under the variable interest model, management then evaluates the entity under the voting interest model to assess if consolidation is appropriate.

The Company has entered into a shared services agreement with a related party that operates in the land development business in which the Company will provide accounting, IT, HR, and other administrative support services and receive property maintenance services and due diligence and negotiation assistance with purchasing third party finished lots. Management has analyzed and concluded that it has a variable interest in this entity through the services agreement that provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are below market rates.

Additionally, the Company enters into lot option purchase agreements with the related party discussed above, other related parties and third parties to procure land or lots for the construction of homes. Under these contracts, the Company funds a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at ~~least reasonably possible~~a future point in time. Under the terms of the option purchase contracts, the option deposits are not refundable. Management determined it holds a variable interest through its potential to absorb some of the related parties’ and third parties’ first dollar risk of loss by placing a non-refundable deposit.

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Management determined that these related and third parties are VIEs, however, the Company is not the primary beneficiary of the VIEs as it does not have the power to direct the VIEs’ most significant activities related to land development. Accordingly, the Company does not consolidate these VIEs. As of March 31, 2024 and December 31, 2023 the Company recognized $77,318 and $88,000, respectively, of assets related to the shared services agreement included within Due from related party on the Condensed Consolidated Balance Sheets, and $38,736,582 and $33,015,812, respectively, of assets related to lot purchase agreements included within Lot purchase agreement deposits on the Condensed Consolidated Balance Sheets. The Company determined these amounts to be the maximum exposure to loss due to involvement with the VIEs as the Company does not provide any financial guarantees or support to these related or third parties.

As discussed above, the Company has entered into a land banking arrangement with a separate third-party to transfer developed lots to the third-party while retaining the right to repurchase the lots through option agreements. Under the terms of these option agreements, the Company obtains the right, but not the obligation, to repurchase the lots over a specified period of time at pre-determined prices. Consistent with ASC 606, the Company is required to continue recognizing the finished lots sold on its Condensed Consolidated Balance Sheets as the arrangement is accounted for as a financing arrangement rather than a sale. At the time the Company sells finished lots to the land banker and simultaneously enters into option agreements to repurchase those finished lots, the net cash received by the land banker represents approximately 80% of the carrying value of the associated finished lots. Management determined it holds a variable interest in the land banker through its potential to absorb some of the third-party’s first dollar risk of loss by not receiving an amount equal to or greater than the value of the associated finished lots the Company continues to recognize on its Condensed Consolidated Balance Sheets as Real estate inventory not owned. Management determined that the ~~estimate~~land banker is a VIE, however, the Company is not the primary beneficiary of the ~~effect~~VIE as it does not have the power to direct the VIE’s significant activities related to land development. The maximum exposure to loss with respect to the land banking arrangement is limited to the value of the Real estate inventory not owned not financed by the land banker, which was $3,740,637 as of March 31, 2024.

Stock-based Compensation – The Company recognizes stock-based compensation expense within Selling, general and administrative expense in the Condensed Consolidated Statements of Operations for certain stock-based payment arrangements, which include stock options, restricted share units (“RSUs”), performance-based restricted stock units (“PSUs”) and stock warrants.

In accordance with ASC 718, Compensation - Stock Compensation, stock-based compensation expense for all stock-based payment awards is based on the grant date fair value. For any awards that do not contain a market condition, ~~situation or set~~the Company estimates fair value using a Black-Scholes option pricing model. For any awards that contain a market condition, the Company estimates fair value using a Monte Carlo simulation model. The grant date fair value of ~~circumstances that existed at~~RSUs is the closing price of UHG’s common stock on the date of the ~~unaudited condensed~~grant. See Note 14 - Stock-based compensation for further details.

The Company recognizes expense for stock-based payment awards based on their varying vesting conditions as follows:

–Awards with service-based vesting conditions only - Expense is recognized on a straight-line basis over the requisite service period of the award.

–Awards with performance-based vesting conditions - Expense is not recognized until it is determined that it is probable the performance-based conditions will be met. When achievement of a performance-based condition is probable, a catch-up expense will be recorded as if the award had been vesting on a straight-line basis from the award date. The award will continue to be expensed on a straight-line basis until the probability of achieving the performance-based condition changes, if applicable.

–Awards with graded vesting conditions and market or performance conditions - Expense is recognized using the graded vesting method over the requisite service period of the award.

–Awards with no service or performance based vesting conditions - Expense is recognized immediately upon the grant date of the award.

Revenue Recognition - The Company recognizes revenue in accordance with ASC 606. For the three months ended March 31, 2024 and 2023, revenue recognized at a point in time from production home closings totaled $100,326,728 and $92,389,410, respectively, and for the three months ended March 31, 2024 and 2023, revenue recognized over time from construction activities on land owned by customers totaled $511,517 and $2,437,292, respectively.

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Advertising – The Company expenses advertising and marketing costs as incurred and includes such costs within Selling, general, and administrative expense in the Condensed Consolidated Statements of Operations. For the three months ended March 31, 2024 and 2023, the Company incurred $732,366 and $490,980, respectively, in advertising and marketing costs.

Recently Issued Accounting Pronouncements – In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the potential impact of adopting this new guidance on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Note 3 - Segment reporting

An operating segment is defined as a component of an enterprise for which ~~management considered~~separate financial information is available and for which segment results are evaluated regularly by the chief operating decision maker (“CODM”) in ~~formulating its estimate, could change~~deciding how to allocate resources and in assessing performance. UHG primarily operates in the ~~near term due~~homebuilding business and is organized and reported by division. The identification of reporting segments is based primarily on similarities in economic and geographic characteristics, product types, regulatory environments, and methods used to ~~one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.~~

~~Cash~~sell and ~~Cash Equivalents~~

construct homes.

The Company ~~considers all short-term investments with an original maturity~~has two reportable segments: South Carolina and Other. The South Carolina reporting segment primarily represents UHG’s South Carolina homebuilding operations. This segment operates in the Upstate, Midlands, and Coastal regions of South Carolina, as well as a smaller presence in Georgia. The Other segment consists of UHG’s homebuilding operations in Raleigh, NC and mortgage operations conducted through a mortgage banking joint venture, Homeowners Mortgage, LLC which do not meet the quantitative thresholds to be disclosed separately.

The CODM reviews the results of operations, including total revenue and pretax income to assess profitability and allocate resources. The following tables summarize revenues and pre-tax income by segment for the three months ~~or less when purchased to be cash equivalents. As~~ended March 31, 2024, and 2023 as well as total assets by segment as of March 31, ~~2021~~2024 and December 31, ~~2020,~~2023, with reconciliations to the amounts reported for the consolidated Company, ~~no cash equivalents held outside the Trust Account.~~

~~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

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	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

___________________________

(1)The Company’s ~~portfolio of investments held~~revenue includes revenue recognized at a point in ~~trust is comprised solely of U.S. government securities, within~~time from production home closings, as well as revenue recognized over time from construction activities on land owned by customers. For the ~~meaning set forth~~three months ended March 31, 2024 substantially all point in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair valuetime revenue and over time revenue was recognized at the ~~end of each reporting period. Gains~~South Carolina segment. For the three months ended March 31, 2023, all point in time and ~~losses resulting from~~over time revenue was recognized at the ~~change~~South Carolina segment.

(2)The corporate reconciling items included prior to consolidated income before taxes include unallocated corporate overhead (which includes all management incentive compensation), stock-based compensation expense, corporate interest income and expense, changes in fair value of ~~these investments~~derivative liabilities, and other corporate level items. Similarly, reconciling items included prior to consolidated assets include corporate cash and cash equivalents, deferred tax assets attributable to the corporate entity, and operating lease right-of-use assets. The Company’s overhead functions, such as accounting, treasury, and human resources, are centrally performed and the costs and related assets are not allocated to the Company’s operating segments. Corporate interest expense primarily consists of interest charges on the Convertible notes. Prior to the merger with DHHC, Legacy UHG did not have a corporate function and therefore did not maintain any corporate level accounts. Following the merger, the Company has implemented a corporate level accounting function, resulting in the need for certain reconciling adjustments which did not exist prior to the Business Combination.

(3)In 2024, the company acquired selected assets of Creekside Custom Homes, LLC, which resulted in the acquisition of goodwill. See Note 4 - Business acquisitions for further details.

(4)Capitalized interest represents unallocated capitalized interest associated with the Company’s Convertible note payable, which was entered into in 2023. See Note 13 - Convertible note payable for further details.

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Note 4 - Business acquisitions

Creekside

On January 26, 2024, the Company completed the acquisition of selected assets of Creekside Custom Homes, LLC, a South Carolina corporation (“Creekside”) (the “Creekside Acquisition”) for $12,742,895 in cash. The acquisition allows UHG to further expand its presence in the coastal region of South Carolina, particularly in the Myrtle Beach, South Carolina area.

The acquisition was accounted for as a business combination under ASC 805, Business Combinations under the acquisition method, and the results of operations have been included in ~~interest~~the Condensed Consolidated Financial Statements since the date of acquisition. The purchase price for the acquisition was allocated based on estimated fair value of the acquired assets and assumed liabilities as of January 26, 2024. The amounts for intangible assets were based on third-party valuations performed. The Company recognized the excess purchase price over the fair value of the net assets acquired as goodwill of $3,573,040 (all of which is tax deductible). The goodwill arising from the acquisition consists largely of the expected synergies from expanding the Company’s market presence in South Carolina and the experience and reputation of the acquired management team.

For the three months ended March 31, 2024, the Company recorded Revenue and Net income ~~held in Trust Account~~of $3,873,578 and $292,697, respectively, related to Creekside operations. Transaction costs of $390,142 related to this transaction were expensed as incurred within the Selling, general and administrative expense line item in the ~~accompanying statement~~Condensed Consolidated Statement of ~~operations.~~ Operations.

The ~~estimated fair values~~purchase price allocation is preliminary and subject to change during its measurement period. The Company has not yet completed its evaluation and determination of ~~investments held~~certain assets acquired and liabilities assumed, primarily (i) the final valuation of intangible assets, and (ii) the final assessment and valuation of certain other assets acquired and liabilities assumed, such as inventory, which could also impact goodwill during the measurement period. Although not expected to be significant, such adjustments may result in changes in the ~~Trust Account are determined using available market information.~~

~~Concentration~~valuation of ~~Credit Risk~~

~~Financial instruments that potentially subject~~assets and liabilities acquired.

The purchase price allocation as of March 31, 2024 is as follows:


	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

Herring Homes

On August 18, 2023, the Company completed the acquisition of selected assets of Herring Homes, LLC (“Herring Homes”), a North Carolina homebuilder, for a purchase price of $2,166,516 in cash. The acquisition allows the Company to ~~concentrations~~expand its presence into the Raleigh, North Carolina market.

The acquisition was accounted for as a business combination under ASC 805 under the acquisition method, and the results of ~~credit risk consist~~operations have been included in the Condensed Consolidated Financial Statements since the date of acquisition. The purchase price for the acquisition was allocated based on estimated fair value of the assets and liabilities as of August 18, 2023. The Company recognized the excess purchase price over the fair value of the net assets acquired as goodwill of $500,000. The goodwill arising from the acquisition consists largely of the expected synergies from establishing a market presence in Raleigh and the experience and reputation of the acquired management team. The remaining basis of $1,666,516 is primarily comprised of the fair value of the acquired developed lots and lot purchase agreement deposits with limited other assets and liabilities. Transaction costs were not material and were expensed as incurred.

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The Company has entered into an agreement with Herring Homes to provide certain services including providing the use of UHG employees to finish unacquired WIP and treasury management in exchange for fees outlined in the agreement. Subsequent to the acquisition, UHG acquired 50 lots and 12 homes under construction in separate transactions for a fair value of $4.9 million and $5.9 million, respectively, in the Raleigh, North Carolina market.

Rosewood

On October 25, 2023, the Company completed the acquisition of 100% of the common stock of Rosewood Communities, Inc., a South Carolina corporation (“Rosewood”) (the “Rosewood Acquisition”) for a purchase price of $24,681,948, of which $22,674,948 was in cash. The remaining purchase price is related to a $300,000 warranty cost reserve and contingent consideration based on 25% of the EBITDA attributable to Rosewood’s business through December 31, 2025. The initial estimate of the contingent consideration is approximately $1,707,000, which will be recorded as compensation expense if and when it is earned. The acquisition allows the Company to further expand its presence in the Upstate region of South Carolina.

