As filed with the U.S. Securities and Exchange Commission on July 14, 2023

Registration No. 333-271527​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 2 to

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933​

United Homes Group, Inc.
(Exact name of registrant as specified in its charter)

90 N Royal Tower Drive
Irmo, South Carolina 29063
Telephone: (844) 766-4663

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)​

Erin Reeves McGinnis
General Counsel and Corporate Secretary
90 N Royal Tower Drive
Irmo, South Carolina 29063
Telephone: (844) 766-4663

(Name, address, including zip code, and telephone number, including area code, of agent for service)​

Copy to:

Andrew M. Tucker
Nelson Mullins Riley & Scarborough LLP
101 Constitution Ave NW, Suite 900
Washington, DC 20001
Telephone: (202) 689-2800

Approximate date of commencement of proposed sale of the securities to the public: From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box.   ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

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 7(a)(2)(B) of the Securities Act.   ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JULY 14, 2023

United Homes Group, Inc.

Secondary Offering of
Up to 21,544,588 Class A Common Shares
$80,000,000 Senior Convertible Promissory Notes due 2028

This prospectus relates to the offer and resale, from time to time, of up to 21,544,588 shares of Class A common stock, $0.0001 par value per share (“Class A Common Shares”) of United Homes Group, Inc. (the “Company” and f/k/a DiamondHead Holdings Corp., or “DHHC”) by the selling stockholders named in this prospectus, including their permitted transferees, donees, pledgees and other successors-in-interest (collectively, the “Selling Stockholders”), consisting of (i) 744,588 Class A Common Shares issued to the Selling Stockholders in a private placement PIPE investment (the “PIPE Investment”), pursuant to a note purchase agreement entered into on March 21, 2023 (the “Note Purchase Agreement”), by and between the Company, Great Southern Homes, Inc., a South Carolina corporation (“GSH”), and certain investors (the “Convertible Note Investors”), and (ii) up to 20,800,000 Class A Common Shares issuable upon conversion of a series of four senior convertible promissory notes (the “Notes”). The number of Class A Common Shares registered under this prospectus represent the maximum number of Class A Common Shares issuable pursuant to the terms of the Notes, including payment of interest on the Notes through March 30, 2028 (the “Maturity Date”), determined as if the outstanding Notes were converted in full at a conversion price of $5.00 per Class A Common Share. Of the 20,800,000 Class A Common Shares being registered that are issuable upon conversion of the Notes, 16,000,000 Class A Common Shares may be issued pursuant to the conversion of the principal amount of the Notes and 4,800,000 Class A Common Shares may be issued pursuant to the conversion of accrued interested over the term of the Notes.

This prospectus also relates to the offer and sale from time to time by the Selling Stockholders of the Notes themselves. The Notes bear interest at a rate of fifteen percent (15.0%) per annum for the first four years following the Notes’ issue date of March 30, 2023 (the “Issue Date”). The interest rate increases by one percent (1.0%) annually beginning on the fourth anniversary of the Issue Date of the Notes. The Notes mature and the entire unpaid principal amount and unpaid accrued interest on the Notes become payable on the fifth anniversary of the Issue Date, March 30, 2028 (“the Maturity Date”). Each Note (or any portion of a Note) is convertible at a holder’s option into Class A Common Shares, at any time after the first anniversary of the closing date of the Business Combination on March 30, 2024 (the “Merger Anniversary Date”) until the Maturity Date of such Note, at a per share price equal to 80% of the value weighted average trading price per Class A Common Share during the thirty (30) consecutive days prior to the Merger Anniversary Date (such thirty-day period, the “Measurement Period”), subject to a floor price of $5.00 and a maximum price of $10.00 per share. The conversion price is subject to customary adjustments for certain corporate events as provided in the Notes. If any such event occurs, the number of Class A Common Shares issuable upon conversion may be higher than implied by the initial conversion price. The Notes may be redeemed by the Company at any time prior to sixty (60) days before the Maturity Date by payment of all principal amounts and interest remaining outstanding at the time of redemption plus an additional amount to compensate the Convertible Note Investors for the early repayment. The Notes are also subject to conversion at the option of the Company following the second anniversary of March 30, 2023, but only if during a specified period following such second anniversary the Class A Common Shares trade at a price equal to or over $13.50 per share. See the sections titled “Private Placement of Notes” for further description of the Notes.

We are registering the Class A Common Shares issuable upon the conversion of the Notes, the Class A Common Shares issued to the Convertible Note Investors in connection with the PIPE Investment, and the Notes themselves (together, the “Registrable Securities”) for resale pursuant to the Note Purchase Agreement between us, GSH, and the Convertible Note Investors. Our registration of the Registrable Securities covered by this prospectus does not mean that the Selling Stockholders will offer or sell any of the Registrable Securities registered hereby. The Selling Stockholders may offer, sell or distribute all or a portion of their Registrable Securities publicly or through private transactions at prevailing market prices or at negotiated prices. We provide more information about how the Selling Stockholders may sell the Registrable Securities in the section entitled “Plan of Distribution.” We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of the Registrable Securities by the Selling Stockholders. See the sections titled “Private Placement of Notes” for a description of the transaction contemplated by the Note Purchase Agreement and “Selling Stockholders” for additional information regarding the Selling Stockholders.

The Selling Stockholders will determine the timing, pricing and rate at which they sell the securities covered by this Registration Statement into the public market. While certain Selling Stockholders may experience a positive rate of return based on the current trading price of our Class A Common Shares, public investors may not experience a similar rate of return on the securities they purchased due to differences in the purchase prices and the current trading price of our Class A Common Shares. Even if the trading price is significantly below the Company’s initial public offering price or the market price as of the date of this prospectus, the Selling Stockholders may have an incentive to sell their securities, because they will still profit on sales due to the lower prices at which they purchased their securities as compared to the public investors. The aggregate gross amount of the PIPE Investment was $75,000,000, in exchange for which the Convertible Note Investors received Notes in an aggregate principal amount of $80,000,000 and 744,588 Class A Common Shares. No additional consideration was paid by the Convertible Note Investors for the Class A Common Shares. Based on the closing price of the Class A Common Shares on July 7, 2023, which was $10.54 per share, and assuming the resale by the Selling Stockholders of (i) all 744,588 Class A Common Shares acquired in the PIPE Investment (ii) all 20,800,000 Class A Common Shares that may be issuable upon conversion of the Notes, and being registered on the registration statement of which this prospectus forms a part, the Selling Stockholders could earn approximately $227.1 million in aggregate proceeds from the resale of such shares. The 744,588 shares issued to the Convertible Note Investors in connection with the PIPE Investment were issued in exchange for the Convertible Note Investors agreeing to participate in the Convertible Note offering and were ascribed a value of $5.00 per share, which would result in a gain to the Selling Stockholders of approximately $4.1 million based on the closing price of the Class A Common Shares on July 7, 2023. The 20,800,000 Class A Common Shares that may be issuable upon conversion of the Notes will be issued at a conversion price determined in accordance with the terms of the Notes, which price will be no less than $5.00 per share and no more than $10.00 per share. Assuming a midpoint conversion price of $7.50 per share, the Selling Stockholders would receive a gain of approximately $63.2 million based on the closing price of the Class A Common Shares on July 7, 2023.

Our Class A Common Shares and public warrants (the “Public Warrants”) are listed on the Nasdaq Capital Market (the “NASDAQ”) under the symbols “UHG” and “UHGWW,” respectively. On July 7, 2023, the closing price of our Class A Common Shares was $10.54 per share and the closing price of our Public Warrants was $0.59 per warrant.

The Class A Common Shares being offered for resale pursuant to this prospectus by the Selling Stockholders represent approximately 67% of the total Class A Common Shares outstanding as of July 7, 2023, assuming no Warrants are exercised and no Notes are converted. In addition, we have concurrently filed a Registration Statement on Form S-1 (SEC File No. 333-271515) (the “Warrants S-1”) to register the primary issuance of up to 11,591,664 Class A Common Shares, consisting of (i) up to 8,625,000 Class A Common Shares issuable upon the exercise of public warrants (the “Public Warrants”), which are exercisable at a price of $11.50 per share; and (ii) up to 2,966,664 Class A Common Shares issuable upon the exercise of private placement warrants (the “Private Placement Warrants”), which are exercisable at a price of $11.50 per share, and the resale of (i) 421,000 Class A Common Shares issued in a private offering, (ii) 2,966,664 Class A Common Shares issuable upon exercise of the Private Placement Warrants, and (iii) 2,966,664 Private Placement Warrants. The Class A Common Shares being registered for resale under the Warrants S-1, which includes up to (i) 421,100 Class A Common Shares issued in a private offering, and (ii) 2,966,664 Class A Common Shares issuable upon exercise of the Private Placement Warrants, represent approximately 23.6% of the total Class A Common Shares outstanding as of July 7, 2023, assuming no Public Warrants are exercised and no Notes are converted. The total amount being registered for resale on this registration statement and the Warrants S-1 represents approximately 57% of the total Class A Common Shares outstanding as of July 7, 2023, assuming that all Public Warrants and Private Placement Warrants are exercised and the Notes are converted. The sale of all of the Class A Common Shares being registered for potential resale pursuant to this prospectus and the Warrants S-1, or the perception in the market that such sales may occur, may cause the market price of our securities to decline significantly.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), and are subject to reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

See the section entitled “Risk Factors” beginning on page 8 of this prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is July   , 2023

 

TABLE OF CONTENTS

You should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus and any applicable prospectus supplement. Neither we nor the Selling Stockholders have authorized anyone to provide you with different information. Neither we nor the Selling Stockholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any applicable prospectus supplement is accurate as of any date other than the date of the applicable document. Since the date of this prospectus and the documents incorporated by reference into this prospectus, our business, financial condition, results of operations and prospects may have changed.

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Stockholders may, from time to time, sell the securities offered by them described in this prospectus.

This prospectus relates to the offer and resale, from time to time, of up to 21,544,588 Class A Common Shares by the Selling Stockholders, consisting of (i) 744,588 Class A Common Shares issued to the Selling Stockholders in the PIPE Investment, and (ii) up to 20,800,000 Class A Common Shares that are issuable upon conversion of the Notes. This prospectus also relates to the offer and sale from time to time by the Selling Stockholders of the Notes themselves. We will not receive any proceeds from the sale of the Class A Common Shares or the Notes pursuant to this prospectus.

Neither we nor the Selling Stockholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus. Neither we nor the Selling Stockholders take responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Stockholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”

On March 30, 2023 (the “Closing Date”), the Company consummated the previously announced business combination pursuant to that certain Business Combination Agreement, dated as of September 10, 2022, by and among the Company, Hestia Merger Sub, Inc., a South Carolina corporation and wholly owned subsidiary of the Company (“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 (the “Business Combination”), with GSH surviving the merger as a wholly owned subsidiary of the Company. On the Closing Date, and in connection with the closing of the Business Combination (the “Closing”), the Company changed its name to “United Homes Group, Inc.”

Unless the context indicates otherwise, references in this prospectus to the “Company,” “United Homes Group,” “UHG,” “we,” “us,” “our” and similar terms refer to United Homes Group, Inc.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this prospectus, our future financial performance, strategy, expansion plans, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “goal,” “outlook,” “forecast,” “possible,” “potential,” “predict,” “project” or the negative of such terms or other similar expressions. 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. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

Forward-looking statements in this prospectus may include, for example, statements about:

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our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

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our financial and business performance following the Business Combination, including financial projections and business metrics;

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our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

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the implementation, market acceptance and success of our business model;

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our market opportunity and the potential growth of that market;

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trends with respect to interest rates and cancellation rates;

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our ability to effect our growth strategies, acquisitions or investments successfully;

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competitive conditions within the homebuilding, lot development and financial services industries;

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the effects of governmental regulations and environmental matters on our homebuilding and land development operations;

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expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”);

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our future capital requirements and sources and uses of cash;

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constriction of the credit and public capital markets, which could limit our ability to access capital and increase our costs of capital; and

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our business, expansion plans and opportunities.

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These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements. The following factors, among others, may cause actual results to differ materially from those expressed or implied in our forward-looking statements:

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the outcome of any legal proceedings;

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our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

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changes in applicable laws or regulations;

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our ability to execute our business model, including the success of our operations in new markets and our ability to expand into additional new markets;

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a slowdown in the homebuilding industry or changes in population growth rates in our markets;

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volatility and uncertainty in the credit markets and broader financial markets;

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disruption in the terms or availability of mortgage financing or an increase in the number of foreclosures in our markets;

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shortages of, or increased prices for, labor, land or raw materials used in land development and housing construction, including due to changes in trade policies;

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delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control;

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our ability to continue to leverage our asset-light operating strategy;

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that we have identified a material weakness in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements;

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the ability to maintain the listing of our securities on Nasdaq or any other exchange; and

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the possibility that we may be adversely affected by other economic, business or competitive factors.

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Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Additional cautionary statements or discussions of risks and uncertainties that could affect our results or the achievement of the expectations described in forward-looking statements may also be contained in any accompanying prospectus supplement.

Should one or more of the risks or uncertainties described in this prospectus, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in the section entitled “Risk Factors” and in our periodic filings with the SEC. Our SEC filings are available publicly on the SEC’s website at www.sec.gov.

You should read this prospectus and any accompanying prospectus supplement completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

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RISK FACTORS

Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements” and “Summary Risk Factors,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus, or any prospectus supplement are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business, financial condition, liquidity, results of operations and prospects.

Risks Related to UHG’s Business

UHG’s long-term growth depends upon its ability to acquire developed lots from affiliated land development companies, including Land to Lots, LLC, GS Jacobs Creek, LLC, and PC Land Development Co., LLC (collectively, the “Land Development Affiliates”) or other sellers, and the ability of such sellers to successfully identify and acquire desirable land parcels for residential build-out. A failure to successfully identify and acquire desirable land parcels for residential build-out could adversely affect UHG’s business or financial results.

UHG’s long-term growth depends upon its ability to continually acquire developed lots from the Land Development Affiliates or other sellers on favorable terms. UHG also depends upon the ability of these entities to successfully identify and acquire attractive land parcels for the construction of UHG’s single-family homes at reasonable prices, and to develop such parcels in a manner that meets UHG’s criteria for developed lots. In addition, because UHG employs an asset-light business model, it may have access to fewer and less attractive homebuilding lots than if it owned lots outright, like some of its competitors who do not operate under an asset-light model.

The ability to acquire land parcels for new single-family homes may be adversely affected by changes in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices, competition for available land parcels, availability of financing to acquire land parcels, zoning, and other market conditions, and there can be no assurance that an adequate supply of land parcels will continue to be available to UHG. If the supply of land parcels appropriate for development of single-family homes is limited because of these factors, or for any other reason, UHG’s ability to grow could be significantly limited, and the number of homes that UHG builds and sells could decline, which could materially and negatively affect its sales, profitability, stock performance, ability to service its debt obligations and future cash flows. To the extent that UHG is unable to purchase developed lots on a timely basis and at reasonable prices, UHG’s home sales revenue and results of operations could be negatively impacted.

UHG’s geographic concentration could materially and adversely affect its business or financial results if the homebuilding industry in its current markets should decline.

UHG currently builds and sells homes in South Carolina, with a smaller presence in Georgia. UHG’s business strategy is focused on the design, construction, and sale of single-family homes and townhomes across these key markets. Because UHG expects that its operations will be concentrated in the Southeastern United States, a prolonged economic downturn in this region, or in a particular industry or sector of employment that is fundamental to this region, could have a material adverse effect on UHG’s business, prospects, liquidity, financial condition, and results of operations, and a disproportionately greater impact on UHG than other homebuilders with more geographically diversified operations.

Constriction of the credit and capital markets could limit UHG’s ability to access financing and increase its costs of capital.

During past economic and housing downturns, the credit markets constricted and reduced some sources of liquidity that were previously available to UHG. Consequently, UHG relied principally on its cash on hand to meet its working capital needs and repay outstanding indebtedness during those times. There likely will be similar periods in the future when financial market upheaval will increase UHG’s cost of

 

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capital or limit UHG’s ability to access the debt markets or obtain bank financing. During such times, UHG may not have sufficient cash on hand to meet its working capital needs and repay outstanding indebtedness.

The homebuilding industry is capital-intensive and requires significant up-front expenditures to acquire lots and begin construction on homes. There is no assurance that cash generated from UHG’s operations, borrowings incurred under its current credit agreements or project-level financing arrangements, or proceeds raised in capital markets transactions will be sufficient to finance UHG’s projects or otherwise fund its liquidity needs. If UHG’s future cash flows from operations and other capital resources are insufficient to finance its projects or otherwise fund its liquidity needs, it may be forced to:

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reduce or delay business activities, lot acquisitions and capital expenditures;

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sell assets;

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obtain additional debt or equity capital; or

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restructure or refinance all or a portion of its debt on or before maturity.

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These alternative measures may not be successful and UHG may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of UHG’s existing debt may limit its ability to pursue these alternatives. Further, UHG may seek additional capital in the form of project-level financing from time to time. The availability of borrowed funds, especially for construction financing, may be greatly reduced nationally, and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans. Construction activities may be adversely affected by any shortage or increased cost of financing or the unwillingness of third parties to engage in joint ventures. Any difficulty in obtaining sufficient capital for planned construction expenditures could cause project delays and any such delay could result in cost increases and may adversely affect UHG’s sales and future results of operations and cash flows.

The risks associated with UHG’s lots under development could adversely affect its business or financial results.

There are risks inherent in controlling, owning and building upon finished lots and housing inventory risks are substantial for UHG’s homebuilding activities. If housing demand declines, UHG may not be able to build and sell homes profitably in some target communities, and it may not be able to fully recover the costs of some of the lots it owns or which it is contracted to purchase. Also, the market value of UHG’s finished lots and housing inventories may fluctuate significantly due to changes in market conditions. As a result, its deposits for lots controlled under purchase contracts may be put at risk because the measures it employs to manage inventory risk, including its asset-light lot operating strategy, may not be adequate to insulate operations from a severe drop in inventory values, and it may have to sell homes for a lower profit margin or record inventory impairment charges on its lots.

Because real estate investments are relatively illiquid, UHG’s ability to promptly sell one or more properties for reasonable prices in response to changing economic, financial, and investment conditions may be limited, and it may be forced to hold non-income producing properties for extended periods of time. UHG cannot predict whether it will be able to sell any property for the price or on the terms that it sets or whether any price or other terms offered by a prospective purchaser would be acceptable, nor can it predict the length of time needed to find a willing purchaser and to close the sale of a property. A significant deterioration in economic or homebuilding industry conditions may result in substantial inventory impairment charges. If UHG is unable to develop its communities successfully or within expected timeframes, its results of operations could be adversely affected.

Because most of UHG’s customers finance the purchase of their homes, the terms and availability of mortgage financing can affect the demand for and the ability to complete the purchase of a home, which could materially and adversely affect UHG.

