Company: UHG
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001830188-25-000012
Chunk: 86

Company: United Homes Group, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 7
Chunk 86
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 affects the comparability of Cost of sales.

Income Taxes 

Prior to the Business Combination, Legacy UHG was included in the tax filings of shareholders of GSH, which were taxed individually under the provision of Subchapter S and Subchapter K of the Internal Revenue Code. Following the Business Combination, UHG became a corporation subject to corporate-level taxes, and the income taxes became dependent upon its taxable income, and its net income since the Business Combination reflects such taxes. UHG recognizes the financial statement impacts of GAAP and tax timing differences on a quarterly basis. 

Selling, General and Administrative Expense

UHG’s selling, general and administrative expense have increased 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 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 has seen an increase in labor costs in order to pay its employees (including hiring additional employees), directors and officers insurance, Board of Directors fees, and professional fees to legal counsel and accountants to assist in implementing these tasks and controls.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities includes certain stock options issued under the 2023 Plan, warrants issued in connection with DHHC’s Initial Public Offering, warrants issued in a private placement by DHHC and certain common shares to be issued upon the achievement of certain future earnout conditions (“Earnout Shares”) issued in connection with the Business Combination. These instruments were recognized as a derivative liability in accordance with ASC 815 starting in 2023, and are marked to market at the end of each reporting period. With the exception of the public warrants, the fair values of each derivative liability are determined using Level 3 inputs. The models used to fair value the derivative liabilities rely on significant assumptions and inputs, including the Company’s stock price, which may cause volatility in the fair value each reporting period. Fluctuations in the fair value of derivative liabilities as a result of Level 3 inputs may impact the comparability of UHG’s results of operations. 

40

Results of Operations 

Year Ended December 31,