The acquisition was accounted for as a business combination under ASC 805 under the acquisition method, and the results of operations have been included in the Condensed Consolidated Financial Statements since the date of acquisition. The purchase price for the acquisition was allocated based on estimated fair value of the assets and liabilities as of October 25, 2023. The amounts for intangible assets were based on third-party valuations performed. The Company recognized the excess purchase price over the fair value of the net assets acquired as goodwill of $5,206,636 (all of which is tax deductible). The goodwill arising from the acquisition consists largely of the expected synergies from expanding the Company’s market presence in South Carolina and the experience and reputation of the acquired management team.

Transaction costs of $515,282 related to this transaction were expensed as incurred within the Selling, general and administrative expense line item in the Condensed Consolidated Statement of Operations.

The final purchase price allocation is as follows:


	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

In connection with the Rosewood acquisition, the Company recorded contingent consideration based on the estimated EBITDA attributable to Rosewood’s business through December 31, 2025. The measurement of contingent consideration was based on projected cash ~~accounts~~flows such as revenues, gross margin, overhead expenses and EBITDA and discounted to present value. The Company recorded the fair value of the contingent consideration within Other accrued expenses and liabilities on the acquisition date. The estimated earn-out payments are subsequently remeasured to fair value at each reporting date based on the estimated future earnings of the acquired entity and the re-assessment of risk-adjusted discount rates. Maximum potential exposure for contingent consideration is not estimable based on the contractual terms of the contingent consideration agreement, which allows for a percentage payout based on a potentially unlimited range of EBITDA.

Unaudited Pro Forma Financial Information

The following unaudited pro forma condensed consolidated results of operations are provided for illustrative purposes only and have been presented as if the Creekside acquisition had occurred on January 1, 2023. The disclosure of Rosewood is included for comparative purposes and reflects revenue and net income balances as if the acquisition closed on January 1, 2022. Unaudited pro forma net income adjusts the operating results of the stated acquisitions to reflect the additional costs that would have been recorded assuming the fair value adjustments had been applied as of the beginning of

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the year preceding the year of acquisition, including the tax-effected amortization of the inventory step-up and transaction costs. This unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future.


	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)

Note 5 - Fair value measurement

Certain assets and liabilities measured and reported at fair value under GAAP are classified in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000 and investments held in Trust Account. As of March 31, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

~~Fair Value of Financial Instruments~~

~~Fair value is defined as the price~~three-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 ~~measuring~~the 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 ~~gives~~is based on the ~~highest priority to unadjusted quoted~~observability and objectivity of the pricing inputs as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, ~~(Level 1 measurements)~~(ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgments about assumptions that market participants would use in pricing the ~~lowest priority to unobservable inputs (Level 3 measurements). These tiers include:~~

●

~~Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;~~asset or liability.

●

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

●

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

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 due~~Due to the short-term nature of the ~~instruments.~~

~~Derivative warrant liabilities~~

~~The Company does not use derivative~~Company’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 stock~~approximate their fair value. Lot purchase ~~warrants, to determine if such instruments~~agreement 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 ~~end~~agreed-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 issued~~either 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 with~~time 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 ~~recognizes~~operates in, the ~~warrant~~carrying amount of these instruments ~~as liabilities~~approximates their fair value.

The Convertible note payable is presented on the Condensed Consolidated Balance Sheet at its amortized cost and not at fair ~~value and adjusts~~value. As of March 31, 2024, 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 the Company’s statement of operations. The fair value of the ~~Public Warrants issued in connection with~~convertible note is $131,600,000. See Note 13 - Convertible note payable for further details on how the ~~Public Offering have been measured at~~ fair value ~~using a Monte Carlo simulation model,~~was estimated.

All other financial instruments except for Derivative private placement warrants liability, Contingent earnout liability, Derivative stock option liability, Contingent consideration, and Convertible note payable are classified within Level 1 or Level 2 of the ~~Private Placement Warrants have been measured at~~ fair value ~~using a Black-Scholes model. As~~hierarchy because the Company values these instruments either based on recent trades of ~~March 31, 2021, the~~securities in active markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

The estimated fair value of the ~~Public Warrants were measured based on~~Derivative private placement warrants liability, Contingent earnout liability, Derivative stock option liability, Contingent consideration and Convertible note payable is determined using Level 3 inputs. The models and significant assumptions used in preparing the ~~trading price since being separately listed~~valuations are disclosed in Note 16 - Warrant liability, Note 15 - Earnout shares,Note 14 - Stock-based compensation, 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 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 costNote 13 - ~~derivative warrant liabilities in the unaudited condensed statement of operations and approximately $19.1 million is included in the unaudited condensed statement of changes in stockholders' equity.~~

~~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.

Convertible note payable respectively.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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.

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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).

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~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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.

~~Table of Contents~~

~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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.

~~Table of Contents~~

~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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:~~

●

~~in whole and not in part;~~

●

~~at a price of $0.01 per warrant;~~

●

~~upon not less than 30 days' prior written notice of redemption to each warrant holder; and~~

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.

~~Table of Contents~~

~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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:~~

●

~~in whole and not in part;~~

●

at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants, but only on a cashless basis, prior to redemption and receive that number of shares to be determined by reference to the table below, based on the redemption date and the “fair market value” of our Class A common stock except as otherwise described below;

●

if, and only if, the closing price of our Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading days within the 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders; and

●

if the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.

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.

~~Table of Contents~~

~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~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 ~~presents~~present information about the Company’s ~~financial~~ assets and liabilities that are measured at fair value on a recurring basis ~~by level within~~as 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

hierarchy of the valuation.


	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

~~Table of Contents~~

~~DIAMONDHEAD HOLDINGS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

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

Transfers to/from Levels 1, 2 and 3 are recognized at the ~~end~~beginning of the reporting period. There were no transfers to/from levels during the three month period ended March 31, 2024 and the year ended December 31, 2023.

The ~~Public Warrants were transferred from~~following table presents a roll forward of the Level 3 liabilities measured at fair value on a recurring basis:


	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

Note 6 - Capitalized interest

The Company accrues interest on the Company’s Homebuilding debt. That debt is used to ~~Level 1~~finance homebuilding operations (see Note 8 - Homebuilding debt and other affiliate debt) and the associated interest is capitalized during active development of the home and included within inventory for Homes under construction and finished homes. Capitalized interest is expensed to Cost of sales upon the sale of the home. The Company also accrued interest on the Company’s Convertible note payable. During periods in which the Company’s active inventory is lower than its debt level, a portion of the interest incurred is reflected as interest expense within Other (expense) income, net in the period incurred (see Note 13 - Convertible note payable). Capitalized interest activity is summarized in the table below for the three months ended March 31, 2024 and 2023:

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	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

Note 7 - Property and equipment

Property and equipment consisted of the following as of March 31, 2024 and December 31, 2023:


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

Depreciation expense, included within Selling, general and administrative expense on the Condensed Consolidated Statements of Operations was $50,565 and $93,942 for the three months ended March 31, 2024 and 2023, respectively.

Note 8 - Homebuilding debt and other affiliate debt

Prior to the Business Combination, Legacy UHG, jointly with its Other Affiliates considered to be under common control, entered into debt arrangements with financial institutions. These debt arrangements are in the form of revolving lines of credit and are generally secured by land (developed lots and undeveloped land) and homes (under construction and finished). Legacy UHG and certain related Other Affiliates were collectively referred to as the Nieri Group. The Nieri Group entities were jointly and severally liable for the outstanding balances under the revolving lines of credit, however, Legacy UHG was deemed the primary obligor. Legacy UHG was considered the primary legal obligor of such debt as it was the sole cash generating entity and responsible for repayment of the debt.

A portion of the revolving lines of credit were drawn down for the sole operational benefit of the Nieri Group and Other Affiliates outside of Legacy UHG (“Other Affiliates’ debt”). During the three months ended March 31, 2024 and 2023, Other Affiliates borrowed zero and $136,773, respectively. These amounts are recorded on the Condensed Consolidated Statements of Cash Flows, financing activities section, with borrowings presented as Proceeds from other affiliate debt and repayments as Repayments of other affiliate debt. On February 27, 2023, Legacy UHG paid off Wells Fargo debt associated with Other Affiliates in the amount of $8,340,545 and on February 28, 2023, Legacy UHG was released as a co-obligor from the Anderson Brothers debt associated with Other Affiliates in anticipation of the Business Combination. As a result there is no remaining debt balance associated with Other Affiliates as of March 31, 2023. Post Business Combination, the Company no longer enters into debt arrangements with Other Affiliates of Legacy UHG. As discussed further below, in connection with the Business Combination, the Wells Fargo Syndication line was amended and restated to exclude any members of the Nieri Group and Other Affiliates of Legacy UHG from the borrower list.

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The advances from the revolving construction lines, reflected as Homebuilding debt - Wells Fargo Syndication, are used to build homes and are repaid incrementally upon individual home sales. The various revolving construction lines are collateralized by the homes under construction and developed lots. The revolving construction lines are fully secured, and the availability of funds are based on the inventory value at the time of the draw request. Interest is accrued based on the total syndication balance and is paid monthly. As the average construction time for homes is less than one year, all outstanding debt is considered short-term as of March 31, 2024 and December 31, 2023.

The following table and descriptions summarize the Company’s debt as of March 31, 2024 and December 31, 2023:


	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

Homebuilding Debt - Wells Fargo Syndication

~~Level 1 instruments include investments~~the 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.

Table of Contents

The remaining availability to be drawn down on the Syndicated Line was $63,272,797 as of March 31, 2024 and $24,398,576 as of December 31, 2023. The Company ~~uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers,~~pays a fee ranging between 15 and ~~other similar sources to determine~~30 basis points per annum depending on the ~~fair value of its investments.~~

~~The fair value~~unused amount of the ~~Public Warrants issued~~Syndicated Line. The fee is computed on a daily basis and paid quarterly in arrears.

The Syndicated Line contains financial covenants, including (a) a minimum tangible net worth of no less than the sum of (i) $70 million, (ii) 25% of positive actual consolidated earnings earned in any fiscal quarter end, (iii) 100% of new equity contributed to the Company, (iv) 100% of any increase in tangible net worth resulting from an equity issuance upon the conversion or exchange of any security constituting indebtedness that is convertible or exchangeable, or is being converted or exchanged, for equity interests; and (v) 100% of the amount of any repurchase of equity interests in the Company, (b) a maximum leverage covenant that prohibits the leverage ratio from exceeding 2.25 to 1.00, (c) a minimum debt service coverage ratio to be no less than 2.00 to 1.00 for any fiscal quarter, (d) a minimum liquidity amount of not less the greater of i) $30,000,000 or ii) an amount equal to 1.50x the trailing twelve month interest incurred, and (e) unrestricted cash of not less than 50% of the required liquidity at all times. The Company was in compliance with all debt covenants as of March 31, 2024 and December 31, 2023.

The interest rates on the borrowings under the Syndicated Line vary based on the leverage ratio. In connection with the ~~Public Offering have been measured at fair value using~~First Amendment, the benchmark interest rate was converted from LIBOR to Secured Overnight Financing Rate (“SOFR”), with no changes in the applicable rate margins. The interest rate is based on the greater of either LIBOR prior to Amendment Date or SOFR post Amendment Date plus an applicable margin (ranging from 275 basis points to 350 basis points) based on the Company’s leverage ratio as determined in accordance with a ~~Monte Carlo simulation model,~~pricing grid, or the base rate plus the aforementioned applicable margin.

In connection with the amendments of the Syndicated Line, the Company incurred debt issuance costs, of which $378,602 is deferred and will be amortized over the ~~Private Placement Warrants have been measured at fair value using a Black Scholes model. As~~remaining life of the Syndicated Line. The amendments are accounted for as modifications of an existing line of credit under ASC 470, Debt for any lenders that continue to participate in the Syndicated Line, therefore, any previously unamortized deferred costs related to those lenders continue to be amortized over the remaining life of the Syndicated Line. The Company expensed all remaining unamortized deferred costs for any lenders that no longer participate in the Syndicated Line as of the Second Amendment Date. The Company recognized $312,695 and $120,988 of amortized deferred financing costs within Other (expense) income, net for the three months ended March 31, 2024 and 2023, respectively. Outstanding deferred financing costs related to the Company’s Homebuilding debt were $3,036,276 and $2,970,369 as of March 31, ~~2021,~~2024 and December 31, 2023, respectively, and are included in Prepaid expenses and other assets on the ~~value~~Condensed Consolidated Balance Sheets as the debt is a revolving arrangement.