A substantial majority of UHG’s customers finance their home purchases through lenders that provide mortgage financing. Rising interest rates, decreased availability of mortgage financing, reduced access to certain mortgage programs, higher down payment requirements or increased monthly mortgage costs, among

 

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other factors, may lead to reduced demand for UHG’s homes and mortgage loans. Mortgage interest rates have generally trended downward for the last several decades and reached historic lows in the summer of 2020, which made the homes UHG sells more affordable. However, more recently, mortgage interest rates have abruptly climbed, and UHG cannot predict whether they will continue to climb, remain at the current levels, or fall. If mortgage rates continue at current levels or climb further, the ability of prospective homebuyers to finance home purchases may be adversely affected and, as a result, UHG’s business, operating results and financial condition may be adversely affected.

Decreases in the availability of credit and increases in the cost of credit adversely affect the ability of homebuyers to obtain or service mortgage debt. Entry-level and first-time move-up homebuyers are the primary source of demand for UHG’s new homes. Entry-level homebuyers are generally more affected by the availability of financing than other potential homebuyers. In addition, many of UHG’s potential move-up homebuyers must sell their existing homes in order to buy a home from UHG. Where potential homebuyers must sell their existing homes in order to buy a new home, increases in mortgage costs, lack of availability of mortgages, and/or regulatory changes could prevent the buyers of potential homebuyers’ existing homes from obtaining a mortgage, which would result in the inability of a significant number of UHG’s potential customers to buy a new home. Similar risks apply to those buyers who are awaiting delivery of their homes and are currently in backlog. The success of homebuilders depends on the ability of potential homebuyers to obtain mortgages for the purchase of homes. If UHG’s customers (or potential buyers of its customers’ existing homes) cannot obtain suitable financing, UHG’s sales and results of operations could be adversely affected and the price of its securities may decline.

The federal government has taken on a significant role in supporting mortgage lending through its conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), both of which purchase home mortgages and mortgage-backed securities originated by mortgage lenders, and its insurance of mortgages originated by lenders through the Federal Housing Administration (“FHA”) and Veterans Administration (“VA”). The FHA insures mortgage loans that generally have lower credit requirements and is an important source for financing the sale of UHG’s homes. The secondary market for mortgage loans continues to primarily prefer securities backed by Fannie Mae, Freddie Mac or Ginnie Mae, and UHG believes the liquidity these agencies provide to the mortgage industry is important to the housing market. The availability and affordability of mortgage loans, including interest rates for such loans, could be adversely affected by a curtailment or cessation of the federal government’s mortgage-related programs or policies. Additionally, the FHA may continue to impose stricter loan qualification standards, raise minimum down payment requirements, impose higher mortgage insurance premiums and other costs, or limit the number of mortgages it insures. Due to federal budget deficits, the U.S. Treasury may not be able to continue supporting the mortgage-related activities of Fannie Mae, Freddie Mac, the FHA and the VA at present levels, or it may revise significantly the federal government’s participation in and support of the residential mortgage market. Because the availability of Fannie Mae, Freddie Mac, FHA and VA-backed mortgage financing is an important factor in marketing and selling many of UHG’s homes, any limitations, restrictions or changes in the availability of such government-backed financing could reduce UHG’s home sales, which could have a material adverse effect on its business, prospects, liquidity, financial condition and results of operations.

Increases in UHG’s home cancellation rate could have a negative impact on its home sales revenue and gross profit.

UHG’s backlog reflects sales contracts with homebuyers for homes that have not yet been delivered. UHG has received a deposit from a homebuyer for most homes reflected in its backlog and, generally, has the right to retain the deposit if the homebuyer fails to comply with his or her obligations under the sales contract, subject to certain exceptions, including as a result of state and local law, the homebuyer’s inability to sell his or her current home or, in certain circumstances, the homebuyer’s inability to obtain suitable financing. Home order cancellations negatively impact the number of closed homes, net new home orders, home sales revenue and results of operations, as well as the number of homes in backlog. Home order cancellations can result from a number of factors, including declines or slow appreciation in the market value of homes, increases in the supply of homes available to be purchased, increased competition, higher mortgage interest rates, homebuyers’ inability to sell their existing homes, homebuyers’ inability to obtain suitable financing, including providing sufficient down payments, and adverse changes in economic conditions.

 

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Cancellation rates have been on the rise in the broad market in recent months. An increase in the level of UHG’s home order cancellations could have a negative impact on its business, prospects, liquidity, financial condition and results of operations.

Tax law changes that increase the after-tax costs of owning a home could prevent potential customers from buying UHG’s homes and adversely affect its business or financial results.

Changes in federal income tax laws may affect the demand for new homes. Significant expenses of owning a home, including mortgage interest and real estate taxes, have historically been deductible expenses for an individual’s U.S. federal, and in some cases, state income taxes, subject to various limitations under current tax law and policy. The Tax Cuts and the Jumpstart Our Business Startups Act (the “JOBS Act”), which became effective January 1, 2018, includes provisions which impose significant limitations with respect to these income tax deductions. For instance, the annual deduction for real estate taxes and state local income taxes (or sales in lieu of income taxes) is now generally limited to $10,000. Furthermore, through the end of 2025, the deduction for mortgage interest is generally only available with respect to the first $750,000 of a new mortgage and there is no longer a federal deduction for interest on home equity loans. If the U.S. federal government or a state government further changes its income tax laws to further eliminate or substantially limit these income tax deductions, the after-tax cost of owning a new home would further increase for many potential customers. The resulting loss or reduction of these homeowner tax deductions that have historically been available has and could further reduce the perceived affordability of homeownership, and therefore the demand for and sales price of new homes, including those built by UHG. In addition, increases in property tax rates or fees on developers by local governmental authorities, as experienced in response to reduced federal and state funding or to fund local initiatives, such as funding schools or road improvements, or increases in insurance premiums can adversely affect the ability of potential customers to obtain financing or their desire to purchase new homes, and can have an adverse impact on UHG’s business and financial results.

UHG cannot make any assurances that its growth strategies will be successful or will not expose it to additional risks or result in other negative consequences to its business or financial results.

UHG intends to achieve its primary business objectives by executing on its growth strategies of continuing to leverage key macro housing trends, capitalizing on strong growth in core markets, engaging in accretive mergers and acquisitions, entering into programmatic build-to-rent partnerships, and identifying ancillary revenue growth opportunities, all of which are discussed in detail in the “Business” section of this prospectus. While UHG has a record of growth and significant achievement in the past, this does not guarantee UHG will continue to perform successfully.

UHG employs an asset-light lot acquisition strategy with a focus on the design, construction and sale of single-family homes and townhomes, and will utilize the Land Development Affiliates to handle land acquisition and development to maximize profits and enhance its access to capital. See “Business — Land Acquisition Strategy and Development Process” herein for additional information. UHG has not historically operated under this structure, and since land development is critical to homebuilding and sales, this measure could adversely affect its results of operations.

UHG intends to capitalize on its demonstrated operational experience to grow its market share within its existing markets and to opportunistically expand into new markets where it identifies strong economic and demographic trends that provide opportunities to build homes that meet its profit and return objectives. These strategic decisions may not advance its business strategy, provide a satisfactory return on its investment or provide any other anticipated benefits. Additionally, the execution and integration of any of these growth and expansion initiatives may not be successful and may require significant time and resources, which would divert management’s attention from other operations. Any of these initiatives could also expose UHG to material liabilities not discovered in the due diligence process and may lead to litigation. If these initiatives under-perform expectations or are unsuccessful, UHG may incur significant expenses or write-offs of inventory, other assets or intangible assets such as goodwill and company brand, and this will adversely affect UHG’s business and financial results.

 

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UHG may not be able to complete or successfully integrate any potential future acquisitions or experience challenges in realizing expected benefits of each such acquisition.

From time to time, UHG may evaluate possible acquisitions, some of which may be material. Potential future acquisitions may pose significant risks to UHG’s existing operations if they cannot be successfully integrated. These acquisitions would place additional demands on UHG’s managerial, operational, financial and other resources and create operational complexity requiring additional personnel and other resources. In addition, UHG may not be able to successfully finance or integrate any businesses that it acquires. Furthermore, the integration of any acquisition may divert management’s time and resources from UHG’s core business and disrupt its operations. Moreover, even if UHG is successful in integrating newly acquired businesses or assets, expected synergies or cost savings may not materialize, resulting in lower-than-expected benefits to UHG from such transactions. UHG may spend time and money on projects that do not increase its revenue. Additionally, when making acquisitions, it may not be possible for UHG to conduct a detailed investigation of the nature of the business or assets being acquired, for instance, due to time constraints in making the decision and other factors. UHG may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition. To the extent UHG pays the purchase price of an acquisition in cash, such an acquisition would reduce its cash reserves, and, to the extent the purchase price of an acquisition is paid with UHG’s stock, such an acquisition could be dilutive to UHG’s stockholders. To the extent UHG pays the purchase price of an acquisition with proceeds from the incurrence of debt, such an acquisition would increase UHG’s level of indebtedness and could negatively affect its liquidity and restrict its operations. Further, to the extent that the purchase price of an acquisition is paid in the form of an earn out on future financial results, the success of such an acquisition will not be fully realized by UHG for a period of time as it is shared with the sellers. All of the above risks could have a material adverse effect on UHG’s business, prospects, liquidity, financial condition and results of operations.

Failure to find suitable subcontractors may have a material adverse effect on UHG’s standards of service.

Substantially all of UHG’s construction work is done by third-party subcontractors with UHG acting as the general contractor. Accordingly, the timing and quality of UHG’s construction depends on the availability and skill of its subcontractors. The difficult operating environment over the last seven years in the United States has resulted in the failure of some subcontractors’ businesses and may result in further failures. In addition, reduced levels of homebuilding in the United States have led to some skilled tradesmen leaving the industry to take jobs in other sectors. UHG does not have long-term contractual commitments with any subcontractors, and there can be no assurance that skilled subcontractors will continue to be available at reasonable rates and in the areas in which UHG conducts its operations.

In the future, certain of the subcontractors UHG engages with may be represented by labor unions or subject to collective bargaining arrangements that require the payment of prevailing wages that are higher than normally expected on a residential construction site. A strike or other work stoppage involving any of UHG’s subcontractors could also make it difficult to retain subcontractors for its construction work. In addition, union activity could result in UHG paying higher costs to retain its subcontractors. The inability to contract with skilled subcontractors at reasonable costs on a timely basis could have a material adverse effect on UHG’s business, prospects, liquidity, financial condition, and results of operations.

UHG could be adversely affected by efforts to impose joint employer liability on it for labor law violations committed by its subcontractors.

Although subcontractors are independent of the homebuilders that contract with them under normal management practices and the terms of trade contracts and subcontracts within the homebuilding industry, if regulatory agencies reclassify the employees of subcontractors as employees of homebuilders, UHG could be responsible for wage, hour, and other employment-related liabilities of their subcontractors, which could adversely affect its results of operations and business or financial results.

UHG may suffer significant financial harm and loss of reputation if it does not comply, cannot comply or is alleged to have not complied with applicable laws, rules and regulations concerning its classification and compensation practices for independent contractors.

UHG retains various independent contractors and subcontractors. With respect to these independent contractors, UHG is subject to the IRS regulations and applicable state law guidelines regarding independent

 

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contractor classification. These regulations and guidelines are subject to judicial and agency interpretation, and it might be determined that the independent contractor classification is inapplicable to any sales agents, vendors or any other entity characterized as an independent contractor. Further, if legal standards for the classification of independent contractors change or appear to be changing, UHG may need to modify its compensation and benefits structure for such independent contractors, including by paying additional compensation or reimbursing expenses.

There can be no assurance that legislative, judicial, administrative or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existing rules and regulations that would change the independent contractor classification of any individual or vendor currently characterized as independent contractors doing business with us. Potential changes, if any, with respect to such classification could have a significant effect on UHG’s operating model. Further, the costs associated with any such potential changes could have a significant effect on UHG’s results of operations and financial condition if it were unable to pass through an increase in price corresponding to such increased costs to its customers. Additionally, UHG could incur substantial costs, penalties and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’ fees in defending future challenges to its employment classification or compensation practices.

UHG is required to obtain performance bonds and other government approvals, the unavailability of which could adversely affect its results of operations and cash flows.

UHG is often required to provide surety bonds to secure its performance or obligations under construction contracts, development agreements and other arrangements. Its ability to obtain surety bonds primarily depends upon its credit rating, financial condition, past performance and other factors, including the capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue performance bonds for construction and development activities. In addition, some municipalities and governmental authorities have been reluctant to accept surety bonds and instead require enhancements such as cash deposits or letters of credit, in order to maintain existing bonds or to issue new bonds. If UHG is unable to obtain surety bonds when required, or if it is required to provide credit enhancements with respect to its current or future bonds or in place of bonds, its results of operations and cash flows could be adversely affected.

UHG may suffer uninsured losses or suffer material losses in excess of insurance limits adversely affecting its business or financial results.

Material losses or liabilities in excess of insurance proceeds may occur in the future. UHG could suffer physical damage to property and liabilities resulting in losses that may not be fully compensated by insurance. In addition, certain types of risks, such as personal injury claims, may be, or may become in the future, either uninsurable or not economically insurable, or may not be currently or in the future covered by its insurance policies. The costs of insuring against construction defect, product liability and director and officer claims are substantial, and the cost of insurance for its operations may rise, deductibles and retentions may increase, and the availability of insurance may diminish. Should an uninsured loss or a loss in excess of insured limits occur, UHG could sustain financial loss or lose capital invested in the affected property as well as anticipated future income from that property. In addition, it could be liable to repair damage or meet liabilities caused by uninsured risks and may also be liable for any debt or other financial obligations related to affected property. Material losses or liabilities in excess of insurance proceeds may occur in the future.

In the United States, the coverage offered and the availability of general liability insurance for construction defects is currently limited and is costly. As a result, an increasing number of UHG’s subcontractors in the United States may be unable to obtain insurance. If UHG cannot effectively recover construction defect liabilities and costs of defense from its subcontractors or their insurers, or if it has self-insured liabilities, it may suffer losses. Coverage may be further restricted and become even more costly. Such circumstances could adversely affect UHG’s business, financial condition, and operating results.

UHG is subject to litigation and other legal proceedings that could harm its business if an unfavorable ruling were to occur.

From time to time, UHG is involved in litigation and other legal proceedings relating to claims arising from its operations in the normal course of business. UHG is currently subject to certain legal proceedings.

 

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Litigation is subject to inherent uncertainties, and unfavorable rulings may occur. These or other litigation or legal proceedings could materially affect UHG’s ability to conduct its business in the manner that it expects or otherwise adversely affect UHG should an unfavorable ruling occur.

A major health and safety incident relating to UHG’s business could be costly in terms of potential liabilities and reputational damage.

Operating in the homebuilding industry poses certain inherent health and safety risks and building sites are inherently dangerous. Due to health and safety regulatory requirements and the number of projects UHG works on, health and safety performance is critical to the success of all areas of its business. Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result. Such a failure could generate significant negative publicity and have a corresponding impact on its reputation, its relationships with relevant regulatory agencies, governmental authorities and local communities, and its ability to win new business, which in turn could have a material adverse effect on its business, prospects, liquidity, financial condition and results of operations.

Difficulties with appraisal valuations in relation to the proposed sales price of UHG’s homes could force UHG to reduce the price of its homes for sale.

UHG’s home sales may require an appraisal of each home value before closing. Appraisals are professional judgments of the market value of the property and are based on a variety of market factors. If UHG’s internal valuations of the market and pricing do not line up with the appraisal valuations and appraisals are not at or near the agreed upon sales price, UHG may be forced to reduce the sales price of the home to complete the sale. These appraisal issues could have a material adverse effect on UHG’s business and results of operations.

Fluctuations in real estate values may require UHG to write-down the book value of its real estate assets.

The homebuilding industry is subject to significant variability and fluctuations in real estate values. As a result, UHG may be required to write-down the book value of its real estate assets in accordance with GAAP, and some of those write-downs could be material. Any material write-downs of assets could have a material adverse effect on UHG’s business, prospects, liquidity, financial condition and results of operations.

UHG may not be able to compete effectively against competitors in the homebuilding industry.

UHG operates in a very competitive environment which is characterized by competition from a number of other homebuilders in each market in which it operates. Additionally, there are relatively low barriers to entry into the business. UHG competes with numerous large national and regional homebuilding companies and with smaller local homebuilders and land developers for, among other things, home buyers, desirable land parcels, financing, raw materials and skilled management and labor resources. These competitors may independently develop land and construct housing units that are superior or substantially similar to UHG’s products. Increased competition could hurt UHG’s business, as it could prevent UHG from acquiring attractive lots on which to build homes or make such acquisitions more expensive, hinder its market share expansion and cause it to increase its selling incentives and reduce its prices. If UHG is unable to compete effectively in its markets, its business could decline disproportionately to its competitors, and its results of operations and financial condition could be adversely affected.

UHG may be at a competitive disadvantage with regard to certain of its large national and regional homebuilding competitors whose operations are more geographically diversified than UHG’s, as these competitors may be better able to withstand any future regional downturn in the housing market. UHG competes directly with a number of large national and regional homebuilders that may have longer operating histories and greater financial and operational resources than UHG. Many of these competitors also have longstanding relationships with subcontractors and suppliers in the markets in which UHG operates. This may give competitors an advantage in securing materials and labor at lower prices, marketing their products

 

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and allowing their homes to be delivered to customers more quickly and at more favorable prices. This competition could reduce UHG’s market share and limit its ability to expand the business as planned.

UHG’s mortgage brokering joint venture may not be able to compete effectively in this area.

UHG will participate in the brokering of mortgage loans through its engagement in its joint venture mortgage brokerage company, Homeowners Mortgage, which was recently launched and brokers loans for financing UHG’s home sales. The competitors to Homeowners Mortgage include mortgage brokers and lenders, including national, regional and local mortgage brokers, banks, and other financial institutions. Some of these competitors are subject to fewer governmental regulations and have greater access to capital than Homeowners Mortgage, and some of them may operate with different criteria. These competitors may offer a broader or more attractive array of financing and other products and services to potential customers than Homeowners Mortgage. For these reasons, Homeowners Mortgage, and therefore UHG, may not be able to compete effectively in the mortgage banking business.

Homeowners Mortgage may be adversely affected by changes in governmental regulation.

Changes in governmental regulation with respect to mortgage brokers and lenders could adversely affect the financial results of Homeowners Mortgage, which in turn could adversely affect UHG’s business. Homeowners Mortgage is subject to numerous federal, state and local laws and regulations, which, among other things: prohibit discrimination and establish underwriting guidelines; require appraisals and/or credit reports on prospective borrowers and disclosure of certain information concerning credit and settlement costs; establish maximum loan amounts; prohibit predatory lending practices; and regulate the referral of business to affiliated entities.

The regulatory environment for mortgage lending is complex and ever changing and has led to an increase in the number of audits, examinations and investigations in the industry. The 2008 housing downturn resulted in numerous changes in the regulatory framework of the financial services industry. More recently, in response to COVID-19, federal agencies, state governments and private lenders are proactively providing relief to borrowers in the housing market by, subject to requirements, suspending home foreclosures and granting payment forbearance, among other things. These relief measures are temporary, but these changes and others could become incorporated into the current regulatory framework. Any changes or new enactments could result in more stringent compliance standards, which could adversely affect UHG’s financial condition and results of operations and the market perception of its business. Additionally, if Homeowners Mortgage is unable to broker mortgages for any reason going forward, its customers may experience significant mortgage loan funding issues, which could have a negative impact on UHG’s homebuilding business.