Homebuilding Debt - Other

As a result of the ~~Public Warrants~~Creekside acquisition, the Company assumed a series of construction loans with a financial institution. The loans have an interest rate of 8.25% and a maturity date of January 26, 2025. The outstanding balance of these arrangements was $2,216,853 as of March 31, 2024.

Private Investor Debt

The Company had other borrowings with private investors totaling $2,569,327 and $3,255,221 as of March 31, 2024 and December 31, 2023, respectively, which are comprised of other notes payable and mortgage loans acquired in the normal course of business. The other notes payable have maturities ranging up to two years. The effective interest rates on these notes range from 6.79% to 7.69%. The mortgage loans contain release fee arrangements with no interest rate that are to be repaid through January 26, 2027.

Note 9 - Related party transactions

Prior to the Business Combination, Legacy UHG transacted with Other Affiliates that were ~~measured~~owned by the shareholders of GSH. Those Other Affiliates included Land Development Affiliates and Other Operating Affiliates (see Note 1 - Nature of operations and basis of presentation).

Post Business Combination, the Company continues to transact with these parties, however, they are no longer considered affiliates of the Company. Land Development Affiliates and Other Operating Affiliates of Legacy UHG (post Business Combination) meet the definition of related parties of the Company as defined in ASC 850-10-20.

Table of Contents

Prior to the Business Combination, Legacy UHG maintained the cash management and treasury function for its Other Affiliates. Cash receipts from customers and cash disbursements made to vendors were recorded through one centralized bank account. Legacy UHG recorded a Due from Other Affiliate when cash was disbursed, generally to a vendor, on behalf of an affiliate. Conversely, Legacy UHG recorded a Due to Other Affiliate when cash was received from a customer on behalf of an affiliate. The balances were settled through equity upon the consummation of the Business Combination.

The below table summarizes Legacy UHG transactions with the Land Development Affiliates and Other Operating Affiliates for the three months ended March 31, 2023. There were no transactions with Land Development Affiliates and Other Operating Affiliates for the three months ended March 31, 2024.


	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

Land development expense – Represents costs that were paid for by Legacy UHG that relate to the Land Development Affiliates’ operations. The Land Development Affiliates acquire raw parcels of land and develop them so that Legacy UHG can build houses on the land.

Other activities – Represent other transactions with Legacy UHG’s Other Affiliates. This includes, predominately, rent expense incurred for leased model homes and payment of real estate taxes.

Settlement of co-obligor debt to other affiliates – The amount represents the settlement of Wells Fargo debt associated with Other Affiliates.

Release of guarantor from GSH to shareholder – The amount represents that Legacy UHG was released as a co-obligor from the Anderson Brothers debt associated with Other Affiliates.

Credit for earnest money deposits – The amount represents credit received from a Legacy UHG affiliate in relation to lot deposits that Legacy UHG paid on behalf of the affiliate.

Sale-leaseback

In December 2022, Legacy UHG closed on 19 sale-leaseback transactions with related parties, whereby it is the lessee. The leases commenced on January 1, 2023. The Company is responsible for paying the operating expenses associated with the model homes while under lease. The rent expense associated with sale-leaseback agreements that mature in less than 12 months (and are excluded thus from the ROU asset and lease liability) is $91,700 and $68,625 for the three months ended March 31, 2024 and 2023, respectively.

Leases

In addition to the transactions above, Legacy UHG has entered into four separate operating lease agreements with a related party. The terms of the leases, including rent expense and future minimum payments, are described in Note 12 - Commitments and contingencies.

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The Company is currently occupying office space owned by a related party for its office headquarters. The Company took possession of the space in October 1, 2023 and pays rent based on the ~~trading price since being separately listed~~square footage within the building occupied by the Company multiplied by a stated rate which was approved by the Related Party Transactions Committee. The Company has capitalized a lease liability and ~~traded.~~corresponding right-of-use asset based on the assumption that the Company is reasonably certain it will execute a lease agreement to use the space for a five-year term, under the rate per square foot previously approved by the Related Party Transactions Committee.

Services agreement

The Company shares office spaces with a related party and certain employees of the Company provide services to the same related party. As such, the Company is allocating certain shared costs to the related party in line with a predetermined methodology based on headcount. During the three months ended March 31, 2024 and 2023, the Company allocated overhead costs to the related party in the amount of $35,619 and $185,812, respectively, and was charged for property maintenance services and consulting services in the amount of $103,057 and $59,825, respectively, by the same related party. The remaining balance outstanding as of March 31, 2024 and December 31, 2023 was a receivable of $77,318 and $88,000, respectively, and is presented within Due from related party on the Condensed Consolidated Balance Sheet.

General contracting

The Company has been engaged as a general contractor by several related parties. For the three months ended March 31, ~~2021,~~2024 and 2023, Revenue of $252,834 and $292,394, respectively, and Cost of sales of $207,832 and $261,546, respectively, were recognized in the Condensed Consolidated Statement of Operations.

Other

The Company utilizes a related party vendor to perform certain civil engineering services. For the three months ended March 31, 2024 and 2023, expenses of zero and $35,529, respectively, were recognized in the Condensed Consolidated Statement of Operations.

Note 10 - Lot purchase agreement deposits

The Company’s strategy is to acquire developed lots through related parties and unrelated third party land developers pursuant to lot purchase agreements. Most lot purchase agreements require the Company ~~recognized~~to pay a ~~charge~~nonrefundable cash deposit of approximately 15% - 20% of the agreed-upon fixed purchase price of the developed lots. In exchange for the deposit, the Company receives the right to purchase the ~~statement~~finished developed lot at a preestablished price over a specified period of ~~operations~~time. Such agreements enable the Company to defer acquiring portions of properties owned by third parties until the Company determines whether and when to complete such acquisition, which may serve to reduce financial risks associated with long-term land holdings.

As of March 31, 2024 all interests in lot purchase agreements, including with related parties, are recorded within Lot purchase agreement deposits on the Condensed Consolidated Balance Sheet and presented in the table below. The following table provides a summary of the Company’s interest in lot purchase agreements as of March 31, 2024 and December 31, 2023:


	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

Out of the lot purchase agreement deposits outstanding as of March 31, 2024 and December 31, 2023, $31,007,803 and $28,363,053 are with related parties.

The Company has the right to cancel or terminate the lot purchase agreements at any time for any reason. The legal obligation and economic loss resulting from a ~~decrease~~cancellation or termination is limited to the amount of the deposits paid. The cancellation or termination of a lot purchase agreement results in the ~~fair value~~Company recording a write-off of ~~liabilities~~the nonrefundable deposit to Cost of ~~$4,248,830 presented~~sales. For the three months ended March 31, 2024 and 2023, the Company had no

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forfeited lot purchase agreement deposits. The deposits placed by the Company pursuant to the lot purchase agreements are deemed to be a variable interest in related party land developers and third-party land developers. See Note 2 - Summary of significant accounting policies for the policy and conclusions about unconsolidated variable interest entities.

Note 11 - Warranty reserves

The Company establishes warranty reserves to provide for estimated future costs as ~~change~~a result of construction and product defects. Estimates are determined based on management’s judgment considering factors such as historical spend and projected cost of corrective action.

The following table provides a summary of the activity related to warranty reserves, which are included in ~~fair value of derivative warrant~~Other accrued expenses and liabilities on the accompanying ~~unaudited condensed statement~~Condensed Consolidated Balance Sheets as follows:


	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

Note 12 - Commitments and contingencies

Leases

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.

Operating lease expense included variable lease expense of $13,788 and $11,925 for the three months ended March 31, 2024 and 2023, respectively. The weighted-average discount rate for the operating leases was 9.72% and 5.54% during the three months ended March 31, 2024 and 2023, respectively. The weighted-average remaining lease term was 4.28 and 2.11 years for the three months ended March 31, 2024 and 2023, respectively.

The maturity of the contractual, undiscounted operating lease liabilities as of March 31, 2024 are as follows:


	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

The Company has certain leases which have initial lease terms of twelve months or less (“short-term leases”). The Company elected to exclude these leases from recognition, and these leases have not been included in our recognized operating ROU assets and operating lease liabilities. The Company recorded $43,419 and $95,381 of rent expense related to the short-term leases within Selling, general and administrative expense on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023, respectively.

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Litigation

The Company is subject to various claims and lawsuits that may arise primarily in the ordinary course of business, which consist mainly of construction defect claims. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s Condensed Consolidated Financial Statements. When the Company believes that a loss is probable and reasonably estimable and not fully able to be recouped, the Company will record an expense and corresponding contingent liability. As of the date of these Condensed Consolidated Financial Statements, management believes that the Company has not incurred a liability as a result of any claims.

Note 13 - Convertible note payable

In connection with the closing of the Business Combination, GSH entered into the Note Purchase Agreement, dated March 21, 2023, and effective March 30, 2023, with DHHC and the Convertible Note Investors. As part of the PIPE Investment, the Convertible Note Investors agreed to purchase $80.0 million in original principal amount of Notes at a 6.25% original issue discount and were issued an additional 744,588 UHG Class A Common Shares. The aggregate proceeds of the PIPE Investment were $75.0 million and were allocated between the securities issued.

The Notes mature on March 30, 2028, and bear interest at a rate of 15%. The Company has the option to pay any accrued and unpaid interest at a rate in excess of 10% either in cash or by capitalizing such interest and adding it to the then outstanding principal amount of the Notes (“PIK Interest”). The Company has elected to pay the full accrued and unpaid interest in excess of 10% in cash rather than PIK Interest. The effective interest rate on the Notes is 20.46%.

The Notes are convertible at the holder’s option into UHG Class A Common Shares at any time after March 30, 2024 through March 30, 2028, at a per share price of $5.58 (“Initial Conversion Price”). The Initial Conversion Price is subject to adjustments for certain anti-dilution provisions as provided in the Notes. If an anti-dilution event occurs, the number of shares of common stock issuable upon conversion may be higher than implied by the Initial Conversion Price. Each Note is also convertible at the Company’s option into UHG Class A Common Shares, at any time after the second anniversary of the Closing Date if the VWAP per UHG Class A Common Share exceeds $13.50 for 20 trading days in a 30 consecutive trading day period. The Company was not required to bifurcate either of these conversion features as they met the derivative classification scope exception as described in ASC 815-15 - Derivatives and Hedging - Embedded Derivatives.

The Notes may be redeemed by the Company at any time prior to 60 days before March 30, 2028, by repaying all principal and interest amounts outstanding at the time of redemption plus a make-whole amount equal to the additional interest that would accrue if the Notes remained outstanding through their maturity date. The Company was not required to bifurcate the embedded redemption feature, as the economic characteristics and risks of the redemption feature were clearly and closely related to the economic characteristics and risk of the Notes in accordance with ASC 815-15.

The Notes also contain additional conversion, redemption, and payment provision features, at the option of the holder, which can be exercised upon contingent events such as the Company defaulting on the Notes, a change of control in the ownership of the Company, or other events requiring indemnification. As the contingent events are either entirely within the Company’s control or based on an event for which management considers the probability of occurring as extremely remote, these features which are required to be bifurcated, would likely have minimal or no value, and therefore deemed to not be material to the Condensed Consolidated Financial Statements.

The fair value of the Notes was calculated using a Binomial model and a Monte Carlo model. The PIPE Shares were valued using a Discounted Cash Flow Model. The Company will accrete the value of the discount across the expected term of the Note using the effective interest method.

The below table presents the outstanding balance of the Notes as of March 31, 2024 and December 31, 2023:


	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

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Interest expense included within Other (expense) income, net on the Condensed Consolidated Statements of Operations was $2.1 million for the Notes for the three months ended March 31, 2024. Interest expense included within Cost of sales on the Condensed Consolidated Statements of Operations was $2.1 million for the Notes for the three months ended March 31, 2024.

The following assumptions were used in the Binomial and Monte Carlo valuation models to determine the estimated fair value of the ~~Private Placement Warrants,~~Notes at the issue date, March 31, 2024 and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in a Monte Carlo simulation and a Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on the historical volatility of an index of companies that matches the expected remaining life of the warrants.March 31, 2023, respectively.


	March 31, 2024		December 31, 2023
Risk-free interest rate	4.39	%	3.97	%
Expected volatility	48	%	40	%
Expected dividend yield	—	%	—	%

Risk-Free Interest Rate – The risk-free interest rate is based on the U.S. Treasury ~~zero-coupon~~zero coupon bond used to reduce any projected future cash flows derived from the payoff of the Notes as UHG common shares.

Expected Volatility – The Company’s expected volatility was estimated based on the average historical volatility of comparable publicly traded companies.

Expected Dividend Yield – The dividend yield is based on the Company’s history and expectation of dividend payouts. The Company does not expect to pay cash dividends to shareholders during the term of the Notes, therefore the expected dividend yield is determined to be zero.

Note 14 - Stock-based compensation

Stock Options

The following table summarizes the activity relating to the Company’s stock options for the three months ended March 31, 2024:


	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

On February 16, 2024, the Company granted 50,000 performance-based stock options to a non-employee consultant that vest upon the occurrence of a specified event. The grant date fair value of the options is $1.80, which was determined using the Black-Scholes option-pricing model. As of March 31, 2024, the Company determined the performance condition would not be met and the options were forfeited. No compensation expense related to these stock options was recorded.

On February 26, 2024, the Company granted 272,000 stock options to directors that vest annually in equal installments over three years. The options also include a clause which accelerates the vesting of the options on the date, if any, that the VWAP of the Company’s Class A common stock for 20 out of the preceding 30 consecutive trading days is greater than or equal to $12.00. The grant date fair value of the options was $3.65 and was determined using the Black-Scholes and Monte Carlo models. As of March 31, 2024, the accelerator had not been triggered.

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The Company recognizes stock compensation expense resulting from the equity-based awards over the requisite service period. Stock compensation expense for stock options is recorded based on the estimated fair value of the equity‑based award on the grant date using the Black‑Scholes valuation model. Stock compensation expense is recognized in the Selling, general and administrative expense line item in the Condensed Consolidated Statements of Operations. Stock compensation expense included in the Condensed Consolidated Statements of Operations for ~~a maturity similar~~stock options for the three months ended March 31, 2024 and 2023 was $1,287,567 and $51,079, respectively. As of March 31, 2024, there was unrecognized stock compensation expense related to non-vested stock option arrangements totaling $19,336,261. The weighted average period over which the unrecognized stock compensation expense is expected to be recognized is 3.17 years.

Certain stock options issued under the 2023 Plan are issued to individuals who are not employees of the Company and who are not providing goods or services to the ~~expected remaining life~~Company. These options are recognized in accordance with ASC 815, Derivatives and Hedging as a derivative liability and marked to market at each reporting period end. As of March 31, 2024, and December 31, 2023, the derivative liability of stock options amounts to $326,379 and $414,260, respectively, and is included within Derivative liability on the Condensed Consolidated Balance Sheet.

Restricted Stock Units (“RSUs”)

The Company grants time-based RSUs to certain participants under the 2023 Plan that are stock-settled with UHG Class A Common Shares. The time-based restricted stock units granted under the 2023 Plan typically vest annually over four years. On February 26, 2024 the Company separately granted 14,000 RSUs to certain members of the ~~warrants. The expected life~~Board of Directors that immediately vested on the date of the ~~warrants~~grant.

Stock-based compensation expense included in Selling, general and administrative expense in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $133,909 for the three months ended March 31, 2024, including $100,240 related to the immediate vesting RSUs. As of March 31, 2024, there was unrecognized pre-tax compensation expense of $680,060 related to time-based restricted stock units that is ~~assumed~~expected to be ~~equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.~~

recognized over a weighted-average period of 3.65 years.

The following table ~~provides quantitative information regarding Level 3~~summarizes the time-based RSU activity for the three months ended March 31, 2024:


	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

Performance-Based Restricted Stock Units (“PSUs”)

On February 16, 2024, the Company granted PSUs to certain employees. The Company granted a total of 478,000 PSUs, which will vest upon the date, if any, that the volume weighted average price of the Company’s Class A common stock for 20 out of the preceding 30 consecutive trading days is greater than or equal to $18.00 during the period through March 30, 2028. The grant date fair value ~~measurements~~of each such PSU was $3.45, which was determined using the Monte Carlo simulation method. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for PSUs was $88,488 for the three months ended March 31, 2024. As of March 31, 2024, there was unrecognized pre-tax compensation expense of $1,560,612 related to PSUs that is expected to be recognized over a weighted-average period of 2.13 years.

The following table summarizes the PSU activity for the three months ended March 31, 2024:

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	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

Stock warrants

In January 2022, Legacy UHG granted an option to non-employee directors to purchase 1,867,368 stock warrants for $150,000. Each warrant represents one non-voting common share. The warrants are exercisable at $4.05 per warrant, which represents an out-of-the-money strike price. The warrants can be exercised for 10 years starting from July 1, 2022. Using the Black-Scholes valuation model, the Company determined the aggregate fair value of these warrants to be approximately $1,376,800 as of the grant date. There were no additional stock warrants granted, and no compensation expense recorded, during the three month period ended March 31, 2024 and March 31, 2023.

On April 28, 2023, a warrant holder of the stock warrantsexercised their warrants. 1,120,421 stock warrants were exercised in a cashless exercise whereby the Company issued 748,020 UHG Class A Common Shares in accordance with the conversion terms. As of March 31, 2024, there are 746,947 stock warrants outstanding.

Earnout Employee Optionholders

The Earnout Shares issuable to holders of equity stock options as of the Closing Date are accounted for as equity classified stock compensation and do not have a requisite service period. During the three months ended March 31, 2023, the Company recognized a one-time stock-based compensation expense related to the Earnout of $4.4 million, which is excluded from the above stock-based compensation expense table. See Note 15 - Earnout shares for the assumptions and inputs ~~at their measurement dates:~~

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
%

Note 15 - Earnout shares

During the five year period after the Closing (“Earnout Period”), eligible GSH Equity Holders and Employee Option Holders are entitled to receive up to 20,000,000 Earnout Shares. Additionally, and pursuant to the Sponsor Support Agreement, the Sponsor surrendered 1,886,379 DHHC Class B Shares for the contingent right to receive Earnout Shares. All Earnout Shares issuable to GSH Equity Holders, Employee Option Holders and the Sponsors are subject to the same Triggering Events (defined below).

On the date when the VWAP of one share of the UHG Class A Common Shares quoted on the NASDAQ has been greater than or equal to $12.50, $15.00, $17.50 (“Triggering Event I,” “Triggering Event II,” and “Triggering Event III,” respectively, and together the “Triggering Events”) for any twenty trading days within any thirty consecutive trading day period within the Earnout Period, the eligible GSH Equity Holders, Employee Option Holders, and the Sponsors will receive Earnout Shares distributed on a pro-rata basis. For Triggering Event I and Triggering Event II, 37.5% of Earnout Shares will be released and following the achievement of Triggering Event III, 25.0% of Earnout Shares will be released.

There are two units of account within the Earnout Shares depending on the Earnout Holder. If the Earnout Holder is either a GSH Equity Holder or Sponsor, the instrument will be accounted for as a derivative liability. If the Earnout Holder is an Employee Option Holder, the instrument will be accounted for as an equity classified award. The following table summarizes the number of Earnout Shares allocated to each unit of account as of March 31, 2024:


	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

As of December 31, 2023, the fair value of the Earnout Shares was $6.20 per share issuable upon Triggering Event I, $5.21 per share issuable upon Triggering Event II and $4.39 per share issuable upon Triggering Event III.

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As of March 31, 2024, the fair value of the Earnout Shares was $4.72 per share issuable upon Triggering Event I, $4.03 per share issuable upon Triggering Event II and $3.46 per share issuable upon Triggering Event III.

The estimated fair value of the Earnout Shares was determined using a Monte Carlo simulation using a distribution of potential outcomes on a daily basis over the Earnout Period. The assumptions used in the valuation of these instruments, using the most reliable information available, include:


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	—		%	—		%

The change in the fair value of the Earnout Shares between December 31, 2023 and March 31, 2024 resulted in a gain of $26.4 million and was primarily attributable to the decrease in the current stock price of the Company from $8.43 as of December 31, 2023 to $6.99 as of March 31, 2024.

The change in the fair value of the Earnout Shares between March 30, 2023 and March 31, 2023 resulted in a loss of $203.4 million and was primarily attributable to the increase in the current stock price of the Company from $12.68 as of March 30, 2023 to $20.80 as of March 31, 2023.

As none of the earnout Triggering Events have occurred as of March 31, 2024, no shares have been distributed.

Note 16 - Warrant liability

Immediately prior to the Closing Date, 2,966,670 of the 5,933,333 Private Placement Warrants were forfeited. The remaining 2,966,663 Private Placement Warrants were recognized as a liability on the Closing Date at fair value. The Private Placement Warrant liability is recognized in accordance with ASC 815 as a derivative liability and marked to market at each reporting period end. The change in fair value of the private placement warrant ~~liabilities measured utilizing Level 1 and Level 3 inputs~~liability for the three months ended March 31, ~~2021~~2024 and March 31, 2023 was de minimis. These changes are included in Change in fair value of derivative liabilities on the Condensed Consolidated Statement of Operations.

The Private Placement Warrants were valued using the following assumptions under the Monte Carlo method:


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	—			—

The Public Warrants were initially recognized as a liability on the Closing Date at a fair value. The Public Warrant liability is ~~summarized~~recognized in accordance with ASC 815 as ~~follows:~~

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

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Note ~~10—Subsequent Events~~

17 - Income taxes

The Company ~~evaluated~~recognized an income tax benefit of $1,163,512 for the three months ended March 31, 2024 as compared to an income tax benefit of $2,021,265 for the three months ended March 31, 2023. At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year and this rate is applied to the results for the year-to-date period, and then adjusted for any discrete period items. Excluding discrete items related to fair value adjustments on derivative liabilities, the Company's estimated effective tax rate as of March 31, 2024 is 33.4% as compared to 25.3% as of March 31, 2023. This differs from the federal statutory rate of 21.0% primarily due to state income tax expense and nondeductible expenses.

Note 18 - Employee benefit plan

Effective January 1, 2021, GSH sponsored an elective safe harbor 401(k) contribution plan covering substantially all employees who have completed three consecutive months of service. The plan provides that the Company will match up to the first 3% of the participant’s base salary rate at 100% and 50% of the next 2% for a maximum contribution of 4%. In addition, participants become 100% vested with respect to employer contributions after completing six years of service starting in 2021. Administrative costs for the plan were paid by the Company.

Total contributions paid to the plans for Legacy UHG’s employees for the three months ended March 31, 2024 and 2023 were approximately $87,959, and $80,077, respectively. These amounts are recorded in Selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.

Note 19 - Earnings per share

The Company computes basic net earnings per share using net income attributable to Company common stockholders and the weighted average number of common shares outstanding during each period.

The weighted average number of shares of common stock outstanding prior to the Business Combination have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Business Combination. The equity structure of the Company for the three months ended March 31, 2024 and March 31, 2023 reflects the equity structure of DHHC, including the equity interests issued by DHHC to effect the business combination.

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The following table sets forth the computation of the Company’s basic and diluted net profit per share:


	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)

The following table summarizes potentially dilutive outstanding securities for the three months ended March 31, 2024 and 2023 that were excluded from the calculation of diluted EPS, because their effect would have been anti-dilutive:


	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

The Company’s 21,886,379 Earnout Shares and 478,000 PSUs are excluded from the anti-dilutive table above for the three months ended March 31, 2024, as the underlying shares remain contingently issuable as the Earnout Triggering Events and performance-based conditions, respectively, have not been satisfied.

Note 20 - Subsequent events

Management has performed an evaluation of subsequent events ~~and transactions that occurred up to June 3, 2021,~~after the Balance Sheet date of March 31, 2024 through the date ~~unaudited condensed financial statements~~the Condensed Consolidated Financial Statements were ~~available to be~~ issued. ~~The~~During this period, the Company ~~did~~has not ~~identify~~identified any subsequent events that ~~would have required adjustment~~require recognition or disclosure, inexcept for the ~~unaudited condensed financial statements.~~

ones noted below.