UHG’s business and financial results could be adversely affected by significant inflation, higher interest rates or deflation.

Inflation can adversely affect UHG by increasing costs of the lots, materials and labor it needs to operate its business. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on housing affordability, thereby further decreasing demand. In a highly inflationary environment, depending on industry and other economic conditions, UHG may be precluded from raising home prices enough to keep up with the rate of inflation, which could reduce its profit margins. Moreover, in a highly inflationary environment, its cost of capital, labor and materials can increase, and the purchasing power of its cash resources can decline, which could have an adverse impact on its business or financial results.

Alternatively, a significant period of deflation could cause a decrease in overall spending and borrowing levels. This could lead to deterioration in economic conditions, including an increase in the rate of unemployment. Deflation could also cause the value of UHG’s inventories to decline or reduce the value of existing homes below the related mortgage loan balance, which could potentially increase the supply of existing homes. If oil prices decline significantly, economic conditions in markets that have significant exposure to the energy sector may weaken. These, or other factors that increase the risk of significant deflation, could have a negative impact on UHG’s business or financial results.

 

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Negative publicity may affect UHG’s business performance and could affect its stock price.

Unfavorable media related to UHG’s industry, company, brands, marketing, personnel, operations, business performance, or prospects may affect its stock price and the performance of its business, regardless of the accuracy or inaccuracy of the media report. UHG’s success in maintaining, extending, and expanding its brand image depends on its ability to adapt to a rapidly changing media environment. Adverse publicity or negative commentary on social media outlets, such as blogs, websites, or newsletters, could hurt operating results, as consumers might avoid brands that receive bad press or negative reviews. Negative publicity may result in a decrease in operating results that could lead to a decline in the price of its securities and cause you to lose all or a portion of your investment.

Public health issues such as a major epidemic or pandemic could adversely affect UHG’s business or financial results.

The United States and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk, including the COVID-19 pandemic. In response to the World Health Organization’s declaration of the COVID-19 pandemic, federal, state and local governments and private entities mandated various restrictions, requiring closure of non-essential businesses for a period of time. In all of the municipalities in which UHG operates, residential construction and financial services were deemed essential businesses as part of critical infrastructure, and UHG was able to continue its homebuilding operations in those markets. UHG implemented operational protocols to comply with social distancing and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.

UHG has experienced some supply-chain issues that delayed deliveries related to COVID-19. As of the date of this prospectus, UHG’s projects are on-schedule and UHG does not expect operations to be materially impacted by the COVID-19 pandemic. UHG has not experienced significant impacts from COVID-19 on its revenue in 2021 or in 2022, but it may experience impacts from quarantines, market downturns, and changes in consumer behavior related to the pandemic in 2023 and in the future. The extent to which the COVID-19 outbreak or a similar pandemic may impact UHG’s business, results of operations, liquidity and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the ultimate geographic spread of such outbreaks; the severity of the virus; the duration of the outbreak; the imposition and duration of travel restrictions; business closures imposed by the governments of impacted countries, states, and municipalities; the implementation, rollout, and efficacy of vaccines; and any new information that may emerge concerning the severity of the virus and the actions to contain its impact.

Increasing attention to environmental, social and governance matters may impact UHG’s business, financial results or stock price.

In recent years, increasing attention has been given to corporate activities related to environmental, social and governance (“ESG”) matters in public discourse and the investment community. A number of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including through the investment and voting practices of investment advisers, public pension funds, universities and other members of the investing community. These activities include increasing attention and demands for action related to climate change and promoting the use of energy saving building materials. A failure to comply with investor or customer expectations and standards, which are evolving, or if UHG is perceived to not have responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, could also cause reputational harm to UHG’s business and could have a material adverse effect on UHG. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings systems for evaluating companies on their approach to ESG matters. These ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings may lead to increased negative investor sentiment toward UHG and its industry and to the diversion of investment to other industries, which could have a negative impact on UHG’s stock price and access to and costs of capital.

 

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An information systems interruption or breach in security could adversely affect UHG.

UHG relies on accounting, financial and operational management information systems to conduct its operations. Any disruption in these systems, or the systems of affiliates and other third parties that UHG conducts business with, could adversely affect UHG’s ability to conduct its business. UHG’s computer systems are subject to damage or interruption from power outages, computer attacks by hackers, viruses, catastrophes, hardware and software failures and breach of data security protocols by its personnel or third-party service providers. If UHG were to experience a significant period of disruption in information technology systems that involve interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect its business.

Furthermore, any security breach of information systems or data could result in the misappropriation or unauthorized disclosure of proprietary, personal and confidential information, including information related to employees, counter-parties, and customers, which could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to its reputation and a loss of confidence in its security measures, which could harm its business. While UHG has not experienced cyber security incidents in the past, there can be no assurance that future cyber security incidents will not have a material impact on UHG’s business or operations.

UHG’s business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection.

As part of UHG’s normal business activities, UHG collects and stores certain information, including information specific to homebuyers, customers, employees, vendors and suppliers. UHG may share some of this information with third parties who assist UHG with certain aspects of its business. The regulatory environment surrounding data privacy and protection is constantly evolving and can be subject to significant change. Laws and regulations governing data privacy and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate UHG’s costs. Any failure, or perceived failure, by UHG to comply with applicable data protection laws could result in proceedings or actions against UHG by governmental entities or others, subject UHG to significant fines, penalties, judgments and negative publicity, require UHG to change its business practices, increase the costs and complexity of compliance and adversely affect UHG’s business. As noted above, UHG is also subject to the possibility of cyber incidents or attacks, which themselves may result in a violation of these laws. Additionally, if UHG acquires a company that has violated or is not in compliance with applicable data protection laws, UHG may incur significant liabilities and penalties as a result.

Acts of war or terrorism may seriously harm UHG’s business.

Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power or acts of terrorism may cause disruption to the U.S. economy, or the local economies of the markets in which UHG operates, cause shortages of building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, affect job growth and consumer confidence, or cause economic changes that UHG cannot anticipate. Each of these events could reduce demand for UHG’s homes and adversely impact its business, prospects, liquidity, financial condition and results of operations.

Risks Related to the Homebuilding Industry

The homebuilding industry is cyclical and affected by changes in general economic, real estate or other conditions that could adversely affect UHG’s business or financial results.

The residential homebuilding industry is highly cyclical and can be significantly affected by changes in local and general economic conditions that are outside of UHG’s control, including changes in:

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the availability of construction and permanent mortgages;

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the supply of developable land in markets in which UHG operates;

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the supply of building materials and appliances;

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•

consumer confidence, income and spending generally and the confidence, income and spending of potential homebuyers in particular;

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levels of employment, job and personal income growth, and household debt-to-income levels;

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the availability and costs of financing for homebuyers;

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private and federal mortgage financing programs and federal, state, and local regulation of lending practices related to the purchase of homes;

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short- and long-term interest rates;

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federal and state income tax provisions, including provisions for the deduction of mortgage interest payments;

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real estate taxes;

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inflation;

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the ability of existing homeowners to sell their existing homes at prices that are acceptable to them;

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housing demand from population growth and other demographic changes (including immigration levels and trends in urban and suburban migration);

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the supply of new or existing homes and other housing alternatives to new homes, such as apartments, foreclosed homes, homes held for sale by investors, and other existing residential and rental property;

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the physical and mental health of homebuyers;

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inclement weather, natural disasters, other calamities and other environmental conditions that can delay the delivery of our homes and/or increase UHG’s costs;

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demographic trends; and

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U.S. and global financial system and credit markets, including stock market and credit market volatility.

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Adverse changes in these general and local economic conditions or a downturn in the broader economy would have a negative impact on UHG’s business and financial results. Changes in these economic conditions may affect some of UHG’s regions or markets more than others. If adverse conditions affect the larger markets that UHG serves, they could have a disproportionately greater impact on UHG than on other homebuilding companies. In addition, an important segment of UHG’s customer base consists of first-time and second-time move-up buyers, who often purchase homes subject to contingencies related to the sale of their existing homes, and therefore will be affected by downturn in the resale market. Further, UHG also competes with the resale, or “previously owned,” home market. The difficulties facing these buyers in selling their homes during periods of economic downturn may adversely affect UHG’s sales, and moreover, during such periods UHG may need to reduce its sale prices and offer greater incentives to buyers to compete for sales, which may reduce its margins.

In the past, the federal government’s fiscal and trade policies and economic stimulus actions have created uncertainty in the financial markets and caused volatility in interest rates, which impacted business and consumer behavior, particularly in the real estate industry. Monetary policy actions affecting interest rates or fiscal policy actions and new legislation related to taxation, spending levels or borrowing limits, along with the related political debates, conflicts and compromises associated with such actions, may negatively impact the financial markets and consumer confidence. Such events could hurt the U.S. economy and the housing market and, in turn, could adversely affect the operating results of UHG’s businesses.

Weather conditions and natural disasters, such as hurricanes, tornadoes, floods, earthquakes, and heavy or prolonged precipitation, can harm UHG’s business. These can delay UHG’s home construction and home closings, adversely affect the cost or availability of materials or labor or damage homes under construction. The climate and geology of the states in which UHG operates have experienced recent natural disasters and present increased risks of adverse weather or natural disasters.

Any of the foregoing adverse changes in general economic, real estate or other conditions may cause potential customers to be less willing or able to buy UHG’s homes. In the future, UHG’s pricing and product

 

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strategies may also be limited by market conditions. UHG may be unable to change the mix of its home offerings, reduce the costs of the homes it builds, offer homes at lower prices or satisfactorily address changing market conditions in other ways without adversely affecting its profits and returns. In addition, cancellations of home sales contracts in backlog may increase if homebuyers do not honor their contracts due to any of the factors discussed above.

Homebuilding is subject to home warranty and construction defect claims in the ordinary course of business that can be significant, and reliance on subcontractors exposes builders such as UHG to regulatory risks that could adversely affect business or financial results.

UHG is subject to home warranty and construction defect claims arising in the ordinary course of its homebuilding business. UHG relies on subcontractors to perform the actual construction of its homes, and in many cases, to select and obtain construction materials. Despite UHG’s detailed specifications and monitoring of the construction process, its subcontractors occasionally do not meet adequate quality standards in the construction of its homes. When UHG finds these issues, it repairs them in accordance with its warranty obligations. Additionally, UHG is subject to construction defect claims which can be costly to defend and resolve in the legal system. Warranty and construction defect matters can also result in negative publicity in the media and on the internet, which can damage UHG’s reputation and adversely affect its ability to sell homes.

Based on the large number of homes UHG has sold over the years, its potential liabilities related to warranty and construction defect claims are significant. As a consequence, UHG maintains product liability insurance, and seeks to obtain indemnities and certificates of insurance from subcontractors covering claims related to their workmanship and materials. UHG establishes warranty and other reserves for the homes it sells based on its historical experience in its markets and its judgment of the qualitative risks associated with the types of homes built. Because of the uncertainties inherent to these matters, UHG cannot provide assurance that its insurance coverage, its subcontractor arrangements and its reserves will be adequate to address all of its future warranty and construction defect claims. Contractual indemnities can be difficult to enforce against subcontractors, and some types of claims may not be covered by insurance or may exceed applicable coverage limits. Additionally, the coverage offered by and the availability of product liability insurance for construction defects is limited and costly. There can be no assurance that coverage will not be further restricted or become more costly. If costs to resolve future warranty and construction defect claims exceed UHG’s estimates, its financial results and liquidity could be adversely affected.

Supply shortages and other risks related to acquiring lots, building materials and skilled labor could increase UHG’s costs and delay deliveries causing an adverse effect on UHG’s business or financial results.

The homebuilding industry has from time to time experienced significant difficulties that can affect the cost or timing of construction, including:

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difficulty in acquiring lots suitable for residential building at affordable prices in locations where potential customers want to live;

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•

shortages of qualified subcontractors and skilled labor;

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•

reliance on local subcontractors, manufacturers, distributors and land developers who may be inadequately capitalized;

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•

shortages of materials; and

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•

significant increases in the cost of materials, particularly increases in the price of lumber, drywall and cement, which are significant components of home construction costs.

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These lots, labor and materials shortages can be more severe during periods of strong demand for housing or during periods where the regions in which UHG operates experience natural disasters that have a significant impact on existing residential and commercial structures. The cost of labor and materials may also increase during periods of shortages or high inflation. In addition, tariffs, duties and/or trade restrictions imposed or increased on imported materials and goods that are used in connection with the construction and delivery of UHG’s homes, including steel, aluminum and lumber, may raise its costs for these items or for the products made with them. These factors may cause construction delays or cause UHG

 

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to incur more costs building its homes. If the level of new home demand increases significantly in future periods, the risk of shortages and cost increases in residential lots, labor and materials available to the homebuilding industry will likely increase.

Governmental regulations and environmental matters could increase the cost and limit the availability of UHG’s homebuilding projects and adversely affect its business or financial results.

UHG is subject to extensive and complex regulations that affect home construction, including zoning, density restrictions, building design and building standards. Projects that are not fully permitted and approved may be subjected to periodic delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations. UHG may also be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. These regulations often provide broad discretion to the administering governmental authorities as to the conditions UHG must meet prior to construction being approved, if approved at all. UHG is subject to determinations by these authorities as to the adequacy of water or sewage facilities, roads or other local services. Government authorities in many markets have implemented no growth or growth-control initiatives. New housing developments may also be subject to various assessments for schools, parks, streets and other public improvements. Any of these may limit, delay or increase the costs of home construction. From time to time UHG receives notices of complaint from the South Carolina Department of Labor, Licensing and Regulation, Division of Professional and Occupational Licensing, Office of Investigations and Enforcement (“LLR”). These complaints arise when a UHG customer contacts LLR complaining of substandard work or other standards or code violations. There is one LLR matter that is currently outstanding against UHG; however, UHG has responded to this matter and has worked with the customer in an effort to resolve their concerns. UHG believes this matter will be dismissed and closed.

UHG is also subject to a significant number and variety of local, state and federal laws and regulations concerning protection of health, safety, labor standards and the environment. The impact of environmental laws varies depending upon the prior uses of the building site or adjoining properties and may be greater in areas with less supply where undeveloped land or desirable alternatives are less available. These matters may result in delays, may cause UHG to incur substantial compliance, remediation, mitigation and other costs, and can prohibit or severely restrict development and homebuilding activity in environmentally sensitive regions or areas. Government agencies also routinely initiate audits, reviews or investigations of developers and homebuilders’ business practices to ensure compliance with these laws and regulations, which could cause UHG to incur costs or create other disruptions in its business that can be significant.

Under various environmental laws, current or former owners of real estate, as well as certain other categories of parties, may be required to investigate and clean up hazardous or toxic substances or petroleum product releases, and may be held liable to a governmental entity or to third parties for related damages, including for bodily injury, and for investigation or clean-up costs incurred by such parties in connection with the contamination. A mitigation system may be installed during the construction of a home if cleanup does not remove all contaminants of concern or to address a naturally occurring condition such as methane. Some buyers may not want to purchase a home with a mitigation system.

Government restrictions, standards, or regulations intended to reduce greenhouse gas emissions or potential climate change impacts are likely to result in restrictions on land development in certain areas and may increase energy, transportation, or raw material costs, which could reduce UHG’s profit margins and adversely affect its results of operations.

The subcontractors UHG relies on to perform the actual construction of its homes are also subject to a significant number of local, state and federal laws and regulations, including laws involving matters that are not within UHG’s control. If the subcontractors who construct UHG’s homes fail to comply with all applicable laws, UHG can suffer reputational damage and may be exposed to possible liability, either or both of which could adversely affect its business or financial results.

Natural disasters, severe weather and adverse geologic conditions may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect UHG.

UHG’s homebuilding operations are located in many areas that are subject to natural disasters, severe weather or adverse geologic conditions. These include, but are not limited to, hurricanes, tornadoes, droughts,

 

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floods, brushfires, wildfires, prolonged periods of precipitation, landslides, soil subsidence, earthquakes and other natural disasters. For example, UHG operates in a number of locations in the Southeast that have been adversely impacted by severe weather conditions and hurricanes. The occurrence of any of these events could damage UHG’s lots and projects, cause delays in completion of UHG’s projects, reduce consumer demand for housing and cause shortages and price increases in labor or raw materials, any of which could affect UHG’s sales and profitability. In addition to directly damaging UHG’s lots or projects, many of these natural events could damage roads and highways providing access to UHG’s assets or affect the desirability of UHG’s lots or projects, thereby adversely affecting UHG’s ability to market and sell homes in those areas and possibly increasing the costs of homebuilding completion. Furthermore, the occurrence of natural disasters, severe weather and other adverse geologic conditions has increased in recent years due to climate change and may continue to increase in the future. Climate change may have the effect of making the risks described above occur more frequently and more severely, which could amplify the adverse impact on UHG’s business, prospects, liquidity, financial condition and results of operations.

Risks Related to UHG’s Financing and Indebtedness

UHG has significant amounts of debt and may incur additional debt. Incurrence of additional debt or a default under any of UHG’s loan agreements or the Notes could affect UHG’s financial health and its ability to raise additional capital to fund its operations or potential acquisitions.

As of March 31, 2023, UHG’s consolidated debt was approximately $175.9 million, which was secured by inventory and equipment. Borrowings under UHG’s debt facilities bore weighted average interest rate of 7.63% as of March 31, 2023. The amount and the maturities of UHG’s debt could have important consequences on UHG’s cash flows and results of operations. For example, UHG’s obligations to service its debt facilities could require the dedication of a substantial portion of cash flow from operations to payment of debt and reduce the ability to use cash flow for other operating or investing purposes; limit the flexibility to adjust to changes in business or economic conditions; and limit the ability to obtain future financing for working capital, capital expenditures, acquisitions, debt service requirements or other requirements. The covenants, restrictions or limitations in UHG’s debt facilities could limit its ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict its activities or business plans and adversely affect its ability to finance operations, acquisition, investments or strategic alliances or other capital needs or to engage in other business activities that would be in its interest.

UHG’s existing financing agreements contain, and the financing arrangements UHG enters into in the future likely will contain, covenants that limit UHG’s ability to take certain actions. UHG’s revolving credit facility with Wells Fargo Bank, National Association (“Wells Fargo”) (the “Wells Fargo Facility”) contains significant restrictions on UHG’s ability to incur additional debt. The Wells Fargo Facility also contains affirmative, negative, and financial covenants, including (a) a minimum tangible net worth of no less than the sum of (x) $70 million, (y) 25% of positive consolidated earnings earned in any fiscal quarter, and (z) 100% of new equity contributed to the borrower from and after June 30, 2023, (b) a maximum leverage covenant that prohibits the leverage ratio from exceeding 2.50 to 1.00 for any fiscal quarter (and which is reduced to 2.25 to 1.00 beginning in the first quarter of 2024), (c) a minimum debt service coverage ratio to be less than 2.50 to 1.00 for any fiscal quarter, and (d) a minimum liquidity amount of not less than $15,000,000 at all times and unrestricted cash of not less than $7,500,000 at all times.