On May 7, 2024, the Company entered into a definitive agreement with Developers Capital Fund LLC for a newly created land fund for a total amount of up to $150 million, which will provide capital for future land development into finished lots.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~

Operation

References to the “Company,” “UHG,” “our,” “us” or “we” refer to ~~DiamondHead Holdings Corp.~~United Homes Group, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited ~~condensed financial statements~~Condensed Consolidated Financial Statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

~~Cautionary~~ See “Cautionary Note Regarding Forward-Looking ~~Statements~~

~~This Quarterly Report on Form 10-Q includes forward-looking statements within~~Statements.”

Overview

UHG designs, builds and sells homes in South Carolina, North Carolina and Georgia. The geographical markets in which UHG presently operates its homebuilding business are high-growth markets, with substantial in-migrations and employment growth. Prior to the ~~meaning~~Business Combination (discussed below), GSH’s business historically consisted of ~~Section 27A~~both homebuilding operations and land development operations. In 2023, GSH separated its land development operations and homebuilding operations across separate entities in an effort to adopt best practices in the homebuilding industry associated with ownership and control of land and lots and production efficiency. Following the separation of the ~~Securities Act of 1933, as amended, and Section 21E~~land development business, which is now primarily conducted by affiliated land development companies (collectively, the “Land Development Affiliates”) that are outside of the ~~Securities Exchange Act~~corporate structure of ~~1934,~~UHG, it employs a land-light lot operating strategy, with a focus on the design, construction and sale of entry-level, first move-up and second move-up single-family houses. UHG principally builds detached single-family houses, and, to a lesser extent, attached single-family houses, including duplex houses and town houses.

UHG’s pipeline as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.

~~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, of~~10,900 lots, which ~~approximately $12.1 million in deferred underwriting commissions.~~

~~Simultaneously with~~includes 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.

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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), subject~~acquire, in addition to ~~applicable law,~~lots that UHG may acquire from third party lot option contracts.

Since its founding in 2004, UHG has delivered approximately 14,000 homes and ~~(iii) as promptly as reasonably possible following such redemption, subject~~currently builds in 63 active subdivisions at prices that generally range from approximately $200,000 to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our 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 our warrants, which will expire worthless if we fail to complete a Business Combination within the Combination Period.

~~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, we~~2024 and 2023, UHG had ~~income~~384 and 389 net new orders, and generated approximately $100.8 million and $94.8 million in revenue on 311 and 328 closings, respectively.

UHG’s strategy to grow its business is multifaceted. UHG expects to grow organically, both arising out of its historical operations and through expansion of its business verticals. UHG’s business verticals are positioned to further drive the Company’s growth include its mortgage joint venture Homeowners Mortgage, LLC (the “Joint Venture”) and its build-to-rent (“BTR”) platform, pursuant to which UHG will continue to work together with institutional investors for development of BTR communities. UHG expects that continued operation of the Joint Venture, which began generating revenue in July 2022, will add to UHG’s revenue and EBITDA growth, improve buyer traffic conversion, and reduce backlog cancellation rates. In addition, UHG plans to continue to execute its external growth strategy, expanding into new markets and increasing community count via targeted acquisitions of complementary private homebuilders and homebuilding operations.

UHG revenues increased from approximately ~~$3.1 million, which consisted of $4.2~~$94.8 million for change in fair value of derivative warrant liabilities, approximately $4,000 of income from investments held in Trust Account, offset by approximately $449,000 of financing costs and approximately $642,000 of general and administrative expenses and approximately $48,000 of franchise tax expense.

~~Liquidity and Capital Resources~~

~~As of~~the three months ended March 31, ~~2021, we had approximately $1.2~~2023 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.~~

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~~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.

Adjusted gross profit, EBITDA, adjusted EBITDA, and EBITDA margin are not financial measures under generally accepted accounting principles in the United States of America (“GAAP”). See “Non-GAAP Financial Measures” for an explanation of how UHG computes these non-GAAP financial measures and for reconciliations to the most directly comparable GAAP financial measure.

In recent years the homebuilding industry has faced headwinds due to macro-economic factors, such as rising inflation and the Federal Reserve’s response of raising interest rates beginning in March 2022 and continuing through July 2023. As a result, new home demand has been negatively impacted by affordability concerns from higher mortgage rates. In response to softer demand for new homes, UHG introduced additional sales incentives, mostly in the form of buyer financing incentives such as mortgage rate buy downs, mortgage forward commitments, or cash incentives applied against

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closing costs. While UHG cannot predict the extent to which the aforementioned factors will impact its performance, it believes that its land-light business model positions it well to effectively navigate market volatility.

Business Combination

On March 30, 2023 (the “Closing Date”), UHG consummated the previously announced business combination (the “Business Combination”) contemplated by the Business Combination Agreement, dated as of September 10, 2022 (the “Business Combination Agreement”), by and among DiamondHead Holdings Corp., a Delaware corporation (“DHHC” and, after the consummation of the Business Combination, United Homes Group, Inc. (“UHG” or the “Company”)), Hestia Merger Sub, Inc., a South Carolina corporation and wholly owned subsidiary of DHHC (“Merger Sub”), and Great Southern Homes, Inc., a South Carolina corporation (“GSH”). Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with and into GSH, with GSH surviving the merger as a wholly owned subsidiary of the Company. In connection with the consummation of the Business Combination on the Closing Date, DHHC changed its name from DHHC to United Homes Group, Inc.

Unless otherwise indicated or the context otherwise requires, references in this quarterly report on Form 10-Q to “Legacy UHG” refer to the homebuilding operations of GSH prior to the consummation of the Business Combination.

Prior to the Closing Date, Legacy UHG’s historical financial records, including the historical financial position, results of operations, and cash flows of Legacy UHG were prepared on a carve-out basis in accordance with GAAP. The carve-out methodology was used since Legacy UHG’s inception until the Closing date. Refer to Note 1 - Nature of operations and basis of presentation of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this quarterly report for more information on the Business Combination and Basis of Presentation.

Recent Developments

Creekside Custom Homes Acquisition

On January 26, 2024, the Company completed the acquisition of selected assets of Creekside Custom Homes, LLC, a South Carolina corporation (“Creekside”) (the “Creekside Acquisition”) for $12,742,895 in cash. In the preliminary purchase allocation, UHG recognized the excess purchase price over the fair value of the net assets acquired as goodwill of $3,573,040. The goodwill arising from the acquisition consists largely of the expected synergies from expanding the Company’s market presence in South Carolina and the experience and reputation of the acquired management team. The remaining basis is primarily comprised of the fair value of inventory, lot purchase agreement deposits acquired, and intangible assets of $10,478,116, $3,055,500, and $442,000 respectively, offset by $4,825,761 of liabilities acquired.

Components of UHG’s Operating Results

Below are general definitions of the Condensed Consolidated Statements of Operations line items set forth in UHG’s period over period changes in results of operations.

Revenues

Revenues predominantly include the proceeds from the closing of homes sold to UHG’s customers. Revenues from home sales are recorded at the time each home sale is closed and closing conditions are met. Performance obligations are generally satisfied at a point in time when the control of the home is transferred to the customer. Control is considered to be transferred to the customer at the time of closing when the title and possession of the home are received by the homebuyer. In some contracts, the customer controls the underlying land upon which the home is constructed. For these specific contracts, the performance obligation is satisfied over time. Revenue for these contracts is recognized using the input method based on costs incurred as compared to total ~~offering~~estimated project costs. Proceeds from home sales are generally received within a few days after closing. Home sales are reported net of sales discounts. The pace of net new orders, average home sales price, and the amount of upgrades or options selected impact UHG’s recorded revenues in a given period.

Cost of Sales

Cost of sales includes the lot cost and carrying costs associated with each lot, construction costs of each home, capitalized interest expensed, building permits, warranty costs (both incurred and estimated to be incurred) and sales

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incentives in the form of mortgage rate buydowns and closings costs. In addition, Cost of sales includes payroll, including capitalized bonuses for UHG’s field-based personnel. Allocated costs, including interest and property taxes incurred during construction of the home, are capitalized and expensed to Cost of sales when the home is closed and revenue is recognized. Indirect costs such as maintenance of communities, signage and supervision are expensed as incurred. Developed land is acquired from related parties and third parties at fair market value, which, when compared to Legacy UHG’s historical acquisition of developed land from non-third parties at cost, increases UHG’s Cost of sales.

Selling, General and Administrative Expense

Selling general and administrative (“SG&A”) expenses consist of corporate and marketing overhead expenses such as payroll, insurance, IT, office expenses, advertising, outside professional services, travel expenses, lease expenses, public company expenses, transaction expenses, stock compensation expense associated with the equity classified Earnout Shares issued in connection with the Business Combination and stock compensation expense associated with the 2023 Plan. UHG recognizes these costs in the period they are incurred.

Prior to the Business Combination, a portion of the SG&A expenses were allocated to Legacy UHG based on direct usage, when identifiable or, when not directly identifiable, on the basis of proportional cost of sales or employee headcount, as applicable. Post Business Combination, the allocation of a portion of SG&A is no longer applicable.

Other (Expense) Income, Net

Other (expense) income, net includes amortization of deferred loan costs associated with UHG’s revolving lines of credit, gain or loss upon sale or retirement of depreciable assets, a portion of interest expense on the Notes entered into in connection with the Business Combination, investment income, management fees, and miscellaneous vendor and credit card rebates.

Equity in Net Earnings from Investment in Joint Venture

The Company owns a 49% equity stake in Homeowners Mortgage, LLC, a mortgage banking joint venture which is accounted for under the equity method and is not consolidated.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities includes certain stock options (as discussed in Note 14 - Stock-based compensation of the Notes to the Condensed Consolidated Financial Statements contained in this report) issued under the 2023 Plan, warrants issued in connection with DHHC’s Initial Public Offering ~~approximately $449,000~~(the “Public Warrants”, as discussed in Note 16 - Warrant liability of the Notes to the Condensed Consolidated Financial Statements contained in this report), warrants issued in a private placement by DHHC (the “Private Placement Warrants”, as discussed in Note 16 - Warrant liability of the Notes to the Condensed Consolidated Financial Statements contained in this report) and certain Earnout Shares issued in connection with the Business Combination (as discussed in Note 15 - Earnout shares of the Notes to the Condensed Consolidated Financial Statements contained in this report). These instruments are recognized as a derivative liability in accordance with ASC 815, and marked to market at the end of each reporting period. The change in fair value of the derivative liability classified instruments is included in ~~financing~~Change in fair value of derivative liabilities on UHG’s Condensed Consolidated Statement of Operations.

Income Before Taxes

Income before taxes is revenues less cost -of sales, SG&A expense, other (expense) income, net, equity in net earnings (losses) from investment in joint venture, and change in fair value of derivative ~~warrant~~liabilities.

Income Tax Benefit

Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences on differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the ~~unaudited condensed statement~~period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is “more-likely-than

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not” that some portion or all of the deferred tax assets will not be realized. When evaluating the realizability of deferred tax assets, all evidence, both positive and negative, is evaluated.

Net Income (Loss)

Net income (loss) is income before taxes adjusted for income tax benefit.

Net New Orders

Net new orders is a key performance metric for the homebuilding industry and is an indicator of future revenues and cost of sales. Net new orders for a period is gross sales less any customer cancellations received during the same period. Sales are recognized when a customer signs a contract and UHG approves such contract.

Cancellation Rate

UHG records a cancellation when a customer provides notification that they do not wish to purchase a home. Increasing cancellations are a negative indicator of future performance and can be an indicator of decreased revenues, cost of sales and net income. Cancellations can occur due to customer credit issues or changes to the customer’s desires. The cancellation rate is the total cancellations during the period divided by the total number of new sales for homes during the period.

Backlog

Backlog represents homes sold but not yet closed with customers. Backlog is affected by customer cancellations that may be beyond UHG’s control, such as customers unable to obtain financing or unable to sell their existing home.

Gross Profit

Gross profit is revenue less cost of sales for the reported period.

Adjusted Gross Profit

Adjusted gross profit, a non-GAAP measure, is gross profit less capitalized interest expensed in cost of sales, amortization included in homebuilding cost of sales (primarily adjustments resulting from the application of purchase accounting in connection with acquisitions) and non-recurring remediation costs.

Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following table presents summary results of operations ~~and approximately $19.1 million is included in~~for the ~~unaudited condensed statement of changes in stockholders’ equity.~~

periods indicated:

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	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 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. We have not considered the effect of the warrants sold~~

(a)UHG had 6 communities 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 and the inclusion of such warrants would be anti-dilutive.

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, basic~~2024 and ~~diluted~~9 communities in closeout for ~~Class A common stock, was calculated by dividing~~ the ~~income earned on investments held~~three months ended March 31, 2023. These communities are not included in the ~~Trust Account~~count of ~~approximately $4,000 less portion available~~“Active communities at end of period.”

(b)Average sales price of homes closed, excluding the impact of percentage of completion revenues and build to ~~pay taxes~~rent revenues.

(c)Calculated as a percentage of revenue

(d)Adjusted gross profit, EBITDA and adjusted EBITDA are non-GAAP financial measures. For definitions of adjusted gross profit, EBITDA and adjusted EBITDA and a reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP, see “Non-GAAP Financial Measures.”

Revenues: Revenues for the three months ended March 31, 2024 were $100.8 million, an increase of $6.0 million, or 6.3%, from $94.8 million for the three months ended March 31, 2023. The increase in revenues was primarily attributable to the increase in average sales price of production-built homes, partially offset by the ~~weighted average~~decrease in production-built home closings. The decrease in the number of ~~31,621,444 Class A common stock outstanding~~home closings was due in part to rising mortgage rates, which caused a reduction in purchasing power for homebuyers. The average sales price of production-built homes closed for the ~~period. Net income~~three months ended March 31, 2024 was $335,057, an increase of $20,807, or 6.6%, from the average sales price of production-built homes closed of $314,250 for the three months ended March 31, 2023.

Cost of Sales and Gross Profit: Cost of sales for the three months ended March 31, 2024 was $84.7 million, an increase of $6.7 million, or 8.6%, from $78.0 million for the three months ended March 31, 2023. The increase in Cost of sales was largely attributable to an increase in incentives, primarily in the form of mortgage rate buydowns and closing costs, as well as an increase in interest expense and the amortization of purchase accounting adjustments. The increase was partially offset by a decrease in number of homes closed. UHG closed 311 homes during the three months ended March 31, 2024, a decrease of 17 home closings, or 5.2%, as compared to 328 homes closed during the three months ended March 31, 2023.

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Gross profit for the three months ended March 31, 2024 was $16.1 million, a decrease of $0.7 million, or 4.2%, from $16.8 million for the three months ended March 31, 2023, due to the decrease in the number of home closings and increased cost per ~~share basic and diluted~~home as described above. Gross profit as a percentage of revenue for ~~Class B common stock,~~the three months ended March 31, 2024 was ~~calculated by dividing~~16.0%, a decrease of 1.7%, as compared 17.7% for the ~~net income (approximately $1.3~~three months ended March 31, 2023.

Adjusted Gross Profit: Adjusted gross profit for the three months ended March 31, 2024 was $20.6 million, ~~less income~~ an increase of $1.4 million, or 7.3%, as compared to $19.2 million for the three months ended March 31, 2023. Adjusted gross profit as a percentage of revenue for the three months ended March 31, 2024 was 20.4%, an increase of 0.2%, as compared to 20.2% for the three months ended March 31, 2023. The increase inadjusted gross profit as a percentage of revenue was attributable to ~~Class A common stock~~slightly lower costs of sales which was driven by higher incentives offset by lower lumber costs. Adjusted gross profit is a non-GAAP financial measure. For the definition of adjusted gross profit and a reconciliation to UHG’s most directly comparable financial measure calculated and presented in accordance with GAAP, see “Non-GAAP Financial Measures.”

Selling, General and Administrative Expense: Selling, general and administrative expense for the ~~amount~~three months ended March 31, 2024 was $17.1 million, an increase of ~~$0, resulting~~$0.4 million, or 2.4%, from $16.7 million for the three months ended March 31, 2023. The overall increase was driven by an increase of $0.8 million in public company expenses to support the Company’s growth and meet the regulatory standards of a public company, and an increase in rent expense of $0.2 million, partially offset by a decrease in salaries, wages, and related expenses of $0.6 million, primarily attributable to lower stock-based compensation.

Other (Expense) Income, Net: Total Other (expense) income, net for the three months ended March 31, 2024 was $2.0 million of expense, a decrease of $2.2 million, from $0.2 million of income for the three months ended March 31, 2023. The decrease in Other (expense) income, net was primarily attributable to an increase in interest expense on the Convertible Notes of $2.1 million.

Equity in Net Earnings from Investment in Joint Venture: Equity in net earnings from investment in joint venture for the three months ended March 31, 2024 was $0.3 million, an increase of $0.1 million, from $0.2 million for the three months ended March 31, 2023. The increase in equity in net earnings from investment in joint venture increased the investment in joint venture as of March 31, 2024 to $1.7 million.

Change in Fair Value of Derivative Liabilities:Change in fair value of derivative liabilities for the three months ended March 31, 2024 was a gain of ~~approximately $1.3 million), by the weighted average number~~$26.4 million as compared to a loss of ~~10,302,489 Class B common stock outstanding~~$207.1 million for the ~~period.~~

Atthree months ended March 31, ~~2021, we did not have any dilutive securities~~2023. 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.

Income Tax Benefit: Income tax benefit for the three months ended March 31, 2024 was $1.2 millionas compared to $2.0 million for the three months ended March 31, 2023. The Company estimates the effective tax rate expected to be applicable for the full fiscal year and ~~other contracts that could, potentially, be exercised or converted into common stock~~this rate is applied to the results for the year-to-date period, and then ~~share in the earnings. As a result, diluted income per share is the same as basic income per share~~adjusted for any discrete period items. The Company's estimated annual effective tax rate for the ~~periods presented.~~

~~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.

Net Income (Loss): ~~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 Net income (loss)for the three months ended March 31, 2024 was $24.9 million, an increase of $229.4 million, or 112.2%, from a loss of $204.5 million for the three months ended March 31, 2023. The increase in Net income was primarily attributable to the increase in income before taxes of $230.2 million, or 111.5%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 (which is primarily attributable to the change in fair value of derivative ~~scope exception, and it simplifies~~liabilities), partially offset by a decrease in income tax benefit of $0.8 million, during the ~~diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption~~three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Non-GAAP Financial Measures

Adjusted Gross Profit

Adjusted gross profit is a non-GAAP financial measure used by management of the ~~ASU did not~~Company as a supplemental measure in evaluating operating performance. The Company defines adjusted gross profit as gross profit excluding the effects of capitalized interest expensed in cost of sales, amortization included in homebuilding cost of sales (primarily adjustments resulting from the application of purchase accounting in connection with acquisitions), and non-recurring remediation costs. The Company’s management believes this information is meaningful because it separates the impact ~~our financial position,~~that

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capitalized interest, purchase accounting adjustments, and non-recurring remediation costs directly expensed in cost of sales have on gross profit to provide a more specific measurement of the Company’s gross profits. However, because adjusted gross profit information excludes certain balances expensed in cost of sales, which have real economic effects and could impact the Company’s results of operations, the utility of adjusted gross profit information as a measure of the Company’s operating performance may be limited. Other companies may not calculate adjusted gross profit information in the same manner that the Company does. Accordingly, adjusted gross profit information should be considered only as a supplement to gross profit information as a measure of the Company’s performance.

The following table presents a reconciliation of adjusted gross profit to the GAAP financial measure of gross profit for each of the periods indicated.


	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		%

(a) Represents expense recognized resulting from purchase accounting adjustments

(b) Calculated as a percentage of revenue

EBITDA and Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization, or ~~cash flows.~~

~~We do~~EBITDA, 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 that~~be 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 new~~EBITDA or ~~revised~~adjusted EBITDA of other companies.

The following table presents a reconciliation of EBITDA and adjusted EBITDA to the GAAP financial measure of net income for each of the periods indicated.

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	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		%

(a) Calculated as a percentage of revenue

(b) Represents expense recognized resulting from purchase accounting ~~pronouncements~~adjustment

Liquidity and Capital Resources

Overview

UHG funds its operations from its current cash holdings and cash flows generated by operating activities, as well as its available revolving lines of credit, as further described below. As of March 31, 2024, UHG had approximately $28.7 million in cash and cash equivalents, a decrease of $28.0 million, from $56.7 million as of ~~public company effective dates.~~

~~Additionally, we~~December 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 $63.3 million, and $24.4 million in unused committed capacity under its revolving lines of credit, respectively. See “Wells Fargo Syndication”below for information on the modification to the Wells Fargo Syndication subsequent to March 30, 2023.

UHG has used proceeds received from the Business Combination and the PIPE Investments for general corporate purposes, including corporate operating expenses and for the acquisitions of homebuilders which closed in 2023 and January of 2024. UHG believes that its current cash holdings including proceeds from the Business Combination and PIPE Investments, as well as cash generated from continuing operations, cash available under its revolving lines of credit and cash obtained from land banking arrangements, will be sufficient to satisfy its short term and long term cash requirements for working capital to support its daily operations, meet current commitments under its contractual obligations, and support the potential acquisition of complementary businesses.

Cash flows generated by UHG’s projects can differ materially in timing from its results of operations, as these depend upon the stage in the life cycle of each project. UHG generally relies upon its revolving lines of credit to fund building costs, and timing of draws is such that UHG may from time to time be in receipt of funds from the line of credit in advance of such funds being utilized. UHG is generally required to make significant cash outlays at the beginning of a project related to lot purchases, permitting, and construction of homes, as well as ongoing property taxes. These costs are capitalized within UHG’s real estate inventory and are not recognized in its operating income until a home sale closes. As a result, UHG incurs significant cash outflows prior to the recognition of associated earnings. In later stages of projects, cash inflows could exceed UHG’s results of operations, as the cash outflows associated with land purchase and home construction and other expenses were previously incurred.

The cost of home construction fluctuates with market conditions and costs related to building materials and labor. The residential construction industry experiences labor and material shortages from time to time, including shortages in qualified subcontractors, tradespeople and supplies of insulation, drywall, cement, steel, and lumber. These labor and material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or as a result of broader economic

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disruptions. Increases in lumber commodity prices may result in the renewal of UHG’s lumber contracts at more expensive rates, which may significantly impact UHG’s cost to construct homes and UHG’s business. Future increases in the cost of building materials and labor could have a negative impact on UHG’s margins on homes sold. Supply-chain disruptions may also result in increased costs to obtain building supplies, delayed delivery of developed lots, and incurrence of additional carrying costs on homes under construction, among other things. Labor and material shortages and price increases for labor and materials could cause delays in home construction and increase UHG’s costs of home construction, which in turn could have a material adverse effect on UHG’s cost of sales and operations.

The Company’s strategy is to acquire developed lots through related parties, unrelated third party land developers, and land bankers pursuant to lot purchase agreements and land banking arrangements. When entering into these contracts, the Company agrees to purchase finished lots at predetermined prices, time frames, and quantities that match expected selling pace in the community. Most lot purchase agreements require the Company to pay a nonrefundable cash deposit of approximately 15% - 20% of the agreed-upon fixed purchase price of the developed lots. Refer to Note 2 - Summary of significant accounting policies and Note 10 - Lot purchase agreement deposits of the Notes to the Condensed Consolidated Financial Statements for additional information.

Homebuilding Debt

Prior to the Business Combination, Legacy UHG, jointly with its Other Affiliates (see Note 1 - Nature of operations and basis of presentation of the Notes to the Condensed Consolidated Financial Statements for definitions of these terms) considered to be under common control, entered into debt arrangements with financial institutions. These debt arrangements are in the ~~process~~form of ~~evaluating~~revolving lines of credit and are generally secured by land (developed lots and undeveloped land) and homes (under construction and finished). Legacy UHG and certain related Other Affiliates were collectively referred to as the ~~benefits~~Nieri Group. The Nieri Group entities were jointly and severally liable for the outstanding balances under the revolving lines of ~~relying~~credit, however; the Legacy UHG had been deemed the primary obligor of such debt, as it is the sole cash generating entity and responsible for repayment of the debt.

A portion of the revolving lines of credit were drawn down for the sole operational benefit of the Nieri Group and Other Affiliates outside of Legacy UHG (“Other Affiliates’ debt”). For the three months ended March 31, 2024 and 2023, Other Affiliates borrowed zero, and $136,773, respectively. These amounts are recorded on the Condensed Consolidated Statements of Cash Flows, financing activities section, with borrowings presented as Proceeds from other ~~reduced reporting requirements~~affiliate debt and repayments as Repayments of other affiliate debt. On February 27, 2023, Legacy UHG paid off Wells Fargo debt associated with Other Affiliates in the amount of $8,340,545 and on February 28, 2023, Legacy UHG was released as a co-obligor from the Anderson Brothers debt associated with Other Affiliates in anticipation of the Business Combination. As a result there is no remaining debt balance associated with Other Affiliates as of March 31, 2023. Post Business Combination, the Company no longer enters into debt arrangements with Other Affiliates of Legacy UHG. As discussed further below, in connection with the Business Combination, the Wells Fargo Syndication line was amended and restated to exclude any members of the Nieri Group and Other Affiliates of Legacy UHG from the borrower list.

The advances from the revolving construction lines, reflected as Homebuilding debt - Wells Fargo Syndication, are used to build homes and are repaid incrementally upon individual home sales. The various revolving construction lines are collateralized by the homes under construction and developed lots. The revolving construction lines are fully secured, and the availability of funds are based on the inventory value at the time of the draw request. Interest is accrued based on the total syndication balance and is paid monthly. As the average construction time for homes is less than one year, all outstanding homebuilding debt is considered short-term as of March 31, 2024 and December 31, 2023.

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The following table and descriptions provide a summary of Company’s material debt under the revolving lines of credit for the periods indicated:


	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

Homebuilding Debt - Wells Fargo Syndication

In July 2021, the Nieri Group entities entered into a $150,000,000 Syndicated Credit Agreement (“Syndicated Line”) with Wells Fargo Bank, National Association (“Wells Fargo”). The Syndicated Line was a three-year revolving credit facility with a maturity date of July 2024, and an option to extend the maturity date for one year that could be exercised upon approval from Wells Fargo. The Syndicated Line also included a $2,000,000 letter of credit as a sub-facility subjected to the same terms and conditions as the Syndicated Line. The Syndicated Line was amended and restated (“First Amendment”) on March 30, 2023 (“Amendment Date”) in connection with the Business Combination (as defined in Note 1 - Nature of operations and basis of presentation) and made GSH the sole borrower of the Syndicated Line. An additional amendment and restatement (“Second Amendment”) was entered into on August 10, 2023 (“Second Amendment Date”). As a result of the Second Amendment, UHG became a co-borrower of the Syndicated Line, the maximum borrowing capacity was increased to $240,000,000, and the maturity date was extended to August 10, 2026. In addition, Wells Fargo Bank and Regions Bank increased their participation in 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 remaining availability to be drawn down on the Syndicated Line was $63,272,797 as of March 31, 2024 and $24,398,576 as of December 31, 2023. The Company pays a fee ranging between 15 and 30 basis points per annum depending on the unused amount of the Syndicated Line. The fee is computed on a daily basis and paid quarterly in arrears.

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equity contributed to the Company, (iv) 100% of any increase in tangible net worth resulting from an equity issuance upon the conversion or exchange of any security constituting indebtedness that is convertible or exchangeable, or is being converted or exchanged, for equity interests; and (v) 100% of the amount of any repurchase of equity interests in the Company, (b) a maximum leverage covenant that prohibits the leverage ratio from exceeding 2.25 to 1.00, (c) a minimum debt service coverage ratio to be no less than 2.00 to 1.00 for any fiscal quarter, (d) a minimum liquidity amount of not less the greater of i) $30,000,000 or ii) an amount equal to 1.50x the trailing twelve month interest incurred, and (e) unrestricted cash of not less than 50% of the required liquidity at all times. The Company was in compliance with all debt covenants as of March 31, 2024 and December 31, 2023.

The interest rates on the borrowings under the Syndicated Line vary based on the leverage ratio. In connection with the First Amendment, the benchmark interest rate was converted from LIBOR to Secured Overnight Financing Rate (“SOFR”), with no changes in the applicable rate margins. The interest rate is based on the greater of either LIBOR prior to Amendment Date or SOFR post Amendment Date plus an applicable margin (ranging from 275 basis points to 350 basis points) based on the Company’s leverage ratio as determined in accordance with a pricing grid, or the base rate plus the aforementioned applicable margin.

Homebuilding Debt - Other

As a result of the Creekside acquisition, the Company assumed a series of construction loans with a financial institution. The loans have an interest rate of 8.25% and a maturity date of January 26, 2025. The outstanding balance of these arrangements was $2,216,853 as of March 31, 2024.

Private Investor Debt

The Company had other borrowings totaling $2,569,327 and $3,255,221 as of March 31, 2024 and December 31, 2023, respectively, which are comprised of other notes payable and mortgage loans acquired in the normal course of business. The other notes payable have maturities ranging up to two years. The effective interest rates on these notes range from 6.79% to 7.69%. The mortgage loans contain release fee arrangements with no interest rate that are to be repaid through January 26, 2027.

Convertible Note

The Company entered into a Convertible Note Agreement in connection with the closing of the Business Combination. The Notes have an outstanding balance of $68,526,995 and $68,038,780, as of March 31, 2024 and December 31, 2023, respectively, and mature on March 30, 2028. The Notes bear interest at a rate of 15%. Future interest payments on the remaining outstanding Notes totaled approximately $60,273,006, with approximately $14,220,410 due within the next twelve months. Refer to Note 13 - Convertible note payable of the Notes to the Condensed Consolidated Financial Statements contained in this report for additional information.

Leases

The Company leases several office spaces in South Carolina under operating lease agreements with related parties, and one office space in North Carolina with a third party. The office leases have a remaining lease term of 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. As of March 31, 2024, the future minimum lease payments required under these leases totaled $6.6 million, with $1.5 million payable within the next twelve months. Further information regarding Company’s leases is provided in Note 12 - Commitments and contingencies of the Notes to the Condensed Consolidated Financial Statements.

Cash Flows

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following table summarizes UHG’s cash flows for the periods indicated:

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	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

Operating Activities

Net cash flows used in operating activities during the three months ended March 31, 2024 was $17.9 million, as compared to cash flows provided of $23.1 million for the three months ended March 31, 2023. The difference in cash flows period over period is a decrease of $41.0 million. This change is primarily attributable to a decrease in cash provided by net income adjusted for non-cash transactions and cash provided by a change in inventory of $7.1 million and$25.2 million, respectively, and an increase in cash used in accounts payable of $7.4 million.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2024 was attributable to cash paid to acquire the ~~JOBS Act. Subject~~homebuilding assets of Creekside Custom Homes of $12.7 million.

Net cash provided by investing activities for the three months ended March 31, 2023 was attributable to ~~certain conditions set forth~~proceeds of from the sale of property and equipment of $0.1 million offset by the purchase of additional property and equipment of $0.1 million.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2024 was $2.6 million compared to net cash used in financing activities of $75.6 million for the three months ended March 31, 2023. The difference in cash flows period over period is $73.0 million. The decrease in financing activities was primarily attributable to proceeds from homebuilding debt and land banking arrangements, net of debt issuance costs, of $37.7 million, partially offset by repayment of homebuilding debt of $35.1 million during the three months ended March 31, 2024. In contrast, during the three months ended March 31, 2023, cash flows provided by financing activities included cash received of $94.4 million as a result of the merger, PIPE, and recapitalization transactions, partially offset by distributions and net transfers to shareholders and other affiliates of $17.9 million.

Critical Accounting Estimates

There have been no significant changes to the Company’s critical accounting policies during the three months ended March 31, 2024 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the ~~JOBS Act,~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, aside from those included below.

Stock-Based Compensation

As of March 31, 2024, the Company had four types of stock-based compensation outstanding: stock options, restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”) with a market condition and stock warrants. Stock option, RSU, and PSU awards are expensed on a straight-line basis over the requisite service period of the entire award from the date of grant through the period of the last separately vesting portion of the grant. For grants that include graded vesting and either a market or performance condition, the Company utilizes the graded vesting method to recognize compensation expense. The Company accounts for forfeitures when they occur. The Company’s stock warrant awards do not contain a service condition and are expensed on the grant date.

The fair value of stock option awards, granted or modified, is determined on the grant date (or modification or acquisition dates, if ~~as an “emerging growth company,” we choose~~applicable) at fair value, using the Black‑Scholes option pricing model. The fair value and requisite service period of PSU awards with a market condition are determined using a Monte Carlo simulation model. These models require the input of highly subjective assumptions, including the option's expected term and stock price volatility. The grant date fair value of the RSUs is the closing price of UHG’s common stock on the date of the grant. Refer to ~~rely on such exemptions we may~~Note 14 - Stock-based compensation of the Notes to the Consolidated Financial Statements contained in this report for additional information.

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Land Banking

During the first quarter of 2024, the Company entered into a land banking arrangement with a separate third-party to transfer developed lots to the third-party while retaining the right to repurchase the lots through option agreements. Under the terms of these option agreements, the Company obtains the right, but not bethe obligation, to repurchase the lots over a specified period of time at pre-determined prices. Consistent with ASC 606, the Company is required to ~~among other things, (i) provide~~continue recognizing the finished lots sold on its Condensed Consolidated Balance Sheets as the arrangement is accounted for as a financing arrangement rather than a sale. At the time the Company sells finished lots to the land banker and simultaneously enters into option agreements to repurchase those finished lots, the net cash received by the land banker represents approximately 80% of the carrying value of the associated finished lots. Management determined it holds a variable interest in the land banker through its potential to absorb some of the third-parties’ first dollar risk of loss by not receiving an ~~auditor’s attestation report~~amount equal to or greater than the value of the associated finished lots the Company continues to recognize on ~~our system~~its Condensed Consolidated Balance Sheets as Real estate inventory not owned.

Management determined that the land banker is a VIE, however, the Company is not the primary beneficiary of ~~internal controls over financial reporting~~the VIE as it does not have the power to direct the VIE’s significant activities related to land development.

Off-Balance Sheet Arrangements

Land-Light Acquisition Strategy

The Company operates a land-light and capital efficient lot acquisition strategy primarily through lot purchase agreements. These contracts generally allow the Company to forfeit its right to purchase the lots for any reason, and its sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to ~~Section 404, (ii) provide all~~such agreements. The Company does not have any financial guarantees or completion obligations, and does not guarantee lot purchases on a specific performance basis under these agreements.

UHG’s pipeline as of March 31, 2024 consists of approximately 10,900 lots, which includes lots that are owned or controlled by Land Development Affiliates, and which UHG expects to obtain the ~~compensation disclosure~~contractual right to acquire, in addition to lots that UHG may ~~be required~~acquire from third party lot option contracts. The entire risk of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplementloss pertaining to the ~~auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such~~aggregate purchase price of contractual commitments resulting from non-performance under finished lot purchase agreements is limited to approximately $38.7 million in Lot purchase agreement deposits as ~~the correlation between executive compensation and performance and comparisons~~ of ~~the CEO’s~~

March 31, 2024.

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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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

UHG’s operations are interest rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a ~~smaller reporting company as defined by Rule 12b-2~~significant increase in interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates could adversely affect UHG’s revenues, gross profits and net income.

UHG is subject to market risk on its debt instruments primarily due to fluctuations in interest rates. UHG utilizes both fixed-rate and variable-rate debt. For fixed-rate debt, changes in interest rates generally affect the fair value of the ~~Exchange Act~~debt instrument but not earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect the Company’s future earnings and cash flows. UHG has not entered into, nor does it intend to enter into in the future, derivative financial instruments for trading or speculative purposes or to hedge against interest rate fluctuations

The interest rate on the borrowings under the Syndicated Line is based upon adjusted daily simple SOFR plus an applicable margin ranging between 275 basis points and 350 basis points, based upon UHG’s leverage ratio. Therefore, UHG is exposed to market risks related to fluctuations in interest rates on its outstanding debt under the Syndicated Line. As of March 31, 2024, UHG had $69.2 million outstanding under the Syndicated Line, which carried a weighted average interest rate of 8.57%. A 100 basis point increase in overall interest rates would negatively affect the Company’s net income by approximately $0.7 million.