If UHG fails to comply with the covenants, restrictions or limitations in its financing arrangements, UHG would be in default under such financing arrangements and its lenders could elect to declare outstanding amounts due and payable and terminate their commitments. A default also could significantly limit UHG’s financing alternatives, which could cause UHG to curtail its investment activities and/or dispose of assets when it otherwise would not choose to do so. In addition, future indebtedness UHG obtains may contain financial covenants limiting its ability to, for example, incur additional indebtedness, make certain investments, reduce liquidity below certain levels and pay dividends to its stockholders and otherwise affect its operating policies. If UHG defaults on one or more of its debt agreements, it could have a material adverse effect on UHG’s business, prospects, liquidity, financial condition and results of operations.

Failure to further extend the Wells Fargo Facility in 2024 could have a material adverse effect on UHG’s ability to meet the financing requirements of its business.

Wells Fargo has notified UHG that it will not extend the Wells Fargo Facility when the outstanding principal balance becomes due and payable on July 9, 2024. While UHG is in active pursuit of additional

 

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debt arrangements, if UHG is unable to find a new source of borrowing on acceptable terms, UHG will be required to pay down the amounts outstanding under the current Wells Fargo Facility through actions such as selling significant assets, seeking additional equity financing (which will result in additional dilution to shareholders) or reducing or delaying capital expenditures, any of which could have a material adverse effect on UHG’s operations and financial condition. If UHG does not have sufficient funds and is otherwise unable to arrange financing, its assets may be foreclosed upon which could have a material adverse effect on UHG’s business, financial condition and results of operations. In addition, UHG’s stock price could decline significantly, UHG would be restricted in its ability to acquire new investments, and UHG’s independent registered public accounting firm could raise an issue as to UHG’s ability to continue as a going concern.

Servicing UHG’s debt, including the Notes, requires a significant amount of cash, and it may not have sufficient cash flow to pay its substantial debt, which could adversely impact its business and financial results.

UHG’s ability to meet its debt service obligations, including the Notes, will depend, in part, upon its future financial performance. Future results are subject to the risks and uncertainties described in this prospectus and the documents incorporated herein. UHG’s revenues and earnings vary with the level of general economic activity in the markets it serves. Its business is also affected by financial, political, business and other factors, many of which are beyond its control. The factors that affect its ability to generate cash can also affect its ability to raise additional funds for these purposes through the sale of debt or equity, the refinancing of debt or the sale of assets. Changes in prevailing interest rates may affect the cost of its debt service obligations because borrowings under its revolving credit facility and mortgage repurchase facility bear interest at floating rates.

UHG’s credit facility, the Note Purchase Agreement, and Notes contain terms which restrict UHG’s current and future operations, particularly UHG’s ability to respond to changes or to take certain actions.

UHG’s credit facility and the Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on UHG and may limit UHG’s ability to engage in acts that may be in UHG’s long-term best interest, including, among other things, restrictions on UHG’s ability to, in certain instances:

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change UHG’s governing documents or capital structure in a manner that adversely affects the Convertible Note Investors;

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incur or guarantee additional indebtedness;

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issue preferred stock;

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pay dividends and make other distributions on, or redeem or repurchase, capital stock;

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amend, modify or supplement any existing equity incentive plan or enter into or adopt any new equity incentive plan; and

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enter into an agreement with respect to any acquisition of another business or person that requires payment of consideration greater than 400% of such business’s or person’s earnings before interest, tax, depreciation and amortization during the previous year.

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As a result of these restrictions, UHG will be limited as to how it conducts its business and may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness UHG may incur could include more restrictive covenants. UHG cannot make any assurances that it will be able to maintain compliance with these covenants in the future and, if UHG fails to do so, that UHG will be able to obtain waivers from the lenders or Convertible Note Investors and/or amend the covenants.

UHG’s failure to comply with the restrictive covenants described above and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in UHG’s being required to repay these applicable borrowing before its due date and the termination of future funding commitments by UHG’s lenders. If UHG is forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, UHG’s results of operations and financial condition could be adversely affected.

 

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Risks Related to UHG’s Organization and Structure

As a result of Michael Nieri’s relationship with UHG and the Land Development Affiliates, conflicts of interest may arise with respect to any transactions involving both UHG and one or more of the Land Development Affiliates, and Mr. Nieri’s interests may not be aligned with yours.

As discussed in more detail in the “Business,” section, UHG has transferred substantially all of the undeveloped land and land under development previously owned by it to the Land Development Affiliates. As a result, UHG operates on an “asset-light” basis, and focuses on the design, construction, and sale of single-family detached homes and townhomes. The Land Development Affiliates are land development entities from whom UHG expects to purchase developed lots pursuant to developed lot purchase agreements. UHG expects to continue to maintain a close relationship with the Land Development Affiliates, allowing, as of June 23, 2023, UHG to benefit from the pipeline of approximately 7,749 lots that are owned and/or will be developed by the Land Development Affiliates and third parties.

Michael Nieri is the President, Chief Executive Officer and Chairman of the Board of Directors and is also an owner and board member of Pennington Communities, LLC, an entity formed to be the sole manager of each of the Land Development Affiliates. Lots developed from land owned by the Land Development Affiliates will be sold to UHG at fair market value. The UHG Related Party Transactions Committee will establish and monitor procedures to be followed to ensure that sale prices reflect actual fair market value and will review all agreements and transactions entered into or to be entered into involving any of the Land Development Affiliates and UHG to ensure any such agreements and transactions are in arm’s length. However, because Mr. Nieri has material interests in the Land Development Affiliates, there may be situations in which UHG’s interests and Mr. Nieri’s interests are inherently not fully aligned in transactions that involve both UHG and one or more of the Land Development Affiliates, and in some cases Mr. Nieri’s interests may directly conflict with the interest of UHG. These conflicts may include, without limitation: conflicts arising from the enforcement of agreements between UHG and the Land Development Affiliates; conflicts in determining whether UHG may be able to obtain more beneficial terms by purchasing lots from other third-party developers; and conflicts in determining the terms of current or future agreements and transactions. These conflicts of interest may result in transactions whose terms or outcomes are less favorable to UHG than would otherwise be the case without such arrangements with the Land Development Affiliates.

The dual class structure of our common stock will have the effect of concentrating voting power with Michael Nieri, which may effectively eliminate your ability to influence the outcome of important transactions, including a change in control.

As a result of the Business Combination, Michael Nieri, GSH’s Chief Executive Officer, President, and Chairman of the Board of Directors, received Class B Common Shares in exchange for his GSH common shares. In addition, three trusts, each for the benefit of each of Mr. Nieri’s three children, the PMN Trust 2018 dated 7/17/2018 (the “PMN Trust 2018”), the PWN Trust 2018 dated 7/17/2018 (the “PWN Trust 2018”), and the MEN Trust 2018 dated 7/17/2018 (the “MEN Trust 2018,” and together with the PMN Trust 2018 and the PWN Trust 2018, the “Nieri Trusts”), received Class B Common Shares in exchange for each Nieri Trust’s GSH common shares.

Each Class A Common Share has one vote per share, and each Class B Common Share has two votes per share. Following the Closing, Michael Nieri and the Nieri Trusts control a majority of the voting power of the outstanding UHG Common Shares. Holders of Class A Common Shares and Class B Common Shares vote together as a single class on all matters presented to UHG’s stockholders for their vote or approval, except as otherwise required by applicable law or the Amended and Restated Certificate of Incorporation. Accordingly, Nr. Nieri and the Nieri Trusts will likely effectively control all matters submitted to the stockholders, including the election of directors, amendments of organizational documents, compensation matters, and any merger, consolidation, sale of all or substantially all of UHG’s assets, or other major corporate transaction requiring stockholder approval. Even if Mr. Nieri’s and the Nieri Trusts’ control constitutes less than a majority of the voting power of the outstanding UHG Common Shares, the extent of the influence that they have over UHG may be substantial.

 

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Mr. Nieri may have interests that differ from yours and may vote in a way with which you disagree, and which may be adverse to your interests. This concentrated control is likely to have the effect of limiting the likelihood of an unsolicited merger proposal, unsolicited tender offer, or proxy contest for the removal of directors. As a result, UHG’s dual class structure, coupled with Mr. Nieri’s and the Nieri Trusts’ concentration of stock ownership, may have the effect of depriving the UHG’s stockholders of an opportunity to sell their shares at a premium over prevailing market prices and make it more difficult to replace directors and management.

UHG is a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, may qualify for exemptions from certain corporate governance requirements. If UHG relies on these exemptions, its stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Michael Nieri and the Nieri Trusts control a majority of the voting power of the outstanding UHG Common Shares, and UHG is therefore a “controlled company” within the meaning of applicable rules of Nasdaq. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements:

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that a majority of the Board of Directors consists of independent directors;

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for an annual performance evaluation of the nominating and corporate governance and compensation committees;

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that the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

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that the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibility.

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While UHG does not intend to rely on these exemptions, UHG may use these exemptions in the future. As a result, UHG’s stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

UHG depends on key personnel whose untimely departure could adversely impact its business and financial results.

UHG’s success depends to a significant degree upon the contributions of certain key personnel who would be difficult to replace, including, but not limited to, Michael Nieri, the Chief Executive Officer, President, and Chairman of the Board of Directors. There is no guarantee that he will remain employed with UHG. If any of UHG’s key personnel were to cease employment with it, its operating results could suffer. Further, the process of attracting and retaining suitable replacements for key personnel whose services it may lose would result in transition costs and would divert the attention of other members of senior management from existing operations. The loss of services from key personnel or a limitation in their availability could materially and adversely impact UHG’s business, prospects, liquidity, financial condition, and results of operations. Further, such a loss could be negatively perceived in the capital markets. UHG has not obtained and does not expect to obtain key man life insurance that would provide it with proceeds in the event of death or disability of any of its key personnel.

UHG’s corporate organizational documents and provisions of state law to which it is subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult, or prevent an attempted acquisition that you may favor or an attempted replacement of the Board of Directors or management.

UHG’s governing documents have anti-takeover effects and may delay, discourage, or prevent an attempted acquisition or change of control or a replacement of the incumbent Board of Directors or management. The governing documents include provisions that:

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empower the Board of Directors, without stockholder approval, to issue preferred stock, the terms of which, including voting power, are to be set by the Board of Directors;

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•

eliminate cumulative voting in elections of directors;

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permit the Board of Directors to alter, amend, or repeal the company’s bylaws or to adopt new bylaws;

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provide for a staggered Board of Directors with approximately one-third of UHG’s directors in each class, with the effect that generally, no more than one-third of UHG’s directors may be elected at any annual meeting of stockholders; and

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enable the Board of Directors to increase, between annual meetings, the number of persons serving as directors and to fill the vacancies created as a result of the increase by a majority vote of the directors present at a meeting of directors.

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These provisions may delay, discourage, or prevent an attempted acquisition or change in control.

UHG may change its operational policies, investment guidelines, and business and growth strategies without stockholder consent which may subject it to different and more significant risks in the future that may adversely impact its business and financial results.

The Board of Directors determines UHG’s operational policies, investment guidelines, and business and growth strategies. The Board of Directors may make changes to, or approve transactions that deviate from, those policies, guidelines, and strategies without a vote of, or notice to, shareholders. This could result in UHG conducting operational matters, making investments, or pursuing different business or growth strategies than those contemplated in this prospectus. Under any of these circumstances, UHG may expose itself to different and more significant risks in the future, which could have a material adverse effect on its business, prospects, liquidity, financial condition, and results of operations.

UHG is an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, its securities may be less attractive to investors.

UHG is an “emerging growth company,” as defined in the JOBS Act, and it is eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, a requirement to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements. UHG has elected to adopt these reduced disclosure requirements. UHG could be an emerging growth company until the last day of the fiscal year following the fifth anniversary of the Initial Public Offering (January 25, 2026), although a variety of circumstances could cause it to lose that status earlier.

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised financial accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. UHG has elected to take advantage of the extended transition period and, as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. In choosing to take advantage of the extended transition period, it may later decide otherwise (i.e., “opt in” by complying with the financial accounting standard effective dates applicable to non-emerging growth companies), so long as it complies with the requirements in Sections 107(b)(2) and (3) of the JOBS Act, which is irrevocable.

UHG cannot predict if investors will find its securities less attractive as a result of it taking advantage of these exemptions. If some investors find its securities less attractive as a result of its choices, there may be a less active trading market for its securities and its stock price may be more volatile.

Any joint venture investments that UHG makes could be adversely affected by its lack of sole decision-making authority, its reliance on co-ventures’ financial conditions, and disputes between it and its co-ventures.

UHG currently has joint venture investments in its joint venture mortgage company, as disclosed in more details in the “Business” section and may co-invest in the future with third parties through partnerships, joint

 

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ventures, or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a land acquisition and/or a development. For such joint venture investments, UHG would not be in a position to exercise sole decision-making authority regarding the acquisition and/or development, and its investment may be illiquid due to its lack of control. Investments in partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-ventures might become bankrupt, fail to fund their share of required capital contributions, make poor business decisions, or block or delay necessary decisions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with UHG’s business interests or goals and may be in a position to take actions contrary to UHG’s policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither UHG nor the partner or co-venturer would have full control over the partnership or joint venture. Disputes between UHG and partners or co-venturers may result in litigation or arbitration that would increase UHG’s expenses and prevent its officers and/or directors from focusing their time and effort on its business. In addition, UHG may in certain circumstances be liable for the actions of its third-party partners or co-venturers.

Risks Related to an Investment in Our Securities

The dual class structure of our common stock may adversely affect the trading market for the Class A Common Shares.

Following the Business Combination, we adopted a dual-class common stock structure in which holders of the Class A Common Shares are entitled to one vote per share and holders of Class B Common Shares are entitled to two votes per share. In July 2017, S&P Dow Jones Indices and FTSE International Limited announced changes to their eligibility criteria for the inclusion of shares of public companies on certain indices, including the Russell 2000, the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, to exclude companies with multiple classes of shares of common stock from being added to these indices. As a result, our dual-class capital structure makes us ineligible for inclusion in any of these indices, and mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in our stock. Furthermore, we cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones or FTSE Russell in the future. Exclusion from indices could make our Class A Common Shares less attractive to investors, and, as a result, the market price of our Class A Common Shares could be adversely affected.

Resales of the Class A Common Shares could depress the market price of the Class A Common Shares of UHG.

There may be a large number of Class A Common Shares that could be sold in the market As of July 7, 2023, there were approximately 11,369,093 Class A Common Shares outstanding. Such sales of Class A Common Shares or the perception of such sales may depress the market price of the Class A Common Shares or Public Warrants. The Class A Common Shares that are being registered for resale under this prospectus represent approximately 67.0% of the total Class A Common Shares outstanding as of July  7, 2023 (assuming conversion of the Notes). In addition to the shares being registered on this registration statement, we have concurrently filed a Registration Statement on Form S-1 (SEC File No. 333-271515) (the “Warrants S-1”) to register the primary issuance of up to 11,591,664 Class A Common Shares, consisting of (i) up to 8,625,000 Class A Common Shares issuable upon the exercise of public warrants (the “Public Warrants”), which are exercisable at a price of $11.50 per share; and (ii) up to 2,966,664 Class A Common Shares issuable upon the exercise of private placement warrants (the “Private Placement Warrants”), which are exercisable at a price of $11.50 per share, and the resale of (i) 421,000 Class A Common Shares issued in a private offering, (ii) 2,966,664 Class A Common Shares issuable upon exercise of the Private Placement Warrants, and (iii) 2,966,664 Private Placement Warrants. The Class A Common Shares being registered for resale under the Warrants S-1 represent approximately 7.7% of the total Class A Common Shares outstanding as of July  7, 2023 (assuming that all Public Warrants and Private Placement Warrants are exercised, and all Notes are converted).

On July  7, 2023, the closing price of the Class A Common Shares was $10.54 per share. The initial public offering price of DHHC units was $10.00 per unit, with each unit consisting of one share of DHHC

 

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Class A common stock and one-quarter of one warrant to purchase one share of DHHC Class A common stock at an exercise price of $11.50 per share.

The Selling Stockholders will determine the timing, pricing and rate at which they sell the securities covered by this Registration Statement into the public market. While certain Selling Stockholders may experience a positive rate of return based on the current trading price of our Class A Common Shares, public investors may not experience a similar rate of return on the securities they purchased due to differences in the purchase prices and the current trading price of our Class A Common Shares. Even if the trading price is significantly below the Company’s initial public offering price or the market price as of the date of this prospectus, the Selling Stockholders may have an incentive to sell their securities, because they will still profit on sales due to the lower prices at which they purchased their securities as compared to the public investors. The aggregate gross amount of the PIPE Investment was $75,000,000, in exchange for which the Convertible Note Investors received Notes in an aggregate principal amount of $80,000,000 and 744,588 Class A Common Shares. No additional consideration was paid by the Convertible Note Investors for the Class A Common Shares. Based on the closing price of the Class A Common Shares on July  7, 2023 of $10.54 per share, and assuming the resale by the Selling Stockholders of the 744,588 Class A Common Shares acquired in the PIPE Investment and being registered on the registration statement of which this prospectus forms a part, the Selling Stockholders could earn approximately $227.1 million in aggregate proceeds from the resale of such shares. The 744,588 shares issued to the Convertible Note Investors in connection with the PIPE Investment were issued in exchange for the Convertible Note Investors agreeing to participate in the Convertible Note offering and were ascribed a value of $5.00 per share, which would result in a gain to the Selling Stockholders of approximately $4.1 million based on the closing price of the Class A Common Shares on July  7, 2023. The 20,800,000 Class A Common Shares that may be issuable upon conversion of the Notes will be issued at a conversion price determined in accordance with the terms of the Notes, which price will be no less than $5.00 per share and no more than $10.00 per share. Assuming a midpoint conversion price of $7.50 per share, the Selling Stockholders would receive a gain of approximately $63.2 million based on the closing price of the Class A Common Shares on July  7, 2023.

The shares held by the Company’s public stockholders are freely tradeable. Subject to certain customary exceptions, the “Lock-up Period” for certain of UHG’s equity securities is (i) with respect to the founder shares (the “Founder Shares”) held by DHHC’s initial stockholders or such affiliates (the “Initial Stockholders”) other than the Anchor Investors, and the shares held by Michael Nieri and Nieri Trusts immediately following the Closing, (A) first, for 50% of the shares, the period ending one year following the Closing, and (B) second, for the remaining 50% of the shares, the period ending two years following the Closing (“Founder Shares Lock-up Period”), (ii) with respect to the securities held by the Anchor Investors (the “Anchor Investor Shares”), the period ending on the earlier of (A) the date on which the last reported sale price of Class A Common Shares 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 the Closing, (B) the date on which UHG completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of its stockholders having the right to exchange their UHG Common Shares for cash, securities or other property or (C) one year after the Closing, (“Anchor Investor Lock-up Period”), (iii) with respect to shares purchased pursuant to subscription agreements (“PIPE Subscription Agreements”) with certain investors (“PIPE Investors”), (A) first, for 50% of such shares, the period ending one year following the Closing, and (B) second, for the remaining 50% of such shares, the period ending two years following the Closing, and (iv) with respect to shares held by the Convertible Note Investors, one year following the Closing.

Once the applicable lock-up periods have lapsed, a significant portion of our total outstanding securities will be eligible to be sold into the market which could cause the market price of our Class A Common Shares to drop significantly.

If the Business Combination benefits do not meet the expectations of investors or securities analysts, the market price of UHG’s securities may decline.

Following the Business Combination, fluctuations in the price of UHG’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there was not a public market for GSH’s capital stock. Accordingly, the valuation DHHC ascribed to GSH in the Business Combination

 

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may not be indicative of the price that will be implied in the trading market for UHG’s securities following the Business Combination. If an active market for UHG’s securities develops and continues after the Business Combination, the trading price of such securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond UHG’s control. Any of the factors listed below could have a material adverse effect on your investment in UHG’s securities and UHG’s securities may trade at prices significantly below the price you paid for them or that were implied by the conversion of GSH’s capital stock as a result of the Business Combination. In such circumstances, the trading price of UHG’s securities may not recover and may experience a further decline.

Factors affecting the trading price of UHG’s securities may include:

•

actual or anticipated fluctuations in UHG’s quarterly financial results or the quarterly financial results of companies perceived to be similar to it;

​

•

changes in the market’s expectations about UHG’s operating results;

​

•

success or entry of competitors;

​

•

UHG’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

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•

changes in financial estimates and recommendations by securities analysts concerning UHG or the homebuilding industry in general;

​

•

operating and share price performance of other companies that investors deem comparable to UHG;

​

•

UHG’s ability to bring its products and technologies to market on a timely basis, or at all;

​

•

changes in laws and regulations affecting UHG’s business;

​

•

UHG’s ability to meet compliance requirements;

​

•

commencement of, or involvement in, litigation involving UHG;

​

•

changes in UHG’s capital structure, such as future issuances of securities or the incurrence of additional debt;

​

•

the volume of UHG’s shares of common stock available for public sale;

​

•

any major change in the Board of Directors or management;

​

•

sales of substantial amounts of UHG’s shares of common stock by its directors, executive officers or significant stockholders or the perception that such sales could occur;

​

•

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations, and acts of war or terrorism, inflation and market liquidity; and

​

•

the other risk factors set forth in the “— Risks Related to UHG’s Business,” “— Risks Related to the Homebuilding Industry,” “— Risks Related to UHG’s Potential Conflicts of Interest,” “— Risks Related to UHG’s Financing and Indebtedness” and “— Risks Related to UHG’s Organization and Structure.”

​

Broad market and industry factors may materially harm the market price of UHG’s securities irrespective of its operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of UHG’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to UHG could depress UHG’s share price regardless of its business, prospects, financial conditions or results of operations. A decline in the market price of UHG’s securities also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future. In the past, following periods of market volatility, stockholders have initiated derivative actions. If we are involved in derivative litigation, it could have a substantial cost and divert resources and the attention of UHG’s management from our business regardless of the outcome of the litigation.

 

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Our actual financial position and results of operations may differ materially from the unaudited pro forma financial information included in this prospectus.

The unaudited pro forma condensed combined financial information included in this prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. See “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.

We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements of businesses providing financial services. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. These laws, regulations, and rules include, without limitation, the following:

•

As an employer, we will be subject to state and federal laws relating to employment practices, health and safety of employees, employee benefits and other employment-related matters.

​

•

As a company whose common stock is listed for trading on Nasdaq, we are subject to Nasdaq’s continued listing requirements, which include requirements relating corporate governance matters, the size of the public float of our shares, and the minimum bid price of our shares. We are also required to notify Nasdaq of various corporate actions, including the intention to complete the Business Combination.

​

•

We are an SEC reporting company and therefore we are required to comply with the various rules and regulations of the SEC that relate to, among other things, the timing and content of annual, quarterly and current reports, the process to register additional shares for sale to the public or for resale by existing investors, and disclosures in connection with meetings of our stockholders. Changes in these rules and regulations can have a significant impact on us.

​

As our business expands to additional states, we will be required to review and comply with those states’ laws that apply to our services and business activities. We will also be required to determine whether we will become subject to additional areas of regulation if we expand the types of activities in which we engage. For example, because we do not hold customer deposits or offer loans for consumer or personal purposes, we are not currently required have a financial institution charter or lending license in the states in which we currently provide services or loans. If we do not identify activities that would require a regulatory application, license or other approval, or if the interpretation and application of the laws to which we are currently subject change, those additional laws, rules, and regulations or changes therein could have a material adverse effect on our business, investments and results of operations. A failure to comply with any applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

Provisions in the Amended and Restated Certificate of Incorporation and Delaware law may have the effect of discouraging lawsuits against the directors and officers of UHG.

UHG’s Amended and Restated Certificate of Incorporation provides that unless UHG consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action brought by a stockholder on behalf of UHG, (ii) any claim of breach of a fiduciary duty owed by any of UHG’s directors, officers, stockholders, or employees, (iii) any claim against UHG arising under its charter or bylaws or the DGCL and (iv) any claim against UHG governed by the internal affairs doctrine. The Amended and Restated Certificate of Incorporation designates the United States District Court for the District of Delaware as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

This exclusive forum provision will not apply to claims under the Exchange Act but will apply to other state and federal law claims including actions arising under the Securities Act. Section 22 of the Securities

 

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Act, however, created concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

Although UHG believes this provision will benefit UHG by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, this choice of forum provision may have the effect of increasing costs for investors to bring a claim against UHG and its directors and officers and of limiting a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with UHG or any of its directors, officers, other employees or stockholders, which may discourage (but not prevent) lawsuits with respect to such claims.

The market for our securities has been volatile and may continue to be volatile, which would adversely affect the liquidity and price of our securities.

The price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board or OTC Pink, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

UHG’s stockholders may not realize a benefit from the Business Combination commensurate with the ownership dilution they will experience in connection with the Business Combination.

If UHG is unable to realize the full strategic and financial benefits currently anticipated from the Business Combination, UHG’s stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent UHG is able to realize only part of the strategic and financial benefits currently anticipated from the Business Combination.

We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although we have conducted due diligence on GSH, we cannot assure you that this diligence will surface all material issues that may be present in GSH’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of GSH’s business and outside of our and GSH’s control will not later arise. As a result of these factors, we may be forced to later write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about UHG or its securities. Accordingly, any of our stockholders who chose to remain stockholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.

The Company may issue additional shares of common or preferred stock under the 2023 Plan or otherwise , which would dilute the interest of the Company’s stockholders and likely present other risks.

The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of a total of 450,000,000 shares of capital stock, each with par value $0.0001 per share, consisting of (a) 410,000,000 UHG Common Shares including (i) 350,000,000 Class A Common Shares and (ii) 60,000,000 Class B

 

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Common Shares and (b) 40,000,000 shares of preferred stock. There are currently approximately 338.6 million authorized but unissued Class A Common Shares available for issuance, which amount does not take into account shares reserved for issuance upon exercise of outstanding warrants. There are currently no shares of preferred stock issued and outstanding. The Company may issue additional shares of common or preferred stock to under the 2023 Plan or as needed after completion of the Business Combination for working capital or other purposes.

The issuance of additional shares of common or preferred stock:

•

may significantly dilute the equity interest of existing investors;

​

•

may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded the Company’s common stock;

​

•

could cause a change in control if a substantial number of common stock is issued, which may affect, among other things, the Company’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of the Company’s present officers and directors; and

​

•

may adversely affect prevailing market prices for the Company’s Class A Common Shares and/or Warrants.

​

UHG is subject to financial reporting and other requirements as a public company for which its accounting and other management systems and resources may not be adequately prepared adversely impacting stock price.

As a public company with listed equity securities, UHG is required to comply with laws, regulations, and requirements, including the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), related regulations of the U.S. Securities and Exchange Commission (the “SEC”) and requirements of Nasdaq, with which it was not required to comply as a private company. The Exchange Act requires that UHG file annual, quarterly, and current reports with respect to its business and financial condition. The Sarbanes-Oxley Act requires, among other things, that UHG establish and maintain effective internal controls and procedures for financial reporting.

Section 404 of the Sarbanes-Oxley Act requires UHG’s management and independent auditors to report annually on the effectiveness of its internal control over financial reporting. However, UHG is an “emerging growth company,” as defined in the JOBS Act, and, for as long as it continues to be an emerging growth company, it intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once UHG is no longer an emerging growth company or, if prior to such date, it opts to no longer take advantage of the applicable exemptions, it will be required to include an opinion from its independent auditors on the effectiveness of its internal control over financial reporting.

UHG will cease to be an “emerging growth company” upon the earliest of: (1) the last day of the fiscal year of the Company following the fifth anniversary of the consummation of the Company’s IPO, which occurred on January 25, 2021, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer,” as defined in the Exchange Act, and (4) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period. These reporting and other obligations will place significant demands on management, administrative, operational, and accounting resources and will cause UHG to incur significant expenses. It may need to upgrade its systems or create new systems, implement additional financial and management controls, reporting systems and procedures, create or outsource an internal audit function, and hire additional accounting and finance staff. If it is unable to accomplish these objectives in a timely and effective fashion, its ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal control over financial reporting could have a material adverse effect on UHG’s business, prospects, liquidity, financial condition, and results of operations.

As a public company, these rules and regulations make it more expensive for UHG to obtain director and officer liability insurance. These factors could also make it more difficult to attract and retain qualified

 

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members to the Board of Directors, particularly to serve on the audit committee and compensation committee, and qualified executive officers.

As a result of disclosure of information in this prospectus and in filings required of a public company, UHG’s business and financial condition is more visible, which it believes may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, UHG’s business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in UHG’s favor, these claims, and the time and resources necessary to resolve them, could divert the resources of UHG’s management and adversely affect its business and operating results.

As a public company, UHG is obligated to develop and maintain proper and effective internal control over financial reporting. UHG may not complete its analysis of its internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in UHG and, as a result, the value of its securities.

UHG is required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting as of the end of its fiscal year. This assessment will need to include disclosure of any material weaknesses identified by UHG’s management in its internal control over financial reporting. UHG is in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes-Oxley Act. It may not be able to complete its evaluation, testing, and any required remediation in a timely fashion. During the evaluation and testing process, if UHG identifies one or more material weaknesses in its internal control over financial reporting, it will be unable to assert that its internal controls are effective. If it is unable to assert that its internal control over financial reporting is effective, it could lose investor confidence in the accuracy and completeness of its financial reports, which would cause the price of its securities to decline, and it may be subject to investigation or sanctions by the SEC.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

Our quarterly operating results may fluctuate significantly because of several factors, including:

•

labor availability and costs for hourly and management personnel;

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•

profitability of our services, especially in new markets and due to seasonal fluctuations;

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•

changes in interest rates;

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•

impairment of long-lived assets;

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•

macroeconomic conditions, both nationally and locally;

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•

negative publicity relating to products we serve;

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•

changes in consumer preferences and competitive conditions;

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•

expansion to new markets; and

​

•

fluctuations in commodity prices.

​

If securities or industry analysts do not publish or cease publishing research or reports about UHG, its business, or its market, or if they change their recommendations regarding the Class A Common Shares of UHG adversely, then the price and trading volume of the Class A Common Shares of UHG could decline.

The trading market for our Class A Common Shares and Public Warrants will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company or UHG. If no securities or industry analysts commence coverage of UHG, the stock price and trading volume of the Class A Common Shares and Public Warrants of UHG would likely be negatively impacted. If any of the analysts who may cover UHG change their recommendation regarding our stock

 

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adversely, or provide more favorable relative recommendations about our competitors, the price of the Class A Common Shares and Public Warrants of UHG would likely decline. If any analyst who may cover the Company were to cease coverage of UHG or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause the stock price or trading volume of the Class A Common Shares and Public Warrants of UHG to decline.

We may be unable to obtain additional financing to fund the operations and growth of UHG.

We may require additional financing to fund the operations or growth of UHG. The failure to secure additional financing could have a material adverse effect on the continued development or growth of UHG. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after the Business Combination.

We may seek warrant holder approval to amend the terms of the Warrants in a manner that may be adverse to holders. As a result, the exercise price of the Warrants could be increased, the exercise period could be shortened and the number of our Class A Common Shares purchasable upon exercise of a Warrant could be decreased, all without your approval.

Our Public Warrants were issued in registered form under a warrant agreement (the “Warrant Agreement”) between American Stock Transfer & Trust Company, LLC, as warrant agent, and us. The warrant agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. All other modifications or amendments, including any modification or amendment to increase the Warrant Price or shorten the Exercise Period (as defined in the Warrant Agreement) shall require the vote or written consent of the Registered Holders (as defined in the Warrant Agreement) of 50% of the number of the then outstanding Public Warrants and, solely with respect to any amendment to the terms of the Private Placement Warrants or Working Capital Warrants (as defined in the Warrant Agreement) or any provision of this Agreement with respect to the Private Placement Warrants or Working Capital Warrants, 50% of the number of then outstanding Private Placement Warrants and Working Capital Warrants. Although our ability to amend the terms of the Warrants with the consent of at least 50% of the then-outstanding Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, shorten the exercise period or decrease the number of Class A Common Shares purchasable upon exercise of a Warrant.

We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Common Shares equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption to the warrant holders and provided certain other conditions are met. We may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force the warrant holders (i) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by the Sponsor or its permitted transferees.

Warrants may be exercised for Class A Common Shares, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

We issued 8,625,000 warrants to purchase Class A Common Shares as part of our IPO and, on the IPO closing date, we issued 5,933,333 Private Placement Warrants to the Sponsor and Anchor Investors to

 

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purchase Class A Common Shares at $11.50 per share. The Class A Common Shares issued upon exercise of our Warrants will result in dilution to the then existing holders of Class A Common Shares and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A Common Shares and Public Warrants of UHG.

The Private Placement Warrants are identical to the warrants sold as part of the units issued in our IPO except that, so long as they are held by the Sponsor or its permitted transferees, (i) they will not be redeemable by us, (ii) they may be exercised by the holders on a cashless basis and (iii) they are subject to registration rights.

Anti-takeover provisions contained in our Amended and Restated Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which could limit the price investors might be willing to pay in the future for our common stock.

Our Amended and Restated Certificate of Incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

•

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

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•

a denial of the right of stockholders to call a special meeting;

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•

a vote of 66 2/3% required to approve certain amendments to the Amended and Restated Certificate of Incorporation and the Bylaws; and

​

•

the designation of Delaware as the exclusive forum for certain disputes.

​

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of SOX, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of SOX are significantly more stringent than those required of GSH as a privately-held company. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of UHG are documented, designed or operating.

Testing and maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business. If we identify material weaknesses in the internal control over financial reporting of UHG or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

 

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We have identified material weaknesses in our internal control over financial reporting. If remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence and, as a result, the value of the Class A Common Shares.

Prior to the Business Combination, GSH was not required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act.

UHG has identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified generally relate to (i) failure to properly evaluate certain transactions in accordance with U.S. GAAP; (ii) lack of appropriate documented review of related party transactions; (iii) a lack of or improper segregation of duties and second level review in certain areas; (iv) failure to retain evidence of review of multiple key controls and lack of formal control review and documentation required by COSO principles; and (v) multiple IT related control deficiencies. In order to remediate the material weaknesses, UHG is updating various processes and implementing certain changes to its internal processes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Internal Controls Over Financial Reporting.”

UHG may not be able to fully remediate the identified material weakness until the steps described above have been completed and its internal controls have been operating effectively for a sufficient period of time. UHG believes it has already and will continue to make progress in its remediation plan during the year ending December 31, 2023, but cannot assure you that it will be able to fully remediate the material weakness by such time. If the steps UHG takes do not correct the material weakness in a timely manner, UHG will be unable to conclude that it maintains effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of UHG’s financial statements would not be prevented or detected on a timely basis. UHG also may incur significant costs to execute various aspects of its remediation plan but cannot provide a reasonable estimate of such costs at this time.

In the future, it is possible that additional material weaknesses or significant deficiencies may be identified that UHG may be unable to remedy before the requisite deadline for these reports. UHG’s ability to comply with the annual internal control reporting requirements will depend on the effectiveness of its financial reporting and data systems and controls across the company. Any weaknesses or deficiencies or any failure to implement new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm UHG’s operating results and cause it to fail to meet its financial reporting obligations, or result in material misstatements in its consolidated financial statements, which could adversely affect its business and reduce its stock price.

If UHG is unable to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404, UHG’s independent registered public accounting firm may not issue an unqualified opinion as to the effectiveness of UHG’s internal controls over financial reporting, as required by Section 404 when UHG no longer qualifies as an emerging growth company. If UHG is unable to conclude that it has effective internal control over financial reporting, investors could lose confidence in its reported financial information, which could have a material adverse effect on the trading price of UHG Common Shares. Failure to remedy any material weakness in its internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict UHG’s future access to the capital markets.

 

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PRIVATE PLACEMENT OF NOTES

Note Purchase Agreement

On March 30, 2023, the Convertible Note Investors purchased from the Company $80,000,000 in original principal amount of convertible promissory notes and, pursuant to the terms of share subscription agreements dated March 30, 2023, entered into between each Convertible Note Investor and the Company (the “Note Subscription Agreements”), an additional 744,588 Class A Common Shares in the PIPE Investment, pursuant the Note Purchase Agreement. The obligation to consummate the transaction contemplated by the Note Purchase Agreement was conditioned upon customary closing conditions, including the consummation of the transactions contemplated by the Business Combination Agreement, including the Business Combination.