The fair value of the outstanding Notes is subject to market risk and other factors due to the convertible features. The Notes are convertible at the holder’s option into UHG Class A Common Shares at any time after March 30, 2024 through March 30, 2028, at $5.58 per share. Going forward, the fair value of the Notes will generally increase as the common stock price increases and will generally decrease as the common stock price declines in value. The Notes are

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carried at amortized cost and the fair value is presented for disclosure purposes only. The interest and market value changes affect the fair value of the Notes, but do not ~~required~~impact UHG’s financial position, cash flows, or results of operations due to ~~provide~~ the ~~information otherwise required under this item.~~

fixed nature of the debt obligation.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Under~~

A company’s internal controls over financial reporting is a process designed to provide reasonable assurance regarding the ~~supervision~~reliability of financial reporting and ~~with~~ the ~~participation~~preparation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation and in light of the SEC Staff Statement, our Certifying Officers concluded that, solely due to the Company’s misapplication of the accounting for the Company’s warrants as liabilities, our disclosure controls and procedures were not effective as of March 31, 2021. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements ~~were prepared~~ in accordance with ~~U.S.~~ generally accepted accounting principles. ~~Accordingly, management believes~~Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

UHG identified material weaknesses in its internal controls in the following areas: ineffective tax review controls; lack of second level reviews in business processes; lack of formal control review and documentation required by COSO principles; ineffective Information Technology General Controls (“ITGCs”) related to certain systems, applications, and tools used for financial reporting; and the Company did not establish effective user access and segregation of duties controls across financially relevant functions.

Each of the material weaknesses described above involves control deficiencies that could result in a misstatement of one or more account balances or disclosures that would result in a material misstatements to the UHG financial statements ~~included~~that would not be prevented or detected, and, accordingly, it has determined that these control deficiencies constitute material weaknesses.

UHG is currently in ~~this Quarterly Report on Form 10Q present fairly in~~the process of implementing measures and has taken the below steps to address the underlying causes of these material weaknesses and the control deficiencies.

•reviewing and enhancing its system of internal controls across all ~~material respects our financial position, results of operations and cash flows for the period presented.~~

~~Disclosure controls and procedures are designed~~departments to ensure that financial statement line items and disclosures are addressed by sufficiently precise controls;

•continuing to enhance the adoption of the COSO framework in order to develop and deploy control activities and assess the effectiveness of internal controls over financial reporting;

•assessing and updating its internal controls related to the financial statement review process, including review controls over manual journal entries and account reconciliations;

•evaluating and improving IT general controls over information ~~required~~systems relevant to financial reporting, including privileged access and segregation of duties;

•realigning existing personnel and the adding both internal and external personnel to strengthen management’s review and documentation over internal control over financial reporting; and

•implementing a more thorough second level review process over the tax provision.

UHG will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be ~~disclosed by us~~remediated until UHG’s remediation plan has been fully implemented, and it has concluded that its internal controls are operating effectively for a sufficient period of time.

UHG cannot be certain that the steps it is taking will be sufficient to remediate the control deficiencies that led to its material weaknesses in ~~our Exchange Act reports is recorded, processed, summarized,~~its internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, UHG cannot be certain that it has identified all material weaknesses and ~~reported within the time periods specified~~control deficiencies in its internal control over financial reporting or that in the ~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal~~future it will not have additional material weaknesses or control deficiencies in its internal control over financial ~~officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.~~

reporting.

Changes in Internal Control over Financial Reporting

~~There was~~

Except for the efforts to begin remediating the material weaknesses described above, there were no ~~change~~changes during the quarter ended March 31, 2024 in ~~our~~UHG’s internal control over financial reporting that ~~occurred during the three months ended March 31, 2021, covered by this Quarterly Report on Form 10-Q that has~~have materially affected, or isare reasonably likely to ~~materially~~material affect, our internal control over financial ~~reporting, as the circumstances that led to the revision~~reporting.

Table of our financial statements have not yet been identified. Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.

Contents

PART ~~II -~~II. OTHER INFORMATION

Item 1. Legal Proceedings

~~From time~~

Reference is made to ~~time, we may be involved~~Note 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.

Item 1A. Risk ~~Factors.~~

Factors ~~that could cause our actual results to differ materially~~

There have been no material changes from ~~those in this Quarterly Report are any of~~ the ~~risks described~~risk factors previously disclosed in Part I, Item 1A ~~of our~~in the Company’s Annual Report on Form 10-K ~~filed~~for the year ended December 31, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the ~~SEC on March 31, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.~~SEC. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 31, 2021, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

~~Table of Contents~~

~~ITEM~~

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~

~~In October 2020, we issued 8,625,000 Founder Shares to~~Proceeds

(a)During the quarter ended March 31, 2024, there were no unregistered sales of our ~~Sponsor for an aggregate purchase price of $25,000.~~

~~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 Units~~securities 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 sold~~not reported in ~~the offering were registered under the Securities Act on~~ a ~~registration statement~~Current 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.~~

8-K.

(b)None.

(c)None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~

(a)None.

(b)None.

(c)None.

~~Table of Contents~~

Item 6. ~~Exhibits.~~

Exhibits

The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by reference herein.

Table of Contents

EXHIBIT INDEX

The following exhibits are ~~filed as part of, or incorporated by reference into,~~included in this ~~Quarterly Report~~report on Form ~~10-Q.~~

10-Q for the period ended March 31, 2024 (and are numbered in accordance with Item 601 of Regulation S-K).


Exhibit No.		Description
~~No.~~ 2.1†		~~Description of Exhibit~~
~~1.1~~	~~Underwriting~~Business Combination Agreement, dated ~~January 25, 2021,~~September 10, 2022, by and between DiamondHead Holdings Corp., Merger Sub and Great Southern Homes, Inc. (incorporated by reference to Exhibit 2.1 to the ~~Company~~Company’s Registration Statement on Form S-4 filed on February 9, 2023)
3.1		Amended and ~~Goldman Sachs & Co. LLC. as representatives~~Restated Certificate of Incorporation of United Homes Group, Inc. (incorporated by reference to Exhibit 3.1 of the ~~several underwriters. (1)~~Company’s Current Report on Form 8-K, filed on April 5, 2023)
~~3.1~~ 3.2			~~Certificate~~Amended and Restated Bylaws of ~~Incorporation. (2)~~United Homes Group, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on April 5, 2023)
~~3.2~~ 4.1			~~Bylaws. (2)~~
~~4.1~~	Warrant Agreement, dated January 25, 2021, by and between ~~the Company and~~ American Stock Transfer & Trust Company ~~LLC, as warrant agent. (1)~~and DiamondHead Holdings Corp. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 25, 2021)
~~10.1~~ 4.2			~~Letter Agreement,~~Senior Convertible Promissory Note, dated ~~January 25, 2021 by and among the Company, its officers, directors and the Sponsor. (1)~~
~~10.2~~	~~Investment Management Trust Agreement, dated January 25, 2021,~~March 30, 2023, by and between the Company and ~~American Stock Transfer & Trust Company, as trustee. (1)~~Conversant Opportunity Master Fund LP (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed on April 28, 2023)
~~10.3~~ 4.3			~~Registration Rights Agreement,~~Senior Convertible Promissory Note, dated ~~January 25, 2021, by and among the Company, the Sponsor and the other holders party thereto. (1)~~
~~10.4~~	~~Private Placement Warrants Purchase Agreement, dated January 25, 2021,~~March 30, 2023, by and between the Company and Dendur Master Fund Ltd. (incorporated by reference to Exhibit 4.3 to the ~~Sponsor. (1)~~Company’s Registration Statement on Form S-1 filed on April 28, 2023)
~~10.5~~ 10.1†		Second Amendment to the Second Amended and Restated Credit Agreement and Omnibus Amendment to Loan Documents, dated as of January 26, 2024, among United Homes Group, Inc., Great Southern Homes, Inc., Rosewood Communities, Inc., Wells Fargo Bank, National Association, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 29, 2024)
10.2		Form of ~~Indemnity~~Time-Based Stock Option Award and Agreement ~~between~~(incorporated by reference to Exhibit 10.1 to the ~~Company and each of the officers and directors of the Company. (1)~~Company’s Current Report on Form 8-K filed on February 23, 2024)
~~10.6~~ 10.3			~~Administrative Support~~Form of Performance Stock Unit Award and Agreement ~~dated January 25, 2021,~~(incorporated by ~~and between~~reference to Exhibit 10.2 to the ~~Company and the Sponsor. (1)~~Company’s Current Report on Form 8-K filed on February 23, 2024)
31.1*			Certification of Principal Executive Officer, ~~Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant~~pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*			Certification of Principal Financial Officer, ~~Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant~~pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**			Certification of Principal Executive Officer, ~~and Principal Financial Officer Pursuant~~pursuant to 18 U.S.C. Section 1350, as ~~adopted Pursuant to~~created by Section 906 of the Sarbanes-Oxley Act of 2002
101.INS* 32.2**		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002	~~XBRL Instance Document~~
101.CAL* 101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH* 101.DEF*			~~XBRL Taxonomy Extension Schema Document~~
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*			Inline XBRL Taxonomy Extension ~~Labels~~Label Linkbase Document
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~ 104*			Cover ~~Page~~page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

______________________________


*			Filed or furnished herewith.

~~Furnished.~~

Certain of the exhibits and schedules to the Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

~~(1)~~

†

~~Previously~~Management contract or compensatory plan or arrangement required to be filed as an exhibit to ~~our Current Report on~~this Form ~~8-K on January 28, 2021 and incorporated by reference herein.~~

10-K.

~~(2)~~

~~Previously filed as an exhibit to our Registration Statement on Form S-3 (Registration No. 333-251961) on January 8, 2021 and incorporated by reference herein.~~

Certain instruments defining rights of holders of long-term debt of the company and its consolidated subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Upon request, the company agrees to furnish to the SEC copies of such instruments.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~registrant~~Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly ~~authorized on this 3rd day of June 2021.~~

authorized.


	UNITED HOMES GROUP, INC.
	(Registrant)		~~DIAMONDHEAD HOLDINGS CORP.~~

Dated: May 10, 2024	By:	/s/ Keith Feldman
		Keith Feldman	~~By:~~	~~/ s/ David T. Hamamoto~~
		Chief Financial Officer	~~Name:~~	~~David T. Hamamoto~~
			~~Title:~~	~~Chief Executive Officer~~ (Principal ~~Executive~~Financial and Accounting Officer)

~~Delaware~~		~~85-3460766~~
(State or other jurisdiction of ~~incorporation)~~ incorporation or organization)				(IRS Employer Identification No.)


					Page No.
PART I.			FINANCIAL INFORMATION		3
Item 1.			Condensed Consolidated Financial Statements:		~~Page No.~~ 3

~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~	~~Financial Statements~~	1

	Condensed Consolidated Balance Sheets as of March 31 ~~2021~~, 202 4 (unaudited) and December 31, ~~2020~~202 3	1 3

	~~Unaudited~~ Condensed ~~Statement~~Consolidated Statements of Operations for the Three Months Ended March ~~31, 2021~~ 3 1 , 202 4 and 202 3 (unaudited)	2 4

	~~Unaudited~~ Condensed ~~Statement~~Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March ~~31, 2021~~ 3 1 , 202 4 and 202 3 (unaudited)	3 5

	~~Unaudited~~ Condensed ~~Statement~~Consolidated Statements of Cash Flows for the Three Months Ended March ~~31, 2021~~ 3 1 , 202 4 and 202 3 (unaudited)	4 6
			Notes to Condensed Consolidated Financial Statements (unaudited)		8
			~~Notes to Unaudited Condensed Financial Statements~~	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			19 31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			23 44

Item 4.	Controls and Procedures			23 45
PART II.			OTHER INFORMATION		46
~~PART II. OTHER INFORMATION~~Item 1.			23 Legal Proceedings		46
Item 1A.			Risk Factors		46
~~Item 1.~~			~~Legal Proceedings~~	23

~~Item 1A.~~	~~Risk Factors~~	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ~~from Registered Securities~~			24 46

Item 3.	Defaults Upon Senior Securities			24 46

Item 4.	Mine Safety Disclosures			24 46
Item 5.			Other Information		46
~~Item 5.~~			~~Other Information~~	24

Item 6.	Exhibits			25
46
~~SIGNATURES~~		26


☒x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware						85-3460766
~~DIAMONDHEAD HOLDINGS CORP.~~
~~(Exact name of registrant as specified in its charter)~~


	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	$	291,250


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	$	0.30


	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


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


	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


	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


	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	%


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