The Note Purchase Agreement also requires that for so long as the Class A Common Shares and Notes held by the Convertible Note Investors, together with their affiliates and permitted transferees, comprise at least 5% of the outstanding Class A Common Shares of the Company on an as-converted basis, the Company will be required to obtain the prior written consent of Convertible Note Investors holding at least 75% of the Notes outstanding at the applicable time for any of the following actions: materially changing the principal business of the Company and its subsidiaries or entering into new lines of business or exiting the Company’s and its subsidiaries’ current line of business; entering into an agreement with respect to a change of control transaction involving the Company; consummating any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company or any of its subsidiaries or filing a petition under bankruptcy or insolvency law; changing the governing documents or capital structure of the Company or any of its subsidiaries in a manner that adversely affects the Convertible Note Investors; authorizing, creating, or issuing any class or series of equity securities or other capital stock of the Company that ranks senior to the shares underlying the Notes with respect to payment of dividends or distribution of assets by the Company; incurring or guarantying any indebtedness, other than (i) pursuant to the Company’s existing Wells Fargo Facility or (ii) pursuant to any line of credit similar to the Wells Fargo Facility and utilized for financing the operation of the Company’s business, so long as (A) the amount outstanding under any such similar line of credit cannot, at any time, exceed a ratio of Indebtedness (as defined in the Note Purchase Agreement) to stockholders equity of the Company and its subsidiaries on a consolidated basis of 2.5 to 1 for the period from the date of the Note Purchase Agreement through December 31, 2023 and 2.25 to 1 thereafter and (B) in the case of any line of credit entered into in addition to the Wells Fargo Facility, such similar line of credit that does not permit the aggregate value of the total borrowing base that is attributable to “Speculative Housing Units” and “Model Housing Units” ​(each as defined in the Wells Fargo Facility) to exceed 70% of the aggregate value of the total borrowing base and excludes any value of “Speculative Housing Units” and “Model Housing Units” in excess of the 70% limitation from the calculation of the aggregate value of the total borrowing base; paying or agreeing to pay any distribution or declaring any dividend on equity securities of the Company or any of its subsidiaries other than repurchases of any options or other securities from employees upon the end of their employment; entering into an agreement with respect to any acquisition of another business or person that requires payment of consideration greater than 400% of such business’s or person’s earnings before interest, tax, depreciation and amortization during the previous year; amending, modifying or supplementing any existing equity incentive plan or entering into a new equity incentive plan unless the new plan or supplement does not increase the number of shares issuable pursuant to all equity incentive plans to more than 10% of the then outstanding shares of the Company on a fully-diluted basis; entering into any agreement that would restrict the Convertible Note Investors’ consent rights under the Note Purchase Agreement or would require the Company or any of its subsidiaries to breach its obligations to the Convertible Note Investors under the Note Purchase Agreement; making any material tax decisions, elections or other determinations with respect to the Company or any of its subsidiaries; dissolving, liquidating, merging or selling the Company or substantially all of its assets; issuing, selling or otherwise transferring equity securities of any subsidiary of the Company to a person other than the Company or a wholly-owned subsidiary of the Company; selecting or changing the independent auditor to an auditor other than a nationally recognized accounting firm; and making any changes or modifications to the Company’s or any of its subsidiaries’ fiscal year.

For so long as any Notes remain outstanding, each Convertible Note Investor will have certain pre-emptive rights with respect to any issuance of any equity securities of the Company or any subsidiary

 

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of the Company that are issued after the closing of the Note Purchase Agreement, subject to certain exceptions, including for (i) securities issued as a dividend or distribution on a pro rata basis in accordance with the dividend and distribution provisions of the applicable entity’s governing documents, (ii) issuances of securities pursuant to any acquisition by the Company whereby the Company’s securities comprise, in whole or in part, the consideration paid by the Company in such transaction and which transaction has been approved by the Board of Directors of the Company, (iii) issuances of securities or options or rights to management, employees, independent directors, service providers and consultants on terms approved by the Board of Directors of the Company, (iv) issuances of securities issued as additional yield or return in respect of institutional indebtedness that is not issued to raise additional equity capital of the Company, (v) issuances of securities that are “debt-like”, (vi) issuances as a result of a stock split or reverse split, (vii) securities issued in connection with strategic partnerships or joint ventures approved by the Board of Directors of the Company, (viii) issuances of Class A Common Shares upon conversion of Class B Common Shares, (ix) issuances of “Earn out Shares” as defined in the Business Combination Agreement, (x) securities issued pursuant to a firm commitment underwritten public offering registered pursuant to the Securities Act and (xi) any issuance by any subsidiary of the Company to the Company or another wholly-owned subsidiary of the Company.

Registration Rights

Pursuant to the Note Purchase Agreement, the Company must file within thirty (30) calendar days after the Closing of the Business Combination, which occurred on March 30, 2023 (the “Filing Deadline”), with the SEC (at its sole cost and expense) a registration statement to register under and in accordance with the provisions of the Securities Act (the “Resale Registration Statement”), the resale of the Notes, the Class A Common Shares underlying the Notes, and any other securities of the Company that are issuable pursuant to the conversion or exercise of the Notes. The Company shall use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day after the Filing Deadline (or the ninetieth (90th) calendar day if the SEC notifies the Company that it will “review” the Resale Registration Statement) and (ii) the fifth (5th) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that the Resale Registration Statement will not be “reviewed” or will not be subject to further review.

Convertible Notes

In connection with the closing of the PIPE Investment, the Company and the Convertible Note Investors entered into the Notes. The Notes bear interest at the rate of fifteen percent (15.0%) per annum for the first four years following the Notes’ Issue Date. The interest rate increases by one percent (1.0%) annually beginning on the fourth anniversary of the Issue Date of the Notes. The Notes mature and the entire unpaid principal amount and unpaid accrued interest on the Notes become payable on the fifth anniversary of the Issue Date.

Each Note (or any portion of a Note) is convertible at a holder’s option into Class A Common Shares, at any time after the first anniversary of the Closing Date of the Business Combination until the maturity date of such Note, at a per share price equal to 80% of the value weighted average trading price per Class A Common Share during the Measurement Period, subject to a floor price of $5.00 and a maximum price of $10.00 per share. The conversion price is subject to customary adjustments for certain corporate events as provided in the Notes. If any such event occurs, the number of Class A Common Shares issuable upon conversion may be higher than implied by the initial conversion price.

If a Change of Control Transaction (as defined in the Note Purchase Agreement) occurs, then each Convertible Note Investor may elect to be repaid in cash as of the closing of the Change of Control Transaction (with an additional premium payable if the closing is scheduled to occur before the end of the Measurement Period), convert the applicable Note into shares of the Company at the conversion price set forth in the Note (subject to certain adjustments if the Change of Control is scheduled to close before the end of the Measurement Period), or have the Note remain outstanding following the closing of the Change of Control Transaction.

 

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The Notes may be redeemed by the Company at any time prior to sixty (60) days before the Maturity Date by payment of all principal amounts and interest remaining outstanding at the time of redemption plus an additional amount to compensate the Convertible Note Investors for the early repayment. The Notes are also subject to conversion at the option of the Company following the second anniversary of the closing of the Business Combination, but only if during a specified period following such second anniversary the Class A Common Shares trade at a price equal to or over $13.50 per share.

Note Subscription Agreements

In connection with the closing of the PIPE Investment, each Convertible Note Investor entered into a Note Subscription Agreement with the Company in respect of the Class A Common Shares to be acquired by that Convertible Note Investor. Pursuant to the Note Subscription Agreements, the Convertible Note Investors have agreed, subject to certain exceptions, not to lend, offer, pledge, transfer or dispose of the Class A Common Shares until the first anniversary of the closing of the Note Purchase Agreement. The Class A Common Shares purchased in the PIPE Investment are treated as having been issued for $5.00 per Share for U.S. federal, state and local income tax purposes.

The principal amount of each Note and the number of Class A Shares subscribed by each Convertible Note Investor, pursuant to each Note Subscription Agreement is set forth next to the name of each Convertible Note Investor below:

Lock-Up

Pursuant to each Subscription Agreement entered into by the Company and each Convertible Note Investor, subject to certain exceptions, the Convertible Note Investors shall not (a) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option, or contract to purchase, purchase any option, or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Class A Common Shares subscribed for, (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A Common Shares, or (c) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (a), (b), or (c) above is to be settled by delivery of Shares or other securities, in cash or otherwise (any of the foregoing described in clauses (a), (b), or (c), a “Prohibited Transfer”), prior to the first anniversary of the Closing Date (the “Lock-up Period”).

Conversant Note Subscription Agreement

Under the Note Subscription Agreement entered into by Conversant Opportunity Master Fund LP, a Cayman Islands exempted limited partnership (the “Conversant Investor”) and the Company (the “Conversant Subscription Agreement”), the Conversant Investor will have the right to designate one

 

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(1) member of the Board of Directors of the Company as long as fifty percent (50%) of the original principal amount of the Notes is outstanding and has not been converted or cash settled. For so long as the Conversant Investor is entitled to designate a member of the Board of Directors, the Company will not, without the prior written approval of the Conversant Investor’s designee to the board, increase the size of the Board of Directors of the Company in excess of eleven (11) members or reduce the size of the Board of Directors to fewer than eleven (11) members or to a size that would require the resignation of the Conversant Investor’s designee.

Pursuant to the Conversant Subscription Agreement the Conversant Investor is granted certain pre-emptive rights on substantially similar terms to those granted to the Convertible Note Investors under the Convertible Notes, for so long as any Notes remain outstanding. The Conversant Subscription Agreement also gives the Conversant Investor certain rights to consent to actions of the Company until the later of (i) the first anniversary of the closing of the transactions contemplated by the Note Purchase Agreement and (ii) such time as the total Class A Common Shares and Notes held by the Conversant Investor, together with its affiliates and permitted transferees, falls below 5% of the outstanding Class A Common Shares if all Notes held by the Conversant Investor had been converted into Class A Common Shares at such time. These consent rights are substantially similar to those granted to the Investors under the Convertible Notes.

 

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USE OF PROCEEDS

All of the Class A Common Shares and Notes offered by the Selling Stockholders pursuant to this prospectus will be sold by the Selling Stockholders for their respective accounts. We will not receive any of the proceeds from these sales.

DETERMINATION OF OFFERING PRICE

Our Class A Common Shares are listed on the NASDAQ under the symbol “UHG.” The Notes will not be listed on any securities exchange.

The offering price of the Class A Common Shares issuable upon conversion of the Notes is determined by reference to the conversion price of the Notes. We cannot currently determine the price or prices at which our Class A Common Shares or the Notes may be sold by the Selling Stockholders under this prospectus.

MARKET INFORMATION FOR COMMON STOCK AND DIVIDEND POLICY

Market Information

Our Class A Common Shares and Public Warrants are currently listed on the NASDAQ under the symbols “UHG” and “UHGWW,” respectively. Prior to the consummation of the Business Combination, the Company’s units, common stock and warrants were listed on the NASDAQ under the symbols “DHHCU,” “DHHC,” and “DHHCW.” As of March 30, 2023, following the completion of the Business Combination, there were 470 holders of record of our Class A Common Shares.

Dividend Policy

We have not paid any cash dividends on our Class A Common Shares to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the Class A Common Shares in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plan

As of July  7, 2023, there were approximately 5.7 million Class A Common Shares authorized for issuance under the 2023 Plan, which our stockholders approved on March 23, 2023 in connection with the Business Combination. The 2023 Plan became effective immediately upon the Closing.

We intend to file a registration statement on Form S-8 under the Securities Act to register the Class A Common Shares issued or issuable under the Incentive Plan. Any such Form S-8 registration statement will become effective automatically upon filing. Once these shares are registered, they can be sold in the public market upon issuance, subject to applicable restrictions.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Introduction

The unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022 and the three months ended March 31, 2023, present the combined financial information of DHHC and the homebuilding operations of GSH after giving effect to the Business Combination and related adjustments described in the accompanying notes. The unaudited Pro Forma Condensed Combined Financial Information does not include an unaudited pro forma condensed combined balance sheet as of March 31, 2023, as the Business Combination was already reflected in the Company’s historical unaudited condensed consolidated balance sheets as of March 31, 2023.

DHHC was a blank-check company incorporated in the state of Delaware on October 7, 2020. It was traded on the Nasdaq under the symbol “DHHC” until the closing of the Business Combination, at which time it changed its name to United Homes Group, Inc. and is traded under the symbol “UHG”. DHHC was 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. Merger Sub was incorporated in connection with the Business Combination, and merged with and into GSH with GSH continuing as the surviving corporation post-merger.

Based in Columbia, South Carolina, GSH was formed in 2004 and elected S corporation status in June 2008. GSH constructs detached and attached single-family residential homes with active operations in South Carolina and Georgia. GSH is primarily focused on entry-level, first, and second move-up homebuyers, with some third move-up and custom construction. The constructed homes appeal to a wide range of buyer profiles ranging from first-time homebuyers to lifestyle buyers. GSH’s primary objective is to provide customers with homes of exceptional quality and value while maximizing its return on investment.

The unaudited Pro Forma Condensed Combined Financial Information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022 combines the historical audited consolidated statement of operations of DHHC for the year ended December 31, 2022 with the historical audited consolidated statement of operations of the homebuilding operations of GSH for the year ended December 31, 2022, giving effect to the Business Combination as if it had been consummated on January 1, 2022, the beginning of the earliest period presented. The unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2023 combines the historical unaudited condensed consolidated statement of operations of DHHC for the period from January 1 to March 30, 2023 with the historical unaudited condensed consolidated statement of the homebuilding operations of operations of GSH for the three months ended March 31, 2023.

The unaudited Pro Forma Condensed Combined Financial Information was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are included elsewhere in the prospectus to which this unaudited Pro Condensed Combined Financial Information is attached:

•

The historical audited financial statements of DHHC as of and for the year ended December 31, 2022; and

​

•

The historical unaudited condensed consolidated financial statements of UHG as of and for the three months ended March 31, 2023, and the audited carve-out financial statements of the homebuilding operations of Great Southern Homes, Inc. as of and for the year ended December 31, 2022.

​

The unaudited Pro Forma Condensed Combined Statements of Operations have been presented for illustrative purposes only. Further, the unaudited Pro Forma Condensed Combined Financial Information may not be useful in predicting the future financial condition and results of operations of GSH. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited transaction accounting adjustments represent estimates

 

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based on information available as of the date of these unaudited Pro Forma Condensed Combined Financial Statements and are subject to change as additional information becomes available and analyses are performed.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022​

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2023​

 

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1.

DESCRIPTION OF THE BUSINESS COMBINATION

​

On September 10, 2022, DHHC and GSH entered into the Business Combination Agreement. On March 30, 2023 (the “Closing Date”), DHHC consummated its previously announced business combination pursuant to the terms of the Business Combination Agreement, where Merger Sub merged with and into GSH, with GSH surviving the merger as a wholly-owned subsidiary of UHG. In connection with the consummation of the Business Combination on the Closing Date, DHHC changed its name to United Homes Group, Inc.

In connection with the Business Combination, (i) holders of GSH Common Shares received aggregate upfront consideration of (1) 373,473 UHG Class A Common Shares, at a price of $10.00 per share, (2) 36,973,877 UHG Class B Common Shares, at a price of $10.00 per share, (3) 905,930 UHG Class A Common Shares underlying the Rollover Options and (4) 1,867,368 UHG Class A Common Shares underlying the Assumed Warrants and (ii) holders of GSH Common Shares, GSH Options and GSH Warrants received a contingent right to receive up to an additional $200.0 million in earnout consideration, or 20,000,000 UHG Common Shares, upon the achievement of certain earn-out targets.

On March 23, 2023, DHHC held the Special Meeting, at which DHHC’s shareholders voted to approve the Business Combination and other proposals, including the approval of a dual-class structure for the Company, comprised of UHG Class A Common Shares, which carry one vote per share and UHG Class B Common Shares, which carry two votes per share. Additionally, DHHC shareholders approved the United Homes Group, Inc. 2023 Equity Incentive Plan, where at the Effective Time, all options of GSH were automatically canceled, and each holder thereof ceased to have any rights under the equity plan of GSH, except as otherwise expressly provided in the Business Combination Agreement.

Each GSH Common Share issued and outstanding as of immediately prior to the Effective Time was canceled and converted into (x) the right to receive the Per Share Upfront Consideration and (y) the contingent right to receive Earn Out Shares in accordance with the terms of the Business Combination Agreement. The Per Share Upfront Consideration is the right to receive UHG Class A Common Shares and UHG Class B Common Shares (in respect of GSH Class A Common Shares and GSH Class B Common Shares, respectively, issued and outstanding prior to the Effective Time), equal to the Exchange Ratio. The Exchange Ratio is the Transaction Share Consideration divided by the total number of GSH Common Shares outstanding immediately prior to the Effective Time.

Each GSH Option outstanding and unexercised as of immediately prior to the Effective Time was canceled in exchange for an option to purchase a number of UHG Class A Common Shares (“Rollover Options”) equal to (x) the number of GSH Common Shares subject to such GSH Options immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, at an exercise price per share equal to (A) the exercise price per GSH Common Share of such GSH Option immediately prior to the Effective Time divided by (B) the Exchange Ratio. The Rollover Options are subject to the same terms and conditions as were applicable to the GSH Option immediately prior to the Effective Time.

Each GSH Warrant outstanding and unexercised as of immediately prior to the Effective Time was converted into a warrant to acquire a number of UHG Class A Common Shares (“Assumed Warrants”) equal to (x) the number of GSH Common Shares subject to such GSH Warrants immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, at a strike price per share equal to (A) the strike price per GSH Common Share of such GSH Warrant immediately prior to the Effective Time divided by (B) the Exchange Ratio. The Assumed Warrants are subject to the same terms and conditions as were applicable to the GSH Warrant immediately prior to the Effective Time.

Redemption of shares

On January 25, 2023, DHHC held the Extension Meeting, at which DHHC’s shareholders voted to approve the Extension Amendment and extend the date by which DHHC must complete a business combination from January 28, 2023, to July 28, 2023. In connection with the Extension Meeting, holders of Class A Common Shares had the right to have DHHC redeem their shares for cash in an amount equal to

 

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the pro rata portion of the cash and investments in the Trust Account, which had a balance of approximately $349.1 million as of the date of the Extension Meeting. Stockholders holding 30,058,968 shares of Class A common stock (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $304.0 million (approximately $10.12 per share) was removed from the Trust Account to pay such redeeming holders and approximately $45.0 million remained in Diamondhead’s Trust Account.

In connection with the Special Meeting on March 23, 2023, holders of Class A Common Stock had the right to have DHHC redeem their shares for an amount in cash equal to the pro rata portion of the cash and investments in the Trust Account, which had a balance of $45.0 million as of the date of the Special Meeting. Stockholders holding 109,426 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $1.1 million (approximately $10.13 per share) was removed from the Trust Account to pay such redeeming holders and approximately $43.9 million remained in Diamondhead’s Trust Account.

Convertible Note

In connection with the closing of the Business Combination DHHC entered into a Convertible Note Purchase Agreement (the “Note Purchase Agreement”), by and among itself, GSH, and a group of investors (the “Convertible Note Investors”). Pursuant to the closing of the transactions contemplated by the Note Purchase Agreement, the Convertible Note Investors agreed to purchase $80.0 million in original principal amount of Convertible Promissory Notes (the “Notes,” or “Note PIPE Financing”) and pursuant to the terms of the share subscription agreements entered into between each Convertible Note Investor and UHG, an additional 744,588 UHG Class A Common Shares (the “PIPE Shares”) in a private placement PIPE investment (the “PIPE Investment”).

The Notes mature on March 30, 2028, and bear interest at a rate of 15%, with a minimum cash rate of 10% per year. DHHC has the option to pay any accrued and unpaid interest at a rate in excess of 10% either in cash or as paid in kind interest. The Notes are convertible into UHG Class A Common Shares at any time following the 12-month anniversary of the Closing, at 80% of the then current trading price, subject to a minimum Conversion Price of $5.00 and a maximum price of $10.00 per share.

Subscription Agreement

In connection with the execution of the Business Combination Agreement, UHG entered into separate subscription agreements (each a “Subscription Agreement”, or “Subscription Agreement PIPE Financing,” and together with the “Note PIPE Financing,” the “PIPE Financings”) with a number of investors (each a “PIPE Investor”), pursuant to which the PIPE Investors agreed to purchase, and UHG agreed to sell to the PIPE Investors, an aggregate of 471,500 shares of DHHC common stock for a purchase price of $10.00 per share and 117,875 shares at a purchase price of $0.01 per share for an aggregate purchase price of $4.7 million in a private placement offering. The PIPE Financing closed simultaneously with the consummation of the Business Combination.

Lock-Up Agreements

In connection with the execution of the Business Combination Agreement, DHHC entered into separate Share Issuance and Lock-Up Agreements (each a “Lock-Up Agreement”) with a number of investors (each a “Lock-Up Investor”), pursuant to which UHG agreed to issue each Lock-Up Investor 0.25 UHG Class A Common Shares (up to 421,100 UHG Class A Common Shares in the aggregate) for a purchase price of $0.01 per share, for each UHG Class A Common Share held by such Lock-Up Investor at the Closing. Following the Closing of the Business Combination, UHG notified each Lock-Up Investor that UHG waived the lock-up restriction contained in the Lock-Up Agreements.

The following summarizes the pro forma DHHC Common Shares on an as-converted basis:

 

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(1)

Represents remaining DHHC Class A shares following share redemptions prior to the Business Combination.

​

(2)

On March 30, 2023, DHHC waived the lock-up restriction on the Share Lock-Up Agreements.

​

Accounting Treatment for the Business Combination

GSH was deemed the accounting acquirer and DHHC was deemed the accounting acquiree. Under this method of accounting, DHHC was treated as the “acquired” company for financial reporting purposes. Accordingly, the transaction was treated as the equivalent of GSH issuing stock for the net assets of DHHC, accompanied by a recapitalization and thus the Business Combination was treated as a reverse recapitalization in accordance with GAAP. The net assets of DHHC were stated at historical cost, with no goodwill or other intangible assets recorded.

2.

RECLASSIFICATIONS

​

As part of the preparation of these unaudited Pro Forma Condensed Combined Statements of Operations, certain reclassifications were made to align DHHC’s and GSH’s financial statement presentation. In connection with the Business Combination, the Post-Combination Company’s management will perform a comprehensive review of DHHC’s and GSH’s accounting policies. As a result of the review, the Post-Combination Company’s management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the Post-Combination Company. Based on its initial analysis, DHHC has identified the presentation differences that would have an impact on the unaudited pro forma financial information and recorded the following adjustments:

Statement of operations for the Year Ended December 31, 2022

 

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Statement of operations for the Three Months Ended March 31, 2023

​

3.

TRANSACTION ACCOUNTING AND AUTONOMOUS ENTITY ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022

​

The unaudited Pro Forma Condensed Combined Financial Information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The pro forma transaction adjustments included in the unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2022 are as follows:

a.

Represents the compensation expense related to earnout shares issuable to holders of GSH options. The actual compensation expense recorded may differ from this estimate and such difference may be material. See Footnote 6 — Earnout for disclosure of the preliminary inputs and assumptions used to value the earnout consideration issuable to holders for GSH options.

​

b.

Represents the elimination of interest earned on cash, cash equivalents and investments held in the Trust Account.

​

c.

Represents the decrease in fair value of the forfeited Private Placement Warrants. 2,966,669 of the 5,933,333 Private Placement Warrants that were outstanding at the Closing Date were forfeited. The remaining 2,966,664 warrants will be converted on a one-to-one basis to give the holder the right to purchase one UHG Class A Common Share at $11.50.

​

d.

Represents the elimination of income tax expense recorded in DHHC’s historical financial statements.

​

e.

Represents income tax expense incurred as a result of the tax impact due to the corporate reorganization from a Subchapter S Corporation to a C Corporation. GSH estimated its effective tax rate as 26%, which is comprised of a 21% federal tax rate applicable to C Corporations plus a 5% state tax rate.

​

f.

In accordance with the Business Combination, GSH has separated its homebuilding operations from its land development operations. This adjustment is made to mark-up historical lots and lot deposits recorded at historical cost. This adjustment represents a one-time historic adjustment for the increase in cost of sales related to land acquired from the Land Development Affiliates. The amount of this adjustment represents an estimate developed by GSH. To develop this estimate, GSH considered third party publications and datasets, which discussed relevant market and economic conditions related to the land, and qualitative factors of the local community. Using information published within these external publications and datasets, GSH created a peer competitive set and developed an estimated fair value for each finished land lot acquired from the Land Development Affiliates. Specific quantitative inputs used to create the peer competitive set included lot size, lot sales price, lot sales pace, average and median home sales by lot size, and the ratio of lot price to home price per lot size. This resulted in a comparable range of $1,000 to $1,500 price per lineal foot which was applied to the acquired land. As no competitive set could be fully representative of each finished land lot acquired from the Land Development Affiliates, material uncertainties over the resulting fair values calculated may exist. GSH attempted to limit the risks associated with these uncertainties by using these inputs to create a representative peer competitive set.

​

 

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g.

Represents the income tax benefit received associated with the autonomous entity adjustments: (i) markup of cost of sales (Note 3f), amortization of directors and officers insurance (Note 3i), and gain on sale of fixed assets to a related party (Note 3l). The income tax benefit received is a result of the corporate reorganization from a Subchapter S Corporation to a C Corporation. GSH estimated its effective tax rate as 26%, which is comprised of a 21% federal tax rate applicable to C Corporations plus a 5% state tax rate.

​

h.

Represents the elimination of the franchise tax expense, as the franchise tax expense levied on DHHC for the year is not applicable to UHG.

​

i.

Represents one year of amortization expense of directors and officers insurance fees that would have been incurred if the transaction closed on January 1, 2022. This amount is partially offset by the elimination of directors and officers insurance that were applicable only to DHHC.

​

j.

$13.3 million represents one year of interest expense incurred on the convertible note issued to the PIPE Investors. Interest expense is calculated using an effective interest rate method. The effective interest rate for the convertible note was 18.61%.

​

k.

$0.5 million represents one year of amortization expense paid related to the settlement fees incurred in connection with the modified line of credit from Wells Fargo Bank. Refer to the audited historical financial statements of GSH, and the related notes thereto as of and for the year ended December 31, 2022 included in this proxy statement for further information.

​

l.

Represents the gain on the sale of fixed assets to a related party.

​

4.

TRANSACTION ACCOUNTING AND AUTONOMOUS ENTITY ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 2023

​

The unaudited Pro Forma Condensed Combined Financial Information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The pro forma transaction adjustments included in the unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2023 are as follows:

a.

Represents the compensation expense related to earnout shares issuable to holders of GSH options. See Footnote 6 — Earnout for disclosure of the inputs and assumptions used to value the earnout consideration issuable to holders for GSH options.

​

b.

Represents the elimination of interest earned on cash, cash equivalents and investments held in the Trust Account.

​

c.

Represents the decrease in fair value of the forfeited Private Placement Warrants. 2,966,669 of the 5,933,333 Private Placement Warrants that were outstanding at the Closing Date were forfeited. The remaining 2,966,664 warrants converted on a one-to-one basis, giving the holder the right to purchase one UHG Class A Common Share at $11.50.

​

d.

Represents the elimination of income tax expense recorded in DHHC’s historical financial statements.

​

e.

Represents income tax expense incurred as a result of the tax impact due to the corporate reorganization from a Subchapter S Corporation to a C Corporation. GSH estimated its effective tax rate as 26%, which is comprised of a 21% federal tax rate applicable to C Corporations plus a 5% state tax rate.

​

f.

In accordance with the Business Combination, GSH has separated its homebuilding operations from its land development operations. This adjustment is made to mark-up historical lots and lot deposits recorded at historical cost. This adjustment represents a one-time historic adjustment for the increase in cost of sales related to land acquired from the Land Development Affiliates. The amount of this adjustment represents an estimate developed by GSH. To develop this estimate, GSH considered third party publications and datasets, which discussed relevant market and economic

​

 

48

 

conditions related to the land, and qualitative factors of the local community. Using information published within these external publications and datasets, GSH created a peer competitive set and developed an estimated fair value for each finished land lot acquired from the Land Development Affiliates. Specific quantitative inputs used to create the peer competitive set included lot size, lot sales price, lot sales pace, average and median home sales by lot size, and the ratio of lot price to home price per lot size. This resulted in a comparable range of $1,000 to $1,500 price per lineal foot which was applied to the acquired land. As no competitive set could be fully representative of each finished land lot acquired from the Land Development Affiliates, material uncertainties over the resulting fair values calculated may exist. GSH attempted to limit the risks associated with these uncertainties by using these inputs to create a representative peer competitive set.

g.

Represents the income tax benefit received associated with the autonomous entity adjustments: (i) markup of cost of sales (Note 4f) and amortization of directors and officers insurance (Note 4h). The income tax benefit received is a result of the corporate reorganization from a Subchapter S Corporation to a C Corporation. GSH estimated its effective tax rate as 26%, which is comprised of a 21% federal tax rate applicable to C Corporations plus a 5% state tax rate.

​

h.

Represents three months of amortization expense of directors and officers insurance fees that would have been incurred if the transaction closed on January 1, 2023.

​

i.

$3.3 million represents three months of interest expense incurred on the convertible note issued to the PIPE Investors. Interest expense is calculated using an effective interest rate method. The effective interest rate for the convertible note was 19.75%.

​

5.

EARNINGS PER SHARE

​

Net income per share is calculated by applying the two-class method and using the pro forma weighted average shares of DHHC Class A Common Shares assuming the shares were outstanding since January 1, 2022. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire period presented.

The unaudited Pro Forma Condensed Combined Financial Information, as outlined in the Introduction section above, has been prepared to reflect the actual redemptions as of the Closing Date for the year ended December 31, 2022 and the three months ended March 31, 2023:

Earnings Per Share for the Year Ended December 31, 2022 and the Three Months Ended March 31, 2023:

For the purposes of applying the treasury stock method for calculating diluted earnings per share, it was assumed that all outstanding GSH stock and option awards, DHHC Public Warrants and Private Placement Warrants, and Assumed Warrants are exchanged for UHG Common Shares. Earn Out shares are not included in the calculation of diluted earnings per share until certain UHG stock prices are met. Note that only the aforementioned DHHC Public Warrants and Private Placement Warrants would have an antidilutive effect and were thereby excluded from the calculation of diluted weighted average shares outstanding.

 

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6.

EARNOUT

​

The earn out consideration issuable to GSH stockholders, warrant holders and the Sponsor, is initially recognized as a liability at fair value offset by additional paid-in capital and subsequently re-measured each reporting period to its fair value. Changes in the fair value are recognized as income or expense on the income statement. In the event of issuance of shares, the liability will be classified as equity, and in the event that there is no issuance of shares within the Earn Out Period, the liability will be reduced to zero through the income statement.

The earn out consideration issuable to holders of GSH options is classified as equity pursuant to ASC Topic 718-10, due to a past service requirement. Charges to compensation expense for the year ended December 31, 2022 and three months ended March 31, 2023 was $3.6 million and $4.4 million, respectively.

The fair value of the Earn Out Shares and Sponsor Earnout Shares was determined using a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over the Earn Out Period. The estimated fair value of the Earn Out Shares and Sponsor Earnout Shares was determined as of December 31, 2022 and March 30, 2023 (the “Valuation Dates”) for the year ended December 31, 2022 and three months ended March 31, 2023 Pro Forma Condensed Combined Statement of Operations, respectively, using the most reliable information available, subject to change as additional information becomes available and subsequent analyses are performed. The assumptions used in the valuation of the Earn Out Shares, include:

•

Current stock price:   The current stock price is used as of the assumed Closing Date for the December 31, 2022 and March 31, 2023 Pro Forma Condensed Combined Financial Statements.

​

•

Risk-free interest rate:   The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities. Given the Earn Out Shares’ 5.0 year expected life, the risk-free interest rate is 4.07 percent and 3.75 percent as of December 31, 2022 and March 30, 2023, respectively.

​

•

Expected volatility:   The expected volatility was determined by using an average of historical volatilities of selected industry peers deemed to be comparable to our business corresponding to the 5.0 year term of awards. The volatility input was determined to be 40 percent (rounded) for both periods presented.

​

•

Expected life:   The expected life is the Earn Out Period which begins on the Grant Date and ends in 5.0 years.

​

•

Expected dividend yield:   The expected dividend yield is zero as management has never declared or paid cash dividends, and does not expect to pay dividends post-Business Combination to shareholders during the term of the Earn Out Shares.

​

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of the homebuilding operations of UHG should be read in conjunction with the audited carve-out financial statements of the homebuilding operations of GSH as of December 31, 2022, and 2021, and for the years ended December 31, 2022, 2021 and 2020, (collectively, the “GSH Carve-Out Financial Statements”), together with the related notes thereto, and the unaudited condensed consolidated financial statements of UHG as of March 31, 2023 and the notes thereto (collectively, the “UHG Interim Financial Statements”), included in this prospectus. References to “UHG” should be understood to be references to the carved-out homebuilding operations of GSH, and not to the historical operations of GSH which included land development activities. The discussion and analysis should also be read together with the information presented in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” included in this prospectus. In addition to historical information, the following discussion contains forward-looking statements that reflect UHG’s future plans, estimates, beliefs and expected performance. UHG’s estimates are based on its assumptions about future events. These statements may be preceded by, followed by or include the words “believes,” “estimates”, “expects”, “projects”, “forecasts”, “may”, “might”, “will”, “should”, “seeks”, “plans”, “scheduled”, “possible”, “anticipates”, “intends”, “aims”, “works”, “focuses”, “aspires”, “strives” or “sets out” or similar expressions.

The forward-looking statements are dependent upon events, risks and uncertainties that may be outside UHG’s control. UHG’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included in this prospectus.

Note Regarding the GSH Carve-Out Financial Statements

The GSH Carve-Out Financial Statements have been prepared on a “carve-out” basis in accordance with U.S. GAAP. The accompanying GSH Carve-Out Financial Statements were derived from GSH’s historical financial statements and accounting records for the homebuilding operations of GSH (such homebuilding operations referred to in this Management’s Discussion and Analysis of Financial Condition and Results of Operations as the “Company”) to represent the financial position and performance of the Company as if the homebuilding operations of the Company had existed on a standalone basis for the years ended December 31, 2022, 2021, and 2020. Certain balances and transactions that are accounted for at the historical operations of GSH, which included land development activities, have been allocated to the Company for purposes of carve-out financial reporting and are reflected in the accompanying balance sheets and statements of income. Accordingly, the accompanying GSH Carve-Out Financial Statements may not necessarily be indicative of the results of operations that would have been obtained if the homebuilding operations of the Company had operated as an independent entity.

For purposes of preparing the GSH Carve-Out Financial Statements on a “carve-out” basis, a portion of the total corporate expenses of the Company were allocated to GSH based on a percentage of direct usage, when identifiable or, when not directly identifiable, on the basis of proportional cost of sales or employee headcount, for the Company. The corporate expense allocations include the cost of corporate functions and resources provided by or administered by the Company for GSH including, but not limited to, costs associated with executive management, finance, accounting, legal, human resources, related benefit costs associated with these functions, and costs associated with operating the Company’s various office buildings in South Carolina and Georgia. The Company’s management believes that the approach to these carve-out allocations is reasonable.

Overview

UHG designs, builds and sells homes principally in South Carolina, with a smaller presence in Georgia. UHG’s business historically consisted of both homebuilding operations and land development operations. Following the separation of the land development business, which is now primarily conducted by affiliated land development companies (collectively, the “Land Development Affiliates”) that are outside of the corporate structure of UHG, it employs an asset-light lot operating strategy, with a focus on the design,

 

51

 

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 expects to continue to enjoy a close relationship with the Land Development Affiliates, allowing it to potentially benefit from the pipeline of approximately 6,088 lots that are owned or controlled by the Land Development Affiliates, as of June 23, 2023, and which UHG expects to obtain the contractual right to acquire, in addition to lots that UHG may acquire from third parties. See “Certain Relationships and Related Transactions” included in this prospectus for a further discussion of the relationship between UHG and the Land Development Affiliates.

Since its founding in 2004, the Company has delivered approximately 11,000 homes and currently builds in approximately 52 active subdivisions at prices that generally range from $200,000 to $450,000. For the three months ended March 31, 2023 and 2022, the Company had 389 and 474 net new orders and generated approximately $94.8 million and $108.4 million in revenue on 328 and 414 closings, respectively.

UHG’s plan to grow its business is multifaceted: it plans to grow organically, through external acquisitions, and through expansion of business verticals via its mortgage joint venture, Homeowners Mortgage, LLC (the “Joint Venture”) and build-to-rent (“BTR”) platform, pursuant to which UHG will work together with institutional investors for development of BTR communities. Organically, community count is expected to increase in 2023, and UHG expects average community size to increase, based on new communities currently under development. The Company also expects to engage in opportunistic acquisitions of complementary private homebuilders within existing and targeted new markets, and to grow its institutional BTR platform.

Additionally, 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.

The Company’s revenues decreased from approximately $108.4 million for the three months ended March 31, 2022 to $94.8 million for the three months ended March 31, 2023. For the three months ended March 31, 2023, the Company generated gross profit of 17.7%, adjusted gross profit of 20.2%, net loss of approximately $(204.5) million, and adjusted EBITDA margin of 9.0%, representing a decrease of 7.5%, 5.8%, $221.5 million, and 8.9%, respectively, from the three months ended March 31, 2022.

The Company increased its revenues from approximately $432.9 million for the year ended December 31, 2021 to approximately $477.0 million for the year ended December 31, 2022. For the year ended December 31, 2022, the Company generated gross profit of 24.9%, adjusted gross profit of 26.0%, net income of approximately $69.5 million, an EBITDA margin of 15.9% and adjusted EBITDA margin of 17.4%, representing an increase of 1.7%, 1.9%, $7.1 million, 0.5% and 1.9%, respectively, from the year ended December 31, 2021.

Adjusted gross profit, EBITDA, adjusted EBITDA, and EBITDA Margin are not financial measures under U.S. 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, including an explanation of the pro forma amounts.

Over the last year 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 the most recent meeting in May 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 sales incentives in the second half of 2022, mostly in the form of mortgage rate buy downs or closing costs.

Although UHG continues to deal with pricing fluctuations related to building materials, labor and lot costs, UHG has experienced a significant decline in lumber prices from the peak prices in 2022 which should have a meaningful positive impact on margins for new homes constructed. UHG does have remaining inventory with various levels of framing costs, which will be reflected in the margins for these homes. There has also been overall improvement in the supply chain, which, coupled with UHG’s standardization of

 

52

 

certain features of its homes, has improved construction cycle times. While UHG cannot predict the extent to which the aforementioned factors will impact its performance, it believes that its asset-light business model positions them well to effectively navigate market volatility.

Factors Affecting UHG’s Results of Operations

The Company believes that its future performance will depend on many factors, including those described below and in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this prospectus.

Availability and Price of Finished Lots

UHG’s business is dependent upon a supply of developed, or finished lots on which to build homes, whether such lots are supplied by Land Development Affiliates or by other land developers. UHG expects to enter into lot purchase and sale agreements with the Land Development Affiliates, which, when combined with contracts UHG has with third-party developers, will give UHG the contractual right to acquire approximately 7,749 lots (as of June 23, 2023). UHG’s pipeline of finished lots may be affected by changes in the general availability of finished lots in the markets in which it operates, the willingness of land developers and sellers to sell finished lots at competitive prices, competition for available finished lots and other market conditions. Acquiring finished lots in desirable geographic areas with prices and acquisition terms that drive profitable home delivery is an important component of UHG’s business. Lot value appreciation or depreciation varies across the markets in which UHG operates. UHG’s acquisition costs associated with finished lots purchased from third parties have increased in certain of UHG’s markets where job and population growth are outpacing lot supply. To the extent the supply of lots is limited, UHG may build and sell fewer homes. To the extent that UHG is unable to acquire finished lots at competitive prices, or at all, its revenues, profits, and other results of operations could be negatively impacted.

Availability of Mortgages; Applicable Interest Rates

UHG’s business is impacted by the availability and affordability of mortgages. In 2022, approximately 90% of UHG’s homebuyers obtained a mortgage to purchase their home. A prospective customer’s ability to obtain or afford a mortgage will be impacted by among other things market conditions, interest rates and the amount required as a down payment, each of which are factors outside of UHG’s control. If mortgages are unavailable or are not available on terms that make the purchase of UHG’s homes affordable, prospective customers may choose to forgo the purchase of a home or purchase a less expensive home, which could negatively impact UHG’s business. In response to rising inflation, the Federal Reserve has increased interest rates beginning in March 2022 and continuing through the most recent meeting in May 2023, which has resulted in a corresponding increase in mortgage rates that continue to rise. While the level and trajectory of mortgage rates in the future is unknown, additional increases in mortgage rates is likely to result in reduced purchasing power for homebuyers, which could result in reduced sales prices for homes and decreased gross margins, negatively impacting earnings and cash flow. To combat rising mortgage rates, UHG has introduced sales incentives primarily focused on mortgage buy down programs or closing costs, which could also result in decreased gross margins.

Costs of Building Materials and Labor

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 such as 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 disruptions. Any 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. Higher costs of building materials, including lumber, generally lead to decreased margins on homes sold. UHG has recently seen a decline in the price of lumber and more moderate reductions in other building materials, which

 

53

 

UHG expects will have a positive impact on its margins in the near-term. Future increases in the cost of building materials and labor could have a negative impact on UHG’s margins on homes sold.

The Company also experienced disruptions to its business as a result of pandemic-induced supply-chain issues, which have generally been resolved. These disruptions generally resulted in increased costs for the Company to obtain building supplies due to lack of inventory from supplier. These increased costs were partially offset by higher home sales prices as a result of increased demand. Delays caused by supply-chain issues in some instances resulted in late delivery of developed lots, which impacted the Company’s ability to sell additional homes, and also resulted in the Company having to absorb additional carrying costs on homes being constructed. In response to supply-chain issues experienced during the pandemic, the Company took steps to standardize certain features of its homes, which has allowed the Company to construct more homes from inventoried supplies and reduces delays that may be experienced by homebuilders with a different operating model. Future labor and material shortages and price increases for labor and materials could cause delays in 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

Inflation

In 2022 the rate of inflation in the United States increased significantly and may continue to increase into the second half of 2023. UHG’s homebuilding operations can be adversely impacted by inflation, primarily from higher land, financing, labor, material, and construction costs. In addition, inflation can be correlated with higher mortgage rates which can significantly affect the affordability of mortgage financing to homebuyers. In response to softer demand for new homes, UHG introduced sales incentives in the second half of 2022, mostly in the form of mortgage rate buy downs or closing costs. While UHG attempts to pass on cost increases to customers through increased home prices, when weak housing market conditions exist, UHG may be unable to offset cost increases with higher selling prices. Although inflationary pressures may persist into the future, UHG believes the affordability of its homes and its favorable land holdings will position UHG to meet the headwinds brought on by these challenging market conditions. UHG believes it should continue to operate effectively and expects to continue to generate strong margins and cash flows from its operations. UHG intends to continue to closely manage its home pricing, incentives, product offerings, and inventory levels to optimize the return on its investments in each of its communities.

Housing Supply and Demand

Sales of residential real estate are highly dependent on housing supply and demand, including the desirability of location and design. When the supply of new homes exceeds new home demand, new home prices may generally be expected to decline. The supply of new homes can be driven by a number of factors including the pace of homebuilding and home foreclosures. Declining new home prices can have a self- reinforcing nature as homebuyers postpone a new home purchase until they are comfortable that stable price levels have been reached, reducing demand further.

Conversely, when the demand for new homes exceeds supply, new home prices may generally be expected to increase. The demand for new homes can be driven by a number of factors including historic under-building of homes and increases in rental rates as compared to the cost of home ownership. Rising new home prices can have a self-reinforcing nature as homebuyers become confident in home prices and accelerate their timing of a new home purchase, thereby increasing demand.

Beginning in the third quarter of 2022, housing demand has been negatively impacted by rising mortgage rates causing a reduction in closings and net sales. In response, the Company has implemented mortgage rate buydowns and payment of closing costs to attempt to mitigate the impact of rising interest rates on demand for new homes. Additional increases in mortgage rates will likely result in reduced purchasing power for homebuyers and could cause continued decreases in housing demand.

Seasonality

The sale of both new and existing homes in the United States exhibit demonstrable seasonality over the course of a calendar year. This seasonality can be evidenced across multiple sources including, but not limited to, government data (U.S. Census Bureau), trade groups (National Association of Realtors) and public

 

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company reports. Typically, prospective home buyers search for homes beginning in late winter to early spring, which in industry parlance is often referred to as the “spring buying season.” As homes are constructed, those contracts are then closed upon through the summer into fall. As a result, the Company and the homebuilding industry tend to experience more new home sales in the first half of a calendar year and experience increased closings and revenue recognized in the second half of a calendar year.

In all of its markets, the Company has historically experienced similar variability in its results of operations and capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry. As a result, UHG’s revenue may fluctuate on a quarterly basis. As a result of seasonal activity, UHG’s quarterly results of operations and financial position at the end of a particular quarter are not necessarily representative of the results it expects at year end. UHG expects this seasonal pattern to continue in the long term.

Factors Affecting the Comparability of UHG’s Financial Condition and Results of Operations

The Company’s historical financial condition and results of operations for the periods presented are not expected to be indicative of UHG’s future performance, either from period to period or going forward, primarily because the lots developed by affiliates were not transferred to the homebuilding operations at a market rate. The following describes various factors that will affect the comparability of UHG’s results of operations in future periods:

Land Development Operations

The Company has historically operated as both a land developer and a homebuilder. As of the date of this prospectus, the Company has transferred substantially all of the raw land and land under development previously owned by it to the Land Development Affiliates. The GSH Carve-Out Financial Statements contained herein reflect the separation of the land development business and present historical information and results attributable to the homebuilding operations of the Company. The historical income statements of the Company contained herein have been adjusted to reflect, on a carve-out basis, the Company’s separation of the land development business. As a result, the historical financial information of the Company may not accurately reflect what the Company’s results would have been if the transition away from land development had occurred at the beginning of the period or what UHG’s future results are likely to be. UHG expects that, in the future, developed land will be acquired from the Land Development Affiliates and third parties at fair market value, which, when compared to the Company’s historical acquisition of developed land from non-third parties at cost, is likely to increase the Company’s cost of sales.

Growth Strategy

The Company has grown organically in recent years primarily by gaining share of new home sales within the markets in which it operates. Going forward, share take, growth in community count and a re-composition of community size are expected to drive organic growth. Specifically, community count is expected to increase in 2023, and UHG expects average community size to increase. Management of UHG expects that larger communities will allow UHG to better manage sales cadence and even-flow production schedules, thereby generating increased operating leverage. Organic delivery growth is expected to be augmented by several other initiatives including the opportunistic acquisition of complementary private homebuilders within existing and targeted new markets and growing UHG’s institutional BTR platform. UHG is targeting approximately 10 – 20% of closings annually from its BTR initiative and plans to continue to disclose specifics regarding this initiative as a public company. Management also expects revenue and EBITDA growth prospectively through the contribution of the Joint Venture, which formally began generating revenue in July 2022. Beyond a new source of revenue and EBITDA for UHG with little incremental expense or capital investment, it is anticipated that the Joint Venture will improve buyer traffic conversion and reduce backlog cancellation rates as well.

Selling, General and Administrative Expense

UHG expects that its selling, general and administrative expense will increase as a result of becoming a public company due to increased compliance costs associated with certain provisions of the Sarbanes-Oxley Act and related SEC regulations and the requirements imposed in connection with UHG’s shares being

 

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listed on Nasdaq. Namely, as a public company, UHG is obligated to establish and maintain internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, to prepare and file periodic financial and other reports in compliance with federal securities laws, and to adhere to certain standards related to corporate governance and its Board of Directors. UHG expects an increase in labor costs in order to pay its employees (including hiring additional employees), legal counsel, and accountants to assist in implementing these tasks and controls; however, UHG expects part of this increase to be offset by the reduction in employees as a result of the separation of the land development business, reflected in the GSH Carve-Out Financial Statements included in this prospectus.

Equity Incentive Plan

To incentivize individuals providing services to GSH or its affiliates, the GSH board adopted the Great Southern Homes 2022 Equity Incentive Plan. In connection with the Business Combination the Great Southern Homes 2022 Equity Incentive Plan was terminated and DHHC’s shareholders approved the 2023 Plan. The 2023 Plan provides for the grant, from time to time, at the discretion of the Board of Directors or a committee thereof, of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards, substitute awards and performance awards. Any individual who is a director, officer, employee, consultant, or advisor of UHG or any of its affiliates (which, for purposes of the 2023 Plan, generally consists of entities controlling, controlled by, or under common control with UHG, or in which UHG has a significant interest), will be eligible to receive awards under the 2023 Plan at the discretion of the Board of Directors or the compensation committee of the Board of Directors.

Components of UHG’s Operating Results

Below are general definitions of the income statement line items set forth in UHG’s period over period changes in results of operations.

Revenues

Revenues 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 estimated project costs. Proceeds from home sales are generally received within a few days after closing. Home sales are reported net of sales. The pace of net new orders, average home sales price, the level of incentives provided to the customer 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 purchase and carrying costs associated with each lot, construction costs of each home, capitalized interest expensed, building permits, and warranty costs (both incurred and estimated to be incurred) and sales incentives in the form of mortgage rate buydowns and closing costs. In addition, cost of sales includes compensation related expense for UHG’s field based personnel. Allocated costs, including interest, and property taxes, incurred during development and home construction 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. UHG expects that developed land will be acquired from the Land Development Affiliates and third parties at fair market value, which, when compared to the Company’s historical acquisition of developed land from non-third parties at cost, is likely to increase UHG’s cost of sales.

Selling, General and Administrative Expense

Selling expense includes sales commissions for closed homes and marketing expenses incurred to maintain model homes. UHG recognizes these costs in the period they are incurred. General and

 

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administrative expense consists of corporate and marketing overhead expenses such as payroll, insurance, IT, office expenses, advertising, outside professional services, travel expenses, and other public company costs such as Board of Director fees, D&O insurance, listing fees and filing expenses. UHG Company recognizes these costs in the period they are incurred. General and administrative expense further includes operating lease expense, variable lease costs including maintenance charges, taxes, insurance and other similar costs, rent expense related to short-term leases, stock compensation expense associated with the equity classified earnout shares issued in connection with the Business Combination, stock compensation expense associated with the 2023 Plan, and transaction expenses.

Prior to the Business Combination, a portion of the selling, general and administrative (“SG&A”) expenses were allocated to the homebuilding operations of the Company 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 Income, Net

Other income, net includes amortization of deferred loan costs associated with UHG’s revolving lines of credit, gain on extinguishment of debt, loss upon sale of retirement of depreciable assets and miscellaneous vendor and credit card rebates.

Equity in Net Earnings from Investment in Joint Venture

On February 4, 2022, the Company entered into a joint venture agreement with an unrelated third party to acquire a 49% equity stake in Homeowners Mortgage, LLC, and made an initial capital contribution of $49,000 at the formation of the joint venture. Equity in net earnings from investment in joint venture for the period from the commencement of operations through March 31, 2023 was $0.2 million, increasing the investment in joint venture as of March 31, 2023 to $0.4 million. Refer to Note 2 — Summary of significant accounting policies in the notes to the GSH Carve-Out Financial Statements included elsewhere in this prospectus for more information on how UHG accounts for its investment in the joint venture.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities includes certain stock options (as discussed in Note 13 —​Share-based compensation in the notes to the UHG Interim Financial Statements) issued under the 2023 Plan, warrants issued in connection with DHHC’s Initial Public Offering (the “Public Warrants”, as discussed in Note 15 — Warrant liability in the notes the UHG Interim Financial Statements), warrants issued in a private placement by DHHC (the “Private Placement Warrants”, as discussed in Note 15 — Warrant liability in the notes the UHG Interim Financial Statements) and certain Earnout Shares issued in connection with the Business Combination (as discussed in Note 14 — Earnout Shares in the notes to the UHG Interim Financial Statements). 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 increase in fair value of the derivative liability classified instruments is included in change in fair value of derivative liabilities on UHG’s Condensed Consolidated Statements of Operations.

(Loss) Income Before Taxes

(Loss) income before taxes is revenues less cost of sales, selling, general and administrative expense, other income, net, equity in net earnings from investment in joint venture, and change in fair value of derivative liabilities.

Income Tax Benefit

Income tax benefit is 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 period when the change is enacted. Deferred

 

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tax assets are reduced by a valuation allowance when it is “more-likely-than 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 (Loss) Income

Net (loss) income 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 the Company 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 (loss) 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 is gross profit less capitalized interest expensed in cost of sales.

Results of Operations

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The following table presents summary results of operations for the periods indicated:

 

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NM — Not Meaningful

(a)

UHG had 9 communities in closeout for the three months ended March 31, 2023 and 5 communities in closeout for the three months ended March 31, 2022. These communities are not included in the count of “Active communities at end of period.”

​

(b)

Average sales price of homes closed is calculated based on homebuilding revenues, excluding the impact of percentage of completion 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 “Management’s Discussion and Analysis of Financial Condition and Result of Operations — Non-GAAP Financial Measures.”

​

Revenues:   Revenues for the three months ended March 31, 2023 were $94.8 million, a decrease of $13.6 million, or 12.5%, from $108.4 million for the three months ended March 31, 2022. The decrease in revenues was primarily attributable to the decrease in production-built homes. The average sales price of production-built homes closed for the three months ended March 31, 2023 was $314,250, an increase of $42,245, or 15.5%, from the average sales price of production-built homes closed of $272,005 for the three months ended March 31, 2022. Lost revenue of $24.5 million due to the decrease in number of production-built homes sold is offset by $12.4 million generated from the increase in overall sales prices. The decrease in revenues was also attributable to a decrease in revenue recognized over time from land owned by customers of $1.5 million.

Cost of Sales and Gross Profit:   Cost of sales for the three months ended March 31, 2023 was $78.0 million, a decrease of $3.2 million, or 3.9%, from $81.2 million for the three months ended March 31, 2022. The decrease in cost of sales was primarily attributable to the decrease in number of homes sold. UHG closed 328 homes during the three months ended March 31, 2023, a decrease of 86 home closings, or 20.8%, as compared to 414 homes closed during the three months ended March 31, 2022. This was partially offset by an increase in the average cost to complete a home due to higher direct costs, including lumber prices, and incentives, primarily in the form of mortgage rate buydowns and closing costs.

Gross profit for the three months ended March 31, 2023 was $16.8 million, a decrease of $10.5 million, or 38.5%, from $27.3 million for the three months ended March 31, 2022, due to the decline in the number of home closings and increased cost per home as described above. Gross profit as a percentage of revenue for the three months ended March 31, 2023 was 17.7%, a decrease of 7.5%, as compared 25.2% for the three months ended March 31, 2022.

 

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Adjusted Gross Profit:   Adjusted gross profit for the three months ended March 31, 2023 was $19.2 million, a decrease of $9.0 million, or 31.9%, as compared to $28.2 million for the three months ended March 31, 2022. Adjusted gross profit as a percentage of revenue for the three months ended March 31, 2023 was 20.2%, a decrease of 5.8%, as compared to 26.0% for the three months ended March 31, 2022. The adjusted gross profit as a percentage of revenue decrease was attributable to a $10.5 million decrease in gross profit for the three months ended March 31, 2023 as compared to March 31, 2022. This decrease was partially offset when excluding interest expense included in cost of sales, which increased by $1.4 million due to higher interest rates period over period. 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 “Management’s Discussion and Analysis of Financial Condition and Result of Operations — Non-GAAP Financial Measures.”

Selling, General and Administrative Expense:   Selling, general and administrative expense for the three months ended March 31, 2023 was $16.7 million, an increase of $6.3 million, or 60.6%, from $10.4 million for the three months ended March 31, 2022. The increase in selling, general and administrative expense was primarily attributable to an increase of $4.4 million related to stock compensation expense associated with the equity classified earnout shares issued in connection with the Business Combination for the three months ended March 31, 2023. Additionally, consulting expenses increased by $1.0 million due to an increase in financial reporting, accounting and legal related costs in connection with the Business Combination. Insurance expense increases of $0.3 million, rent expense increases of $0.1 million and bad debt expense increases of $0.1 million were also attributable to the increase in selling, general and administrative expense for the three months ended March 31, 2022.

Other Income, Net:   Total other income, net for the three months ended March 31, 2023 was $0.2 million, and there was no change as compared to $0.2 million for the three months ended March 31, 2022.

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, 2023 was $0.2 million compared to zero for the three months ended March 31, 2022, due to the joint venture not being formed until mid-2022. The increase in equity in net earnings from investment in joint venture increased the investment in joint venture as of March 31, 2023 to $0.4 million. There were no impairment losses related to the Company’s investment in the joint venture recognized during the three months ended March 31, 2023.

Change in Fair Value of Derivative Liabilities:   Change in fair value of derivative liabilities for the three months ended March 31, 2023 was $207.1 million as compared to zero for the three months ended March 31, 2022. Under ASC 815, derivative liabilities are marked to market each reporting period with changes recognized on the Statements of Operations. The loss incurred related to the derivative liabilities was primarily attributable to a change in fair value of $203.4 million related to the Earnout Shares, $1.5 million related to the Public Warrants, and $1.2 million related to the Private Placement Warrants issued in connection with the Business Combination.

Income Tax Benefit:   Income tax benefit for the three months ended March 31, 2023 was $2.0 million, an increase of $2.0 million as compared to zero for the three months ended March 31, 2022. The income tax benefit was due to a $0.8 million increase in connection with continuing operations for the post transaction two day period ended March 31, 2023. Additionally, Great Southern Homes, Inc, a consolidated subsidiary of the Company, recorded an income tax benefit of $1.2 million, which is included in the total income tax benefit for the three months ended March 31, 2023, due to its change in tax status to a taxable corporation.

Net (Loss) Income:   Net (loss) income for the three months ended March 31, 2023 was $(204.5) million, a decrease of $221.5 million, or 1,302.9%, from $17.0 million for the three months ended March 31, 2022. The decrease in net income was primarily attributable to the decrease in income before taxes of $223.5 million, or 1,314.7%, during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, partially offset by an increase in income tax benefit of $2.0 million, during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

 

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following table presents summary results of operations for the periods indicated: