What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-02 compared with 2022-03-16 · 609 added, 1045 removed, 309 unchanged (84% of the section changed)

2 unchanged sentences

and Subsidiaries

Report of Independent Registered Public Accounting Firm ( 238 )

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm ( PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Comprehensive Income

Consolidated Statements of Mezzanine Equity, Members’ Equity and Stockholders’ Equity

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

2 unchanged sentences

To the Board of Directors and Stockholders of Dream Finders Homes, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dream Finders Homes, Inc.

and its subsidiaries (the “Company”) as of

December 31, 2021 and 2020, and the related consolidated statements of comprehensive income, of mezzanine equity, members’ equity and stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2021,

including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of

December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As described in Note 1 to the consolidated financial statements, the

Company changed the manner in which it accounts for cash proceeds from home closings that are in-transit from or held within title company escrow accounts for the benefit of the Company in 2021.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the

Company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to

perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or

complex judgments.

separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Contingent Consideration

As described in Note 1 to the consolidated financial statements, the Company has recorded contingent consideration related to the

acquisitions of McGuyer Homebuilders, Inc.

As described in Note 1 to the consolidated financial statements, the Company has recorded contingent consideration related to the acquisitions of McGuyer Homebuilders, Inc.

in 2021, H&H Constructors of Fayetteville in 2020, and Village Park Homes in 2019.

Management recorded the fair value of the contingent consideration as a liability on the respective acquisition

Management recorded the fair value of the contingent consideration as a liability on the respective acquisition dates.

The estimated earn-out payments are subsequently remeasured to fair value at each reporting date based on the estimated future earnings of the acquired entities and the reassessment of risk-adjusted discount rates.

The measurement of

contingent consideration was based on projected cash flows such as revenues, gross margin, overhead expenses, and pre-tax income and discounted to present value using the discounted cash flow method.

As of December 31, 2021, the liability for

contingent consideration was $124.1 million.

The principal considerations for our determination that performing procedures relating to the valuation of contingent consideration is a

critical audit matter are (i) the significant judgment by management when estimating the fair value of contingent consideration;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s

significant assumptions related to projected pre-tax income and the risk-adjusted discount rates;

The measurement of contingent consideration was based on projected cash flows such as revenues, gross margin, overhead expenses, and pre-tax income and discounted to present value using the discounted cash flow method.

As of December 31, 2022, the liability for contingent consideration was $115 million.

The principal considerations for our determination that performing procedures relating to the valuation of contingent consideration is a critical audit matter are (i) the significant judgment by management when estimating the fair value of contingent consideration;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenue, gross margin and pre-tax income and the risk-adjusted discount rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included, among others, testing management’s process for estimating the fair value of contingent consideration, which included evaluating the appropriateness of the discounted cash flow methods,

testing the completeness and accuracy of data used in the methods, and evaluating the reasonableness of management’s significant assumptions related to projected pre-tax income and the risk-adjusted discount rates.

Evaluating the reasonableness

of the projected pre-tax income involved considering the past performance of the acquired businesses, as well as economic and industry forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the

appropriateness of the discounted cash flow methods and the reasonableness of the risk-adjusted discount rates.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s remeasurement of the contingent consideration, including controls over the projected revenue, gross margin and pre-tax income and risk-adjusted discount rates applied in the contingent consideration valuation calculation.

These procedures also included, among others, testing management’s process for estimating the fair value of contingent consideration, which included evaluating the appropriateness of the discounted cash flow methods, testing the completeness and accuracy of data used in the methods, and evaluating the reasonableness of management’s significant assumptions related to projected revenue, gross margin and pre-tax income and the risk-adjusted discount rates.

Evaluating the reasonableness of the projected revenue, gross margin and pre-tax income involved considering the past performance of the acquired businesses, as well as economic and industry forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow methods and the reasonableness of the risk-adjusted discount rates.

/s/ PricewaterhouseCoopers LLP

3 unchanged sentences

DREAM FINDERS HOMES, INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

2022 December 31,

Cash and cash equivalents $ 364,531 $ 227,227

Restricted cash (VIE amounts of $ 4,372 and $ 4,275 )

30,599 54,095

Accounts receivable (VIE amounts of $ 580 and $ 2,684 )

43,490 33,482

Construction in process and finished homes 1,175,107 961,779

VIE owned land and lots

Company owned land and lots 196,563 83,197

Equity method investments

VIE owned land and lots 6,515 21,686

Total inventories 1,378,185 1,066,662

Lot deposits 277,258 241,406

Other assets (VIE amounts of $ 1,877 and $ 2,185 )

49,913 43,962

Investments in unconsolidated entities 14,008 15,967

Property and equipment, net 7,337 6,789

Operating lease right-of-use assets 24,084 19,359

Finance lease right-of-use assets

Intangible assets, net of amortization

Deferred tax asset 4,526 4,232

Other assets (VIE amounts of $ 2,185,265 and $ 0 )

1,894,247,623

Intangible assets, net of amortization 4,999 9,140

Goodwill 172,207 171,927

Total assets $ 2,371,137 $ 1,894,248

Accounts payable (VIE amounts of $ 353 and $ 1,309 )

$ 134,702 $ 113,498

Accrued expenses (VIE amounts of $ 4,434 and $ 6,915 )

184,051 139,508

Customer deposits 145,654 177,685

Construction lines of credit

Notes payable (VIE amounts of $ 1,979,389 and $ 8,821,282 )

Construction lines of credit (VIE amounts of $ 0 and $ 1,979 )

966,248 763,292

Operating lease liabilities 24,661 19,826

Finance lease liabilities

Contingent consideration 115,128 124,056

Total liabilities 1,570,444 1,337,865

1,337,864,345

Commitments and contingencies (Note 6)

1 unchanged sentence

Preferred mezzanine equity 156,045 155,220

Common mezzanine equity

Total mezzanine equity

Members’ Equity

Common members’ equity

Total members’ equity

Stockholders’ Equity - Dream Finders Homes, Inc.

Class A common stock, $ 0.01 per share, 289,000,000 authorized, 32,295,329

Class B common stock, $ 0.01 per share, 61,000,000 authorized, 60,226,153

Stockholders’ Equity

Class A common stock, $ 0.01 per share, 289,000,000 authorized, 32,533,883 and 32,295,329 outstanding as of December 31, 2022 and 2021, respectively

Class B common stock, $ 0.01 per share, 61,000,000 authorized, 60,226,153 outstanding as of December 31, 2022 and 2021

Additional paid-in capital 264,757 257,963

1 unchanged sentence

Non-controlling interests 12,970 24,081

Total mezzanine equity, members’ equity and stockholders’ equity

Total liabilities, mezzanine equity, members’ equity and stockholders’ equity

1,894,247,623

Total mezzanine and stockholders’ equity 800,693 556,383

Total liabilities, mezzanine equity and stockholders’ equity $ 2,371,137 $ 1,894,248

The accompanying notes are an integral part of these consolidated financial statements.

DREAM FINDERS HOMES, INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Twelve Months Ended December 31,

1,923,909,806

1,133,806,607

Cost of sales

(In thousands, except share and per share amounts)

Year ended December 31,

2022 2021 2020

Homebuilding $ 3,334,559 $ 1,917,301 $ 1,127,976

Other 7,776 6,609 5,831

Total revenues 3,342,335 1,923,910 1,133,807

Homebuilding cost of sales 2,722,139 1,610,332 962,928

Selling, general and administrative expense 271,040 154,405 90,359

Income from equity in earnings of unconsolidated entities

Gain on sale of assets

Loss on extinguishment of debt

Paycheck Protection Program forgiveness

Other Expense

Income from unconsolidated entities ( 16,122 ) ( 9,428 ) ( 7,992 )

Contingent consideration revaluation 11,053 7,533 1,379

Other (income) expense, net ( 1,963 ) ( 1,653 ) 1,749

Interest expense 32 672 871

Income before taxes

Income before income taxes

356,156 162,049 84,513

Income tax expense

( 81,859 ) ( 27,455 ) —

Net and comprehensive income $ 274,297 $ 134,594 $ 84,513

Net and comprehensive income attributable to non-controlling interests

Net and comprehensive income attributable to noncontrolling interests ( 11,984 ) ( 13,461 ) ( 5,420 )

Net and comprehensive income attributable to Dream Finders Homes, Inc.

$ 262,313 $ 121,133 $ 79,093

Earnings per share

Basic $ 2.67 $ 1.27 $ —

Diluted $ 2.45 $ 1.27 $ —

Weighted-average number of shares

The Company calculated earnings per share (“EPS”) based on net income attributable to common stockholders for the period January 21, 2021

through December 31, 2021 over the weighted average diluted shares outstanding for the same period.

EPS was calculated prospectively for the period subsequent to the Company’s initial public offering and corporate reorganization,

resulting in 92,521,482 shares of common stock outstanding as of the closing of the initial public offering.

The total outstanding shares of common stock are made up of Class A common stock and Class B common stock, which participate

equally in their ratable ownership share of the Company.

Diluted shares were calculated by using the treasury stock method for stock grants and the if‐converted method for the convertible preferred stock and the associated preferred

Basic 92,745,781 92,521,482 —

Diluted 106,691,248 95,313,593 —

The accompanying notes are an integral part of these consolidated financial statements.

DREAM FINDERS HOMES, INC.

and Subsidiaries

Consolidated Statements of Mezzanine Equity, Members’ Equity and Stockholders’ Equity

CONSOLIDATED STATEMENTS OF EQUITY

Year ended December 31, 2022, 2021, 2020

(In thousands, except share amounts)

Redeemable Preferred

Common Stock -

Additional Paid-in Capital

Retained Earnings

Balance at December 31, 2018

Unit compensation

Contributions

Contributions from non-controlling

Conversion of units

Distributions

Mezzanine Redeemable

Mezzanine Common Units

Members’ Common Stock -

Class A Common Stock -

Class B Additional Paid-in Capital Retained Earnings Total

Interests Total Equity

Units Amount Units Amount Units Amount Shares Amount Shares Amount

Balance at December 31, 2019 49,555 $ 58,269 5,774 $ 16,248 76,655 $ 56,503 — $ — — $ — $ — $ — $ 30,471 $ 161,491

Unit compensation

Units compensation — — — — — 947 — — — — — — — 947

Contributions — — 1,236 — — — — — — — — — — —

Contributions from non-controlling

Conversion of units

Contributions from non-controlling interests — — — — — — — — — — — — 3,883 3,883

Redemptions ( 1,012 ) ( 13,000 ) — — — — — — — — — — — ( 13,000 )

Distributions — ( 2,522 ) — ( 1,202 ) — ( 14,252 ) — — — — — — ( 7,835 ) ( 25,811 )

Net income — 12,891 — 5,547 — 60,655 — — — — — — 5,420 84,513

Balance at December 31, 2020 48,543 $ 55,638 7,010 $ 20,593 76,655 $ 103,853 — $ — — $ — $ — $ — $ 31,939 $ 212,023

Unit compensation

Contributions

Contributions from non-controlling

Conversion of units

Distributions

January 20, 2021 - prior to reorganiation and transactions and IPO

Reorganization transactions ( 15,400 ) ( 19,958 ) ( 7,010 ) ( 19,227 ) ( 76,655 ) ( 84,473 ) 21,255,329 213 60,226,153 602 122,843 — — —

Issuance of common stock in IPO, net

Issuance of convertible preferred

Issuance of common stock, net — — — — — — 11,040,000 110 — — 129,887 — — 129,997

Issuance of convertible preferred stock 150,000 148,124 — — — — — — — — — — — 148,124

Equity-based compensation — — — — — — — — — — 5,233 — — 5,233

Contributions — — — — — — — — — — — — 2,000 2,000

Contibutions from non-controlling

Conversion of units

Redemptions ( 26,000 ) ( 25,530 ) — — — — — — — — — — — ( 25,530 )

Distributions — ( 3,617 ) — ( 1,275 ) — ( 18,384 ) — — — — — ( 13 ) ( 23,319 ) ( 46,608 )

Preferred dividends declared

Preferred stock dividends declared — — — — — — — — — — — ( 3,450 ) — ( 3,450 )

Net income (loss) — 563 — ( 91 ) — ( 996 ) — — — — — 121,657 13,461 134,594

Balance at December 31, 2021 157,143 $ 155,220 — $ — — $ — 32,295,329 $ 323 60,226,153 $ 602 $ 257,963 $ 118,194 $ 24,081 $ 556,383

Equity-based compensation — — — — — — 238,554 2 — — 6,794 — — 6,796

Distributions — — — — — — — — — — — — ( 23,095 ) ( 23,095 )

Preferred stock dividends declared — — — — — — — — — — — ( 13,688 ) — ( 13,688 )

Net income — 825 — — — — — — — — — 261,488 11,984 274,297

Balance at December 31, 2022 157,143 $ 156,045 — $ — — $ — 32,533,883 $ 325 60,226,153 $ 602 $ 264,757 $ 365,994 $ 12,970 $ 800,693

The accompanying notes are an integral part of these consolidated financial statements.

DREAM FINDERS HOMES, INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve Months Ended December 31,

(In thousands)

Year ended December 31,

2022 2021 2020

Cash Flows from Operating Activities

Net income $ 274,297 $ 134,594 $ 84,513

Adjustments to Reconcile Net Income to Net cash used in operating activities

3 unchanged sentences

Extinguishment of unamortized debt issuance costs 283 507 —

Amortization of right-of-use operating lease

Amortization of right-of-use financing lease

Amortization of right-of-use operating lease assets 5,839 3,786 3,843

Stock compensation expense 6,796 5,233 947

1 unchanged sentence

Deferred tax benefit ( 294 ) ( 946 ) —

Income from equity method investments, net of distributions received

Income from unconsolidated entities, net of return on investments 1,810 ( 3,918 ) ( 2,680 )

Remeasurement of contingent consideration 11,053 7,533 1,379

Changes in Operating Assets and Liabilities, Net of Effects from Acquisitions

( 134,238,066

Other assets and accounts receivable

Payments of contingent consideration ( 4,461 ) — —

Changes in Operating Assets and Liabilities

Accounts receivable ( 11,850 ) ( 16,717 ) ( 12,227 )

Inventories ( 311,523 ) ( 80,196 ) 23,513

Lot deposits ( 35,852 ) ( 134,238 ) ( 37,913 )

Other assets ( 6,712 ) ( 3,706 ) ( 10,567 )

Accounts payable and accrued expenses 65,748 63,361 6,198

Customer deposits ( 32,031 ) 78,167 37,556

Operating lease ROU Assets

Operating lease liabilities ( 5,730 ) ( 3,510 ) ( 3,634 )

Net cash provided by operating activities

Net cash (used in) provided by operating activities ( 27,623 ) 65,108 96,911

Cash Flows from Investing Activities

1 unchanged sentence

Proceeds from disposal of property and equipment 152 508 242

Investments in equity method investments

Return of investments from equity method investments

Investments in unconsolidated entities ( 300 ) ( 1,980 ) ( 90 )

Return of investments from unconsolidated entities 449 668 6,578

Business combinations, net of cash acquired ( 280 ) ( 519,465 ) ( 16,833 )

( 519,464,971

Net cash used in investing activities ( 5,524 ) ( 523,043 ) ( 13,027 )

( 523,042,849

Cash Flows from Financing Activities

Proceeds from issuance of common stock in IPO, net

Proceeds from issuance of convertible preferred stock, net

Proceeds from construction lines of credit 11,023,077 1,897,540 742,391

1,894,574,866

Principal payments on construction lines of credit ( 10,820,121 ) ( 1,450,639 ) ( 771,863 )

( 1,424,960,047

( 758,681,883

( 522,926,492

Proceeds from notes payable

Principal payments on notes payable

Payment of debt issue costs

Payment of debt issuance costs ( 5,539 ) ( 7,657 ) ( 1,995 )

Proceeds from common stock issuance — 143,630 —

Proceeds from issuance of convertible preferred stock — 148,500 —

Payments of preferred stock dividends ( 13,688 ) — —

Payments of equity issuance costs — ( 14,009 ) —

Payments on financing leases

Payments on contingent consideration

Other financing activities

Contributions from non-controlling interests

Distributions to non-controlling interests

Contributions

Distributions — ( 23,289 ) ( 17,257 )

Redemptions — ( 25,530 ) ( 13,000 )

Contribution from conversion of converted LLC units — 123,658 —

1 unchanged sentence

— ( 123,658 ) —

Contributions from non-controlling interests — 2,000 3,883

Distributions to non-controlling interests ( 23,095 ) ( 23,319 ) ( 7,835 )

Payments of contingent consideration ( 13,679 ) ( 1,207 ) —

Payments on financing leases — ( 136 ) ( 154 )

Net cash provided by (used in) financing activities 146,955 645,884 ( 65,830 )

1 unchanged sentence

Cash, cash equivalents and restricted cash at beginning of period

281,322 93,373 75,319

Cash, cash equivalents and restricted cash at end of period

Supplemental Disclosure of Cash Flow Information

Cash paid for interest, net of amounts capitalized

Non-cash Financing Activities

Financed land payments to seller

Leased assets obtained in exchange for new operating lease liabilities

Accrued distributions

Equity issuance costs incurred

Contingent Consideration

Non-cash Investing Activities

Investment capital reallocation

Total non-cash financing and investing activities

$ 395,130 $ 281,322 $ 93,373

DREAM FINDERS HOMES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

Year ended December 31,

2022 2021 2020

Reconciliation of cash, cash equivalents and restricted cash

2 unchanged sentences

Total cash, cash equivalents and restricted cash shown on the Consolidated Statements of Cash Flows $ 395,130 $ 281,322 $ 93,373

Supplemental disclosures of noncash activities:

Noncash Investing Activities

Investment capital reallocation $ — $ ( 3,469 ) $ 1,171

Noncash Financing Activities

Financed land payments to seller — 8,916 —

Equity issuance costs incurred — 1,282 —

Accrued distributions 825 3,450 719

Contingent consideration ( 1,841 ) 94,573 16,310

Leased assets obtained in exchange for new operating lease liabilities 10,564 8,149 2,963

Total noncash financing and investing activities $ 9,548 $ 112,901 $ 21,163

The accompanying notes are an integral part of these consolidated financial statements.

DREAM FINDERS HOMES, INC.

and Subsidiaries

Notes to Consolidated Financial Statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Nature of Business and Significant Accounting Policies

2 unchanged sentences

(the “Company” or “DFH, Inc.”) was incorporated in the State of Delaware on September 11, 2020.

The Company was formed for the purpose of

completing an initial public offering (“IPO”) of its common stock and related transactions in order to carry on the business of Dream Finders Holdings LLC, a Florida limited liability company (“DFH LLC”), as a publicly-traded entity.

Pursuant to a

corporate reorganization and completion of its Initial Public Offering (“IPO”) on January 25, 2021, the Company became a holding company for DFH LLC and its subsidiaries.

In connection with the IPO and pursuant to the terms of the Agreement and Plan of Merger by and among DFH, Inc., DFH LLC and DFH Merger Sub LLC, a Delaware limited liability company and direct, wholly owned subsidiary of DFH, Inc., DFH Merger Sub LLC

merged with and into DFH LLC with DFH LLC as the surviving entity (the “Merger”).

The Company was formed for the purpose of completing an initial public offering (“IPO”) of its common stock and related transactions in order to carry on the business of Dream Finders Holdings LLC, a Florida limited liability company (“DFH LLC”), as a publicly-traded entity.

Pursuant to a corporate reorganization and completion of its IPO on January 25, 2021, the Company became a holding company for DFH LLC and its subsidiaries.

As a result of the Merger, all of the outstanding non-voting common units and Series A Preferred Units of DFH LLC converted into 21,255,329 shares of Class A common stock of DFH, Inc., all of the outstanding common units of DFH LLC converted into 60,226,153 shares of Class B common stock of DFH, Inc.

and all of the outstanding Series B Preferred Units and Series C Preferred Units of DFH LLC

remained outstanding.

and all of the outstanding Series B Preferred Units and Series C Preferred Units of DFH LLC remained outstanding.

We refer to this and certain other related events and transactions, as the “Corporate Reorganization”.

The Company successfully completed its IPO of 11,040,000 shares of Class A common stock (which included full exercise of the

over-allotment option) at an IPO price of $ 13.00 per share.

Shares of the Company’s Class A common stock began trading on the NASDAQ Global

Select Market under the ticker symbol “DFH” on January 21, 2021, and the IPO closed on January 25, 2021.

The Company is the sole manager of DFH LLC and owns 100 %

of the voting membership interest in DFH LLC.

Following the Corporate Reorganization, the Company owns all of the voting membership interest of DFH LLC.

The Company successfully completed its IPO of 11,040,000 shares of Class A common stock (which included full exercise of the over-allotment option) at an IPO price of $ 13.00 per share.

Shares of the Company’s Class A common stock began trading on the Nasdaq Global Select Market under the ticker symbol “DFH” on January 21, 2021, and the IPO closed on January 25, 2021.

On January 27, 2021, the Company redeemed all of the outstanding Series C Preferred Units for $ 26.0 million, including accrued unpaid preferred distributions.

On October 10, 2022, the Company transferred the listing of its Class A common stock from the Nasdaq Global Select Market to the New York Stock Exchange.

The Company's Class A common stock continues to trade under the stock symbol "DFH".

The following is a description of the significant accounting policies and practices, which conform to accounting principles generally accepted in the United States of America (“U.S.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of DFH, its wholly owned subsidiaries and its investments that qualify for consolidation treatment

(see Note 11).

As a result of the reorganization transactions in connection with the IPO, for accounting purposes, our historical results included herein present the combined assets, liabilities and results of operations of Dream Finders Homes, Inc.

since the date of its formation and Dream Finders Holdings LLC, a Florida limited liability company (“DFH LLC”) and its direct and indirect subsidiaries prior to the IPO.

All intercompany accounts and transactions have been eliminated in

consolidation.

The accompanying consolidated financial statements include the accounts of DFH, Inc., its wholly-owned subsidiaries and its investments that qualify for consolidation treatment (see Note 7 ).

All intercompany accounts and transactions have been eliminated in consolidation.

There are no other components of comprehensive income not already reflected in net and comprehensive income on our Consolidated Statements of Comprehensive Income.

As a result of the Corporate Reorganization, for accounting purposes, our historical results included herein present the combined assets, liabilities and results of operations of DFH, Inc.

and DFH LLC and its direct and indirect subsidiaries for the period September 11, 2020 to January 21, 2021.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include the

valuation and impairment of goodwill, impairment of inventories and business combination estimates.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ materially from those estimates.

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Cash and cash equivalents consist of highly liquid instruments, with original maturities of three months or less.

Cash and cash equivalents includes

cash proceeds from home closings in-transit from or held by third-party escrow agents for the Company’s benefit, typically for less than five days, which are considered deposits in-transit.

At various times throughout the year, the Company may have

cash deposited with financial institutions that exceed the federally insured deposit amount.

Management reviews the financial viability of these financial institutions on a periodic basis and does not anticipate nonperformance by the financial

institutions.

The Company had $ 372,726 and $ 9,676,416

of cash and cash equivalents in interest bearing money market accounts at December 31, 2021 and 2020, respectively.

Cash and cash equivalents includes cash proceeds from home closings in-transit from or held by third-party title company escrow accounts for the benefit of the Company, typically for less than five days.

At various times throughout the year, the Company may have cash deposited with financial institutions that exceed the federally insured deposit amount.

Management reviews the financial viability of these financial institutions on a periodic basis and does not anticipate nonperformance by the financial institutions.

Restricted Cash

Restricted cash represents funds held in accounts that are restricted for specific purposes.

Restricted cash at December 31, 2021, includes $ 48,597,903 of escrow monies held in the title company, and $ 5,496,935

of funds related to specific future projects.

Restricted cash at December 31, 2020, includes $ 39,837,702 of escrow monies held in the title

company, and $ 9,877,851 of funds related to specific future projects.

Restricted cash represents funds held in accounts that are restricted for specific purposes, primarily related to escrow monies held in title companies.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606, Revenue from

Contracts with Customers (“ASC 606”), which requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for

those goods or services.

The Company recognizes revenue in accordance with ASC 606, which requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We recognize revenue by following the five-step model:

(i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv)

allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied.

(i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied.

The Company’s revenues consist primarily of home sales in the United States, which is its principal market.

Home sale transactions are made pursuant to contracts under which the Company typically has a single performance obligation to deliver a

completed home to the homebuyer when closing conditions are met.

Home sale transactions are made pursuant to contracts under which the Company typically has a single performance obligation to deliver a completed home to the homebuyer when closing conditions are met.

The Company generally determines the selling price per home based on the expected cost-plus margin.

The Company has performed an assessment and its contracts do not contain

significant financing terms.

Performance obligations are satisfied at the point in time when control of the asset is transferred to the customer, which is generally when title to and possession of the home and the risks and rewards of ownership are

transferred to the homebuyer on the closing date.

Under home sale contracts, the Company typically receives an initial cash deposit from the homebuyer at the time the sales contract is executed and receives the remaining consideration to which the

Company is entitled, through an escrow agent, at closing.

The Company has performed an assessment and its contracts do not contain significant financing terms.

A large portion of the Company’s contracts with customers and the related performance obligations have an original expected duration of one year or less.

For the majority of contracts, performance obligations are satisfied and revenue is recognized at the point in time when control of the asset is transferred to the customer, which is generally when title to and possession of the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date.

Under home sale contracts, the Company typically receives an initial cash deposit from the homebuyer at the time the sales contract is executed and receives the remaining consideration to which the Company is entitled, through an escrow agent, at closing.

In certain contracts, the customer controls the underlying land upon which the home is constructed.

For these specific contracts, the performance obligation is satisfied over time, as the

Company’s performance creates or enhances an asset that the customer controls.

The Company recognizes revenue for these contracts based on the percentage of completion of the projec t.

Typically, the Company has two types of percentage of

completion contracts.

For these specific contracts, the performance obligation is satisfied over time, as the Company’s performance creates or enhances an asset that the customer controls.

The Company recognizes revenue for these contracts based on the percentage of completion of the project, determined by the number of days of construction completed compared to the total estimated number of days to construct the home.

Typically, the Company has two types of percentage of completion contracts.

The first type is with individual customers for which the Company acts as a general contractor on land owned by the homebuyer.

The second is with institutional buyers for which the Company acts as a general contractor on land

owned by the institution.

The second is with institutional buyers for which the Company acts as a general contractor on land owned by the institution.

Individual customers generally have construction-to-permanent loans that are taken out by the customer.

During the underwriting process for our individual customers and institutional customers a draw schedule is agreed

upon by the bank, the customer and the Company.

During the underwriting process for our individual and institutional customers a draw schedule is agreed upon by the bank, the customer and the Company.

Funds are disbursed for labor and materials that have been completed or installed.

These both result in a contract asset as work is being completed prior to receiving funds.

A contract liability would

be recorded in cases where we have received funds in excess of costs incurred.

At December 31, 2021 and 2020, the contract asset related to percentage of completion contracts was $ 21,030,708 and $ 6,259,567 , respectively, and included in other

assets on the Consolidated Balance Sheets.

At December 31, 2021 and 2020, the contract liability related to percentage of completion contracts was $ 3,906,312

and $ 0 , respectively, included in accrued expenses on the Consolidated Balance Sheets.

Sales incentives in the form of price concessions on the selling price of a home are recorded as a reduction of revenues.

The cost of sales incentives

in the form of free or discounted products or services provided to homebuyers, including option upgrades, are reflected as construction and land costs because such incentives are identified in home sale contracts with homebuyers as an intrinsic part

of the Company’s single performance obligation to deliver and transfer title to the home for the transaction price stated in the contracts.

A contract liability would be recorded in cases where we have received funds in excess of costs incurred.

At December 31, 2022 and 2021, the contract asset related to percentage of completion contracts was $ 20.7 million and $ 21.0 million, respectively, and is included in other assets on the Consolidated Balance Sheets.

At December 31, 2022 and 2021, the contract liability related to percentage of completion contracts was $ 2.2 million and $ 3.9 million, respectively, and is included in accrued expenses on the Consolidated Balance Sheets.

Revenues include forfeited deposits, which occur when home sale or land sale contracts that include a nonrefundable deposit are cancelled.

A large portion of the Company’s contracts with customers and the related performance obligations have an original expected duration of one year or

Refer to Note 13 for a more detailed disaggregation of our revenues by reportable segments.

Sales incentives in the form of price concessions on the selling price of a home are recorded as a reduction of revenues.

The cost of sales incentives in the form of free or discounted products or services provided to homebuyers, including option upgrades, are reflected in land and development costs because such incentives are identified in home sale contracts with homebuyers as an intrinsic part of the Company’s single performance obligation to deliver and transfer title to the home for the transaction price stated in the contracts.

Refer to Note 9, Segment Reporting for a more detailed disaggregation of our revenues by reportable segments.

Other Income and Expense

Other income includes income related to the forgiveness of the Paycheck Protection Program (“PPP”) grant, proceeds from sale of non-core assets and

interest income and management fees we earn for managing certain joint ventures.

Other income includes income from the sale of non-core assets, interest income and management fees we earn from shared services with the former owner of MHI and from managing certain joint ventures.

In general, we earn four to six percent of the sales price of homes built by us on behalf of the joint ventures.

Other expense consists primarily of expenses related to the sale of

non-core assets and contingent consideration valuation changes associated with earn out agreements with former owners of acquired entities.

Inventories include the costs of direct land acquisition, land development, construction, capitalized interest, real estate taxes and direct overhead

costs incurred related to land acquisition and development and home construction.

Indirect overhead costs are charged to selling, general, and administrative expenses (SG&A) as incurred.

Land and development costs are typically allocated to individual residential lots on a pro rata basis based on the number of lots in the development,

and the costs of residential lots are transferred to construction work in progress when home construction begins.

Sold units are expensed on a specific identification basis as cost of contract revenues earned.

Cost of contract revenues earned for

homes closed includes the specific construction costs of each home and all applicable land acquisition, land development and related costs allocated to each residential lot.

Other expense consists primarily of expenses related to the sale of non-core assets.

For 2021, other income and expense also included the one-time forgiveness of the $ 7.2 million Paycheck Protection Program (“PPP”) loan and a $ 7.6 million litigation settlement expense.

Inventories include the costs of direct land acquisition, land development, construction, capitalized interest, real estate taxes and direct overhead costs incurred related to land acquisition and development and home construction.

Indirect overhead costs are charged to selling, general, and administrative expenses as incurred.

Land and development costs are typically allocated to individual residential lots on a pro rata basis based on the number of lots in the development, and the costs of residential lots are transferred to construction work in progress when home construction begins.

Units are expensed on a specific identification basis as homebuilding cost of sales.

Homebuilding cost of sales for homes closed includes the specific construction costs of each home and all applicable land acquisition, land development and related costs allocated to each residential lot.

Inventories are carried at the lower of accumulated cost or net realizable value.

The Company reviews the performance and outlook of its inventories

for indicators of potential impairment on a quarterly basis at the community level.

The Company reviews the performance and outlook of its inventories for indicators of potential impairment on a quarterly basis at the community level.

In addition to considering market and economic conditions the Company assesses current sales absorption levels and recent profitability.

The Company looks for

instances where sales prices for a home in backlog or potential sales prices for a future sold home would be at a level at which the carrying value of the home may not be recoverable.

No impairments were recognized during the years ended December 31, 2021, 2020 or 2019.

The Company looks for instances where sales prices for a home in backlog or potential sales prices for a future sold home would be at a level at which the carrying value of the home may not be recoverable.

There were $ 1.8 million in inventory impairment charges recorded for the year ended December 31, 2022.

There were no impairment charges recorded for the years ended December 31, 2021 and 2020.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

Maintenance and repairs are charged to expense as incurred and betterments

are capitalized.

Maintenance and repairs are charged to expense as incurred and betterments are capitalized.

When items of property and equipment are sold or otherwise disposed, the asset and related accumulated depreciation accounts are eliminated and any gain or loss is included in operations.

Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets as follows:

Furnitures and fixtures

Asset Class Useful Life Years

Furniture and fixtures 2 - 7

Office equipment 4

Software 1 - 4

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate an impairment

The Company evaluates the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate an impairment may exist.

Recoverability is measured by the expected undiscounted future cash flows of the assets compared to the carrying amount of the assets.

If the expected undiscounted future cash flows are less than the carrying amount of the assets, the

excess of the net book value over the estimated fair value is charged to current earnings.

Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals,

and, if appropriate, current estimated net sales proceeds from pending offers.

There were no triggering events or impairments recorded

during the years ended December 31, 2021, 2020 or 2019.

Intangibles Asset, Net of Amortization

The Company has intangible assets that consist of tradenames that are recorded in connection with acquisitions at their fair value based on the

results of valuation analyses.

If the expected undiscounted future cash flows are less than the carrying amount of the assets, the excess of the net book value over the estimated fair value is charged to current earnings.

Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers.

There were no triggering events or impairments recorded during the years ended December 31, 2022, 2021 or 2020.

Intangible Assets, Net of Amortization

The Company has intangible assets that consist of trade names that are recorded in connection with acquisitions at their fair value based on the results of valuation analyses.

Trademarks acquired in business combinations are generally valued using the relief-from-royalty method, which are Level 3-type measurements.

Trademarks with finite lives are amortized over five-year periods.

Trademarks with finite lives are amortized over no more than five-year periods.

Goodwill represents the excess of purchase price over the fair value of the assets acquired and the liabilities assumed in a business combination.

Note 2 for details on recent acquisitions.

See Note 2, Business Combinations, for details on recent acquisitions.

The Company tests for impairment at least annually as of October 1, but the Company tests for impairment more frequently if a triggering event occurs.

This test assesses qualitative factors to determine if

it is more likely than not that the fair value of the reporting units is less than their carrying value.

These qualitative factors include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall

performance of the reporting unit and other entity and reporting unit specific events.

This test assesses qualitative factors to determine if it is more likely than not that the fair value of the reporting units is less than their carrying value.

These qualitative factors include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall performance of the reporting unit and other entity and reporting unit specific events.

If the qualitative assessment indicates a stable fair value, no further testing is required.

However, if the qualitative assessment indicates that the fair value

of a reporting unit has declined past its carrying value, the Company will then calculate the fair value of the reporting unit based on discounted future cash flows.

An impairment loss is recorded if this assessment concludes that the fair value of

the reporting unit is less than its current carrying value.

However, if the qualitative assessment indicates that the fair value of a reporting unit has declined past its carrying value, the Company will then calculate the fair value of the reporting unit based on discounted future cash flows.

An impairment loss is recorded if this assessment concludes that the fair value of the reporting unit is less than its current carrying value.

The Company completed its most recent goodwill impairment test on October 1, 2022 and determined that the fair value of all the reporting units was not less than carrying value.

No impairment was recognized during the years ended December 31, 2022, 2021 or 2020.

In addition, the Company has not recognized any impairment

relating to triggering events that would cause additional impairment testing over goodwill.

In addition, the Company has not identified any triggering events that would result in the Company performing additional impairment tests.

The Company determines if an arrangement is, or contains, a lease at inception.

We recognize leases when the contract provides us the right to use an

identified asset for a period of time in exchange for consideration.

We recognize leases when the contract provides us the right to use an identified asset for a period of time in exchange for consideration.

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Consolidated Balance Sheets.

Finance leases are included in

finance lease ROU assets and finance lease liabilities in the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to

make lease payments arising from the lease.

Finance leases are included in finance lease ROU assets and finance lease liabilities in the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

As most of the Company’s leases do not provide an explicit rate,

management uses the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

As most of the Company’s leases do not provide an explicit rate, management uses the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

An explicit rate is used when readily determinable.

The ROU assets also include

any lease payments made, reduced by any lease incentives.

The ROU assets also include any lease payments made, reduced by any lease incentives.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for operating leases is recognized on a

straight-line basis over the lease term.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company elected the practical expedient to combine lease and nonlease components when accounting for the ROU assets and liabilities for all asset classes.

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Leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets.

Lot deposits represent amounts paid by the Company to secure the ability to acquire land for development or home sites through a contract.

enters into contracts with different land sellers to ensure it has property on which to build future homes over a two to four-year timeline.

The contracts provide for a due diligence period during which the deposit is refundable, after which time the deposit may be partially

or completely forfeited should the Company decide not to proceed.

The Company reviews lot deposits for impairment on a quarterly basis and will record an impairment charge if it believes it will forfeit its deposit on an individual or portfolio of

There were no deposit forfeitures or impairments recorded as of December 31, 2021, 2020 and 2019, and the Company does not

expect any over the next twelve months.

Lot deposits represent amounts paid by the Company to secure the ability to acquire finished lots or land for development through an option contract.

The Company enters into contracts with different land sellers to ensure it has property on which to build future homes over a two to four-year timeline.

The contracts provide for a due diligence period during which the deposit is refundable, after which time the deposit may be partially or completely forfeited should the Company decide not to proceed.

The Company reviews lot deposits for impairment on a quarterly basis and will record an impairment charge if it believes it will forfeit its deposit on an individual or portfolio of lots.

There were $ 3.0 million of impairment charges recorded in 2022, a nd no impairment charges were recorded in 2021 and 2020.

Warranty Reserve

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The Company’s standard warranty requires the Company or its subcontractors to repair or replace defective construction during such warranty period at no cost to the homebuyer.

At the time a home is sold,

the Company records an estimate of warranty expense based on historical warranty costs.

An analysis of the warranty reserve is performed periodically to ensure the reserve’s adequacy.

The warranty reserve is classified on the Consolidated Balance

Sheets as an accrued expense.

Contingent Consideration

In connection with the H&H Constructors of Fayetteville (“H&H”) acquisition in October 2020 (Note 2), the Company recorded contingent

consideration based on estimated pre-tax net income of the acquired entity for the fourth quarter of 2020, fiscal years 2021, 2022, 2023 and the first quarter of 2024.

In connection with the McGuyer Homebuilders, Inc.

(“MHI”) acquisition in October

2021 (Note 2), the Company recorded contingent consideration based on estimated pre-tax net income of the acquired entity for the fourth quarter of 2021, fiscal years 2022, 2023, 2024 and the first three quarters of 2025.

The measurement of

contingent consideration was based on projected cash flows such as revenues, gross margin, overhead expenses and pre-tax income and discounted to present value using the discounted cash flow method.

The Company recorded the fair value of the

contingent consideration as a liability on the respective acquisition dates.

The estimated earn-out payments are subsequently remeasured to fair value at each reporting date based on the estimated future earnings of the acquired entities and the

re-assessment of risk-adjusted discount rates.

The contingent consideration for each acquisition is scheduled to be paid out in April of each year subsequent to the anniversary of the respective acquisition closing date.

At December 31, 2021 and 2020, the Company remeasured contingent consideration related to the 2019 acquisition of Village Park Homes, LLC (“VPH”) and

adjusted the liability to $ 7,580,126 and $ 6,847,524 ,

respectively, based on revised pre-tax income forecasts as of the balance sheet date.

The Company recorded contingent consideration adjustments resulting in $ 732,602

of expense, $ 1,378,686 of expense, and $ 3,944,030

of income for the years ended December 31, 2021, 2020 and 2019, respectively.

These adjustments are included in Other expense – Contingent consideration valuation on the Consolidated Statements of Comprehensive Income.

At December 31, 2021 and 2020, the Company remeasured contingent consideration related to the acquisition of H&H and adjusted the liability to $ 19,739,135

and $ 16,310,000 , respectively, based on revised pre-tax income forecasts as of the balance sheet date.

The Company recorded contingent

consideration adjustments resulting in $ 4,635,904 of expense and $ 0 of expense for the years ended December 31, 2021 and 2020, respectively.

These adjustments are included in Other expense – Contingent consideration valuation on the

Consolidated Statements of Comprehensive Income.

The Company measured contingent consideration related to the acquisition of MHI on October 1, 2021, and recorded a liability in the opening balance sheet of $ 94,572,694 .

At December 31, 2021, the Company remeasured contingent consideration related to the acquisition and adjusted the liability to $ 96,737,018 ,

based on revised pre-tax income forecasts as of the balance sheet date.

For the year ended December 31, 2021, the Company recorded Other expense - Contingent consideration valuation for MHI of $ 2,164,324 .

Total contingent consideration on the Consolidated Balance Sheets is $ 124,056,279 .

The Company’s contingent consideration related to

acquisition earn-out payments is based on a percentage of pre-tax net and comprehensive income achieved by the acquired entity and is discounted to present value using risk-adjusted discount rates that reflect current market conditions.

of the H&H and MHI earn-out is subject to minimal earnings thresholds, which must be met by H&H and MHI, respectively, before an earn-out payment occurs.

Maximum potential exposure for contingent consideration is not estimable based on the contractual terms of the contingent consideration agreements, which allow for a percentage payout based on a potentially unlimited range of pre-tax income.

2021, the Company paid $ 1,206,769 in contingent consideration to H&H.

There were no other payments of contingent consideration for the years ended December 31, 2021, 2020 and 2019.

See Note 15 — Fair Value Disclosures for additional discussion on fair

value measurement inputs related to contingent consideration.

At the time a home is sold, the Company records an estimate of warranty expense based on historical warranty costs.

An analysis of the warranty reserve is performed quarterly to ensure the reserve’s adequacy.

The warranty reserve is classified on the Consolidated Balance Sheets as an accrued expense.

Business Acquisitions and Contingent Consideration

Business acquisitions are evaluated and accounted for in accordance with guidance set forth in ASC 805.

Once a business combination has been identified, all material assets and liabilities of the business are recognized at fair value as of the acquisition date.

Any residual amount remaining of fair value over net assets is recognized as goodwill.

In connection with applicable acquisitions (Note 2 ), the Company records the fair value of contingent consideration as a liability on the acquisition date as prescribed by the underlying agreement, usually resulting in additional purchase price allocations which is calculated as a percentage of future estimated pre-tax income of the acquiree.

The initial measurement of contingent consideration is based on projected cash flows such as revenues, gross margin, overhead expenses and pre-tax income and is discounted to present value using the discounted cash flow method.

The remaining estimated contingent consideration payments are subsequently remeasured to fair value at each reporting date based on the estimated future earnings of the acquired entities and the re-assessment of risk-adjusted discount rates that reflect current market conditions.

Customer Deposits

Customer deposits are amounts collected from customers in conjunction with the execution of the home sale contract.

Customer deposits are applied

against the final settlement due at the home closing.

In the event of contract default or termination, the customer deposit generally is forfeited and recognized as revenue.

Debt Issuance Costs and Debt Discounts

Debt issuance costs and debt discounts are amortized to interest expense using the effective interest method over the estimated economic life of the

underlying debt instrument.

Customer deposits are amounts collected from customers in conjunction with the execution of the home sale contract, and are recorded as a liability when cash is received.

Customer deposits are applied against the final settlement due at the home closing.

In the event of contract default or termination, the customer deposit is generally forfeited and recognized as revenue.

Debt Issuance Costs

Debt issuance costs are amortized to interest expense using the straight-line method over the estimated economic life of the underlying debt instrument.

Portions of this amortization are evaluated for capitalization as inventories and subsequently expensed through cost of sales at the home closing.

Variable Interest Entities

The Company participates in joint ventures that conduct land acquisition, land development and/or other homebuilding activities in various markets

where the Company’s homebuilding operations are located.

The Company’s investments in these joint ventures may create a variable interest in a variable interest entity (“VIE”), depending on the contractual terms of the arrangement.

Additionally, the

Company, in the ordinary course of business, enters into contracts with third parties and unconsolidated entities for the ability to acquire rights to land for the construction of homes.

Under these contracts, the Company typically makes a specified

earnest money deposit in consideration for the right to purchase land in the future, usually at a predetermined price.

Consideration paid for these contracts is recorded as lot deposits on the Consolidated Balance Sheets.

Pursuant to Financial Accounting Standards Board ( “ FASB ” )

Accounting Standards Codification (“ASC”) 810 and subtopics related to the consolidation of variable interest entities, the Company analyzes its joint ventures under the variable interest model to determine if such are required to be consolidated in the Company’s consolidated financial statements.

The accounting standard requires a VIE to be consolidated by a company if that company is determined to be the primary

Pursuant to ASC 810 and subtopics related to the consolidation of variable interest entities (“VIEs”), m anagement analyzes the Company’s investments first under the variable interest model to determine if they are VIEs and, if so, whether the Company is the primary beneficiary.

Management determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion if changes to the Company’s involvement arise.

To make this determination, management considers factors such as whether the Company could direct finance, determine or limit the scope of the entity, sell or transfer property, direct development or direct other operating decisions.

The primary beneficiary is defined as the entity having both of the following characteristics:

1) the power to direct the activities that most significantly impact the VIE’s performance, and 2) the obligation to absorb losses and

rights to receive the returns from the VIE that would be potentially significant to the VIE.

See Note 11 for a description of the Company’s joint ventures, including those that were determined to be VIEs, and the related accounting treatment.

Management determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion continually.

To make this determination, management considers factors such as whether the

Company should direct finance, determine or limit the scope of the entity, sell or transfer property, direct development or direct other operating decisions.

Joint ventures for which the Company is not identified as the primary beneficiary are accounted for as equity method investments.

The Company and its

unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures, typically on a pro rata basis, according to each party’s respective equity interests.

The obligations to make capital

contributions are governed by each such unconsolidated joint venture’s respective operating agreement and related governing documents.

Partners in these unconsolidated joint ventures are unrelated homebuilders, land developers or other real estate

For distributions received from these unconsolidated joint ventures, the Company has elected to use the cumulative earnings approach for the

Consolidated Statements of Cash Flows.

Under the cumulative earnings approach, distributions up to the amount of cumulative equity in earnings recognized are treated as returns on investment within operating cash flows and those in excess of that

amount are treated as returns of investment within investing cash flows.

The Company typically has obtained options to acquire portions of the land held by the unconsolidated joint ventures in which the Company currently

participates.

When an unconsolidated joint venture sells land to the Company, the Company defers recognition of its share of such unconsolidated joint venture’s earnings (losses) until the Company recognizes revenues on the corresponding home sale.

At that time, the Company accounts for the earnings (losses) as a reduction (increase) to the cost of purchasing the land from the unconsolidated joint venture.

The Company shares in the earnings (losses) of these unconsolidated joint ventures generally in accordance with its respective equity interests.

some instances, the Company recognizes earnings (losses) that differ from its equity interest in the unconsolidated joint venture.

This typically arises from the Company’s deferral of the unconsolidated joint venture’s earnings (losses) from land

sales to the Company.

1) the power to direct the activities that most significantly impact the VIE’s performance, and 2) the obligation to absorb losses and rights to receive the returns from the VIE that would be potentially significant to the VIE.

Management consolidates the entity if the Company is the primary beneficiary or if a standalone primary beneficiary does not exist and the Company and its related parties collectively meet the definition of a primary beneficiary.

If the investment does not qualify as a VIE under the variable interest model, management then evaluates the entity under the voting interest model to assess if consolidation is appropriate.

See Note 7, Variable Interest Entities, for a description of the Company’s interests, including which entities were determined to be VIEs.

Accounting for Unconsolidated VIEs

Investments for which the Company is not identified as the primary beneficiary, but the Company has significant influence are accounted for as equity method investments.

Investments for which the Company does not have significant influence are accounted for at cost under the cost method.

Equity and cost method investments are classified as unconsolidated entities on the Consolidated Balance Sheets.

For equity method investments, the Company shares in the earnings (losses) of these unconsolidated entities generally in accordance with its respective equity interests.

In some instances, the Company recognizes earnings (losses) that differ from its equity interest in the unconsolidated entity.

For distributions received from equity method investments, the Company has elected to use the cumulative earnings approach for the Consolidated Statements of Cash Flows.

When applicable dividends are declared for the cost method investments, we record them as income of unconsolidated entities on the Consolidated Statements of Comprehensive Income.

Non-Controlling Interests

The equity interests held by others in DFH Leyden LLC, DFH Amelia LLC, DFH Clover LLC, DFH Leyden II LLC, DFH MOF Eagle Landing LLC, DCE DFH JV LLC,

DFH Capitol LLC, DFC Mandarin Estates LLC, DFC East Village LLC, DFC Wilford LLC, DFC Amelia Phase III LLC, DFC Sterling Ranch LLC, DFC Grand Landings LLC and FMR IP, LLC.

have been reflected as non-controlling interests in the Consolidated Balance

The equity interests held by others in DFH Leyden LLC, DFH Amelia LLC, DFH Clover LLC, DFH Leyden II LLC, DFH MOF Eagle Landing LLC, DCE DFH JV LLC, DFH Capitol LLC, DFC Mandarin Estates LLC, DFC East Village LLC, DFC Wilford LLC, DFC Amelia Phase III LLC, DFC Sterling Ranch LLC, DFC Grand Landings LLC and FMR IP, LLC, have been reflected as non-controlling interests in the Consolidated Balance Sheets.

Income attributable to these non-controlling interests are presented in the Consolidated Statements of Comprehensive Income as net income attributable to non-controlling interests.

We are a corporation subject to income taxes in the United States.

Our proportional share of the Company’s subsidiaries’ provisions are included in

our consolidated financial statements.

Our proportional share of the Company’s subsidiaries’ provisions are included in our consolidated financial statements.

Our deferred income tax assets and liabilities are computed for differences between the asset and liability method and financial statement amounts that will result in taxable or deductible amounts in the future.

We compute deferred balances based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income.

A valuation allowance is recognized for deferred tax assets if it is more likely than not that

some portion or all of the net deferred tax assets will not be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future

taxable income, tax-planning strategies and results of recent operations.

If we determine we would be able to realize our deferred tax assets for which a valuation allowance had been recorded, then we would adjust the deferred tax asset valuation

allowance, which would reduce our provision for income taxes.

A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations.

If we determine we would be able to realize our deferred tax assets for which a valuation allowance had been recorded, then we would adjust the deferred tax asset valuation allowance, which would reduce our provision for income taxes.

We evaluate the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions.

position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized.

Interest and penalties related to unrecognized tax

benefits are recorded in income tax benefit.

Income Taxes.

Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50% likely to be realized is recognized.

Interest and penalties related to unrecognized tax benefits are recorded in income tax expense.

Refer to Note 8, Income Taxes.

The Company expenses advertising costs as they are incurred.

Advertising expense for the years ended December 31, 2021, 2020 and 2019 was $ 7,098,015 , $ 6,247,583 and $ 5,291,652 , respectively.

Advertising expense for the years ended December 31, 2022, 2021 and 2020 was $ 15.5 million, $ 7.1 million and $ 6.2 million, respectively.

Equity-Based Compensation

Certain individuals on our executive-level management team are eligible for equity-based compensation, which is awarded according to the terms of

individual contracts with those managers.

The Company records compensation cost for units awarded to employees in return for employee service.

The cost is measured at the grant-date fair value of the award and

recognized as compensation expense over the employee service period, which is normally the vesting period.

The Company estimates that there are no forfeitures.

In the event of forfeitures, the compensation expense recognized would be adjusted.

Change in Accounting Principle – Cash and cash equivalents

On December 31, 2021, the Company elected to change its accounting policy for presentation of cash proceeds from home closings that are in-transit from or held within title company escrow

accounts for the benefit of the Company.

Under the new principle, cash proceeds in-transit from or held by third-party escrow agents for its benefit, typically for less than five days, are included in cash and cash equivalents, whereas

previously, they were considered accounts receivable and included in other assets.

This reclassification for cash proceeds from home closings in-transit from or held in escrow represents a change in accounting principle which the Company believes

to be preferable because it is a more accurate reflection of its liquidity at period end and the predominant method used in our industry.

This change in accounting principle has been applied retrospectively, and the Consolidated Balance Sheets as

well as Consolidated Statements of Cash Flows reflect the effect of this accounting principle change in all years presented.

This reclassification had no impact on the Consolidated Statements of Comprehensive Income or Consolidated Statements of

Mezzanine Equity, Members’ Equity and Stockholders’ Equity.

The following financial statement line items for fiscal years 2019, 2020 and 2021 were affected by the change in accounting principle:

As of and for the year ended December 31, 2021:

Under previous

Under current

Effect of change

Cash and cash equivalents

Accounts receivable

Net cash provided by operating activities

As of and for the year ended December 31, 2020:

As previously reported

Effect of change

Cash and cash equivalents

Net cash provided by operating activities

For the year ended December 31, 2019:

As previously reported

Effect of change

Net cash provided by operating activities

Certain Reclassifications

Certain individuals on our management team are eligible for equity-based compensation, which is awarded according to the terms of individual contracts with those managers.

The Company records compensation cost for equity units awarded to employees in return for employee service.

The cost is measured at the grant-date fair value of the award and recognized as compensation expense over the employee service period, which is normally the vesting period.

We recognize forfeitures of equity-based awards as a reduction to compensation costs in the period in which they occur .

Reclassifications

Certain reclassifications have been made in the 2021 and 2020 Consolidated Financial Statements to conform to the classifications used in 2022.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides practical expedients and exceptions for applying GAAP

when modifying contracts and hedging relationships that use LIBOR as a reference rate.

In addition, these amendments are not applicable to contract modifications made and hedging relationship entered into or evaluated after December 31, 2022.

not anticipate a material increase in interest rates from our creditors as a result of the shift away from LIBOR as a reference rate, and we are currently evaluating the impact of the shift and this guidance on our financial statements and

Business Acquisitions

On October 5, 2020, the Company acquired 100 % of the issued and outstanding membership interests in H&H, an operative

homebuilder, for a purchase price of $ 44,096,448 , net of $ 1,710,275

in purchase price reduction related to customary closing adjustments.

To fund the acquisition, the Company obtained a $ 20,000,000 bridge loan from Boston Omaha Corporation, LLC, with an interest rate of 14 % per annum maturing on May 1, 2021 , paid cash of $ 9,496,723 and agreed to pay contingent consideration in the

amount of $ 16,310,000 if H&H

met certain financial metrics.

The acquisition was accounted for as a business combination under FASB ASC Topic 805, Business Combinations (“Topic

805”) under the acquisition method, and the acquisition has been included in the Company’s consolidated results of operations since the date of acquisition.

We recorded an allocation of the purchase price to H&H tangible assets and

identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of October 1, 2020.

The amounts for intangible assets were supported by third-party valuations performed.

Goodwill was recorded as the

residual amount by which the purchase price exceeded the provisional fair value of the net assets acquired.

Goodwill consists largely of synergies and economies of scale from H&H’s operating footprint, which includes owned properties,

increased future revenue and earnings from organic growth, new business opportunities and strategic initiatives, none of which qualify as separately identifiable intangible assets.

Transaction costs were not material and were expensed as

The final purchase price allocation is as follows:

As Originally Reported

Measurement period adjustments (1)

Acquired Value

Cash acquired

Construction lines of credit

( 116,894,907

Other liabilities

Total purchase price

period adjustments were recorded during the period, impacting inventories, accounts receivable and goodwill.

These adjustments were related to and reflect the final valuation of the acquired assets.

The measurement period adjustments did

not have a material effect on our results of operations in prior periods.

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform, which provides practical expedients and exceptions for applying GAAP when modifying contracts and hedging relationships that use LIBOR as a reference rate.

These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.

In June 2022, we amended and restated our revolving credit facility, with no material impact as a result of the shift away from LIBOR (see Note 4).

Business Combinations

Century Homes

On January 31, 2021, the Company completed the acquisition of Century Homes Florida, LLC (“Century Homes”).

from Tavistock Development Company for a total purchase price of $ 35,584,376 .

The acquisition was accounted for as a business combination under Topic 805.

We recorded an allocation of the purchase price to Century Homes tangible assets

acquired and liabilities assumed based on their estimated fair values as of January 31, 2021.

There were no identifiable intangible

On January 31, 2021, the Company completed the acquisition of Century Homes Florida, LLC (“Century Homes”) from Tavistock Development Company for a total purchase price of $ 35.6 million.

The acquisition was accounted for as a business combination under ASC 805.

We recorded an allocation of the purchase price to Century Homes’ tangible assets acquired and liabilities assumed based on their estimated fair values as of January 31, 2021.

There were no identifiable intangible assets.

Goodwill was recorded as the residual amount by which the purchase price exceeded the provisional fair value of the net assets acquired and is expected to be fully deductible for tax purposes.

Goodwill consists primarily of expected

synergies of combining operations, the acquired workforce, and growth opportunities, none of which qualify as separately identifiable intangible assets.

As of January 31, 2022, the Company has completed its allocation of the purchase price and no

measurement period adjustments were identified.

The purchase price allocation as of December 31, 2021 is as follows:

Goodwill consists primarily of expected synergies of combining operations, the acquired workforce, and growth opportunities, none of which qualify as separately identifiable intangible assets.

As of January 31, 2022, the Company completed its allocation of the purchase price and no measurement period adjustments were identified.

The final purchase price allocation as of January 31, 2022 was as follows (in thousands):

Cash acquired $ 3,993

Other assets 754

Goodwill 1,795

Inventories 34,324

Property and equipment, net 549

Liabilities ( 5,831 )

Total purchase price $ 35,584

On October 1, 2021, we completed the acquisition of certain assets, rights and properties, and assumed certain

liabilities of privately held Texas homebuilder McGuyer Homebuilders, Inc.

On October 1, 2021 , the Company completed the acquisition of certain assets, rights and properties, and assumed certain liabilities of privately held Texas homebuilder McGuyer Homebuilders, Inc.

and related affiliates (“MHI”), including:

(i) single-family residential home-building;

(i) single-family residential homebuilding;

(ii) owning model homes;

(iii) acquisition, ownership and licensing of intellectual

property (including architectural plans);

(iii) acquisition, ownership and licensing of intellectual property (including architectural plans);

(iv) purchasing and reselling homebuilding supplies;

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(vi) mortgage origination through a mortgage company;

and (vii) title

insurance, escrow and closing services through a title company.

The acquisition allows the Company to expand its existing footprint in the Texas market.

Total cash paid at closing of approximately $ 471,000,000 included $ 463,004,096 in purchase price based on

preliminary value of purchased net assets and a 10 % deposit on a separate land bank facility.

On December 3, 2021, the Company paid an

additional $ 25,173,742 in cash for customary post-closing adjustments based on final value of the net assets acquired as of September 30,

Additionally, the Company agreed to the future payment of additional consideration of up to 25 % of pre-tax net income for up to five periods, the last of which ends 48

months after the closing subject to certain minimum pre-tax income thresholds and certain overhead expenses, estimated at approximately $ 94,472,694

as of the acquisition date.

The total purchase price is as follows:

and (vii) title insurance, escrow and closing services through a title company.

The acquisition allowed the Company to expand its existing footprint in the Texas market.

Total cash paid at closing of approximately $ 471.0 million included $ 463.0 million in purchase price based on the preliminary value of purchased net assets and a 10 % deposit on a separate land bank facility.

On December 3, 2021, the Company paid an additional $ 25.2 million in cash for customary post-closing adjustments based on the final value of the net assets acquired as of September 30, 2021.

Additionally, the Company agreed to the future payment of additional consideration of up to 25 % of pre-tax net income for up to five periods, the last of which ends 48 months after the closing subject to certain minimum pre-tax income thresholds and certain overhead expenses, estimated at approximately $ 94.6 million as of the acquisition date.

The total purchase price was as follows (in thousands):

Cash consideration $ 488,178

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Total consideration $ 582,751

The Company used $ 20,000,000 of cash on hand and proceeds from the sale of the Convertible Preferred Stock and from unsecured debt

incurred under the Credit Agreement, to fund the MHI acquisition.

On October 1, 2021, the Company borrowed approximately $ 300,000,000

million under the Credit Agreement and paid off MHI’s vertical lines of credit in connection with the closing of the acquisition (See Note 4).

acquisition was accounted for as a business combination under Topic 805.

We recorded an allocation of the purchase price to MHI tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as

of October 1, 2021.

The Company used $ 20.0 million of cash on hand and proceeds from the sale of the Convertible Preferred Stock (see Note 12 ) and from unsecured debt incurred under the Credit Agreement, to fund the MHI acquisition.

On October 1, 2021, the Company borrowed approximately $ 300.0 million under the Credit Agreement and paid off MHI’s vertical lines of credit in connection with the closing of the acquisition (See Note 4 ).

The acquisition was accounted for as a business combination under Topic 805.

We recorded an allocation of the purchase price to MHI tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of October 1, 2021 .

The amounts for intangible assets were based on third-party valuations performed.

Goodwill was recorded as the residual amount by which the purchase price exceeded the provisional fair value of the net assets acquired and is

expected to be fully deductible for tax purposes.

Goodwill was recorded as the residual amount by which the purchase price exceeded the provisional fair value of the net assets acquired and is expected to be fully deductible for tax purposes.

Goodwill consists primarily of expected synergies of combining operations, the acquired workforce, and growth opportunities, none of which qualify as separately identifiable intangible assets.

of December 31, 2021, the Company has substantially completed its allocation of the purchase price.

The principal open items relate to the valuation of certain contingencies as management is awaiting additional information to complete its

Estimates have been recorded as of the acquisition date and updates to these estimates may increase or decrease goodwill.

As of September 30, 2022, the Company completed its purchase price allocation and no further updates to goodwill are expected as a result of the acquisition.

Pursuant to Topic 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods.

Rather, we will recognize any provisional adjustments during the reporting period in

which the adjustments are determined.

We will also be required to record, in the same period’s financial statements, the effect on earnings, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been

completed at the acquisition date.

We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The purchase price allocation as of

December 31, 2021, is as follows:

Rather, we will recognize any provisional adjustments during the reporting period in which the adjustments are determined.

The final purchase price allocation as of September 30, 2022 was as follows (in thousands):

Cash acquired $ 297

Inventories 473,037

Lot deposits 40,452

Other assets 14,722

Property and equipment 3,163

Equity method investments 6,192

Intangible assets, net of amortization

Property and equipment, net

Intangible assets 8,840

Goodwill 141,071

Operating lease right-of-use assets 1,508

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Total purchase price $ 582,751

The following unaudited pro forma condensed consolidated results of operations are provided for illustrative purposes

only and have been presented as if the H&H, Century Homes and MHI acquisitions had occurred on January 1, 2020.

This unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been

obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future.

For the Year Ended

Unaudited Pro Forma

Total revenue

2,432,947,396

2,291,993,087

Net and comprehensive income attributable to Dream Finders Homes, Inc.

On January 31, 2022, the Company made a cash payment of $ 34.9 million for model homes from MHI Models, Ltd., a Texas limited partnership (the “ MHI Model Homes”).

The post-close consideration payment completed the asset purchase transaction, which was considered to be economically separate from the acquisition of MHI and the related purchase price allocation above.

See Note 6, Commitments and Contingencies for discussion on subsequent sale and leaseback transactions related to the MHI Model Homes.

Contingent Consideration

At December 31, 2022 and 2021, the Company remeasured the fair value of contingent consideration related to the 2019 acquisition of Village Park Homes, LLC (“VPH”) and adjusted the liability to $ 1.4 million and $ 7.6 million, respectively, based on revised pre-tax income forecasts and revised discount rates as of the balance sheet date and from accretion of the liability.

The Company recorded contingent consideration adjustments resulting in $ 0.7 million of expense, $ 0.7 million of expense, and $ 1.4 million of expense for the years ended December 31, 2022, 2021 and 2020, respectively.

These adjustments are included in contingent consideration revaluation on the Consolidated Statements of Comprehensive Income.

At December 31, 2022 and 2021, the Company remeasured the fair value of contingent consideration related to the 2020 acquisition of H&H and adjusted the liability to $ 11.6 million and $ 19.8 million, respectively, based on revised pre-tax income forecasts and revised discount rates as of the balance sheet date and from accretion of the liability.

The Company recorded contingent consideration adjustments resulting in $ 2.0 million of income and $ 4.6 million of expense for the years ended December 31, 2022 and 2021, respectively.

These adjustments are included in contingent consideration revaluation on the Consolidated Statements of Comprehensive Income.

At December 31, 2022 and 2021, the Company remeasured the fair value of contingent consideration related to the 2021 acquisition of MHI and adjusted the liability to $ 102.1 million and $ 96.7 million, respectively, based on revised pre-tax income forecasts and revised discount rates as of the balance sheet date and from accretion of the liability.

The Company recorded contingent consideration adjustments resulting in $ 12.4 million of expense and $ 2.2 million of expense for the years ended December 31, 2022 and 2021, respectively.

These adjustments are included in contingent consideration revaluation on the Consolidated Statements of Comprehensive Income.

See Note 10, Fair Value Disclosures for the fair value measurement for contingent consideration.

Property and Equipment

Property and equipment consisted of the following as of December 31, 2021 and 2020:

Property and equipment consisted of the following as of December 31, 2022 and 2021 (in thousands):

For the Years Ended

Furniture and fixtures $ 18,753 $ 17,756

Buildings 401 401

Vehicles 64 21

Office equipment and software 3,733 4,384

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Property and equipment, net $ 7,337 $ 6,789

Depreciation expense was $ 3,720,011 , $ 3,851,876 and $ 3,035,451 for the years

ended December 31, 2021, 2020 and 2019, respectively.

Depreciation expense was $ 5.0 million, $ 3.7 million and $ 3.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Construction Lines of Credit

On January 25, 2021, the Company entered into a $ 450,000,000 syndicated senior, unsecured credit facility with Bank of America, N.A.

(the “Credit Agreement”), and subsequently repaid $ 340,000,000 in outstanding debt, including the $ 20,000,000 bridge loan with Boston Omaha Corporation,

LLC, and terminated all then-existing construction lines of credit.

Under the Credit Agreement, the Company has the option to enter into Base Rate or LIBOR Rate contracts.

The interest is payable based on the contract terms and is variable dependent

on the Company’s debt to capitalization ratio, and applicable interest rates in the market (LIBOR Rate, Prime Rate, etc.).

On September 8, 2021, the Company entered into a First Amendment and Commitment Increase Agreement (the “Amendment”) to its Credit

The Company exercised its right, and the Amendment provides, for an increase in the aggregate commitments under the Credit Agreement of up to $ 300,000,000 .

The aggregate commitments increase amounted to $ 292,500,000 , and the total availability under the Credit Agreement reached $ 742,500,000 .

Three new lenders were added

as additional lenders under the Credit Agreement.

As amended by the Amendment, the Credit Agreement includes provisions for any existing lender to, at the Company’s request, increase its revolving commitment under the Credit Agreement, add new

revolving loan tranches under the Credit Agreement or add new term loan tranches under the Credit Agreement, in all cases not to exceed an aggregate of $ 1,050,000,000 .

In addition, the Amendment clarified and modified certain definitions and covenants as more fully set forth therein, including modifications of certain financial covenants to facilitate the consummation of the MHI acquisition (Note 2).

29, 2021, in connection with the closing of the MHI acquisition, the Company exercised its right to further increase the aggregate commitments under the Credit Agreement to $ 817,500,000 and one lender was added as an additional lender under

the Credit Agreement.

Certain of the Company’s subsidiaries guaranteed the Company’s obligations under the Credit Agreement.

The Credit Agreement will mature on January 25, 2024 .

As of December 31, 2021, the outstanding balance under the Credit Agreement was $ 760,000,000 and the effective interest rate was 3.75 %.

December 31, 2020, the Company had 34 lines of credit with cumulative maximum availability of $ 762,979,000 , and an aggregate outstanding balance of $ 289,878,716 .

During 2020, the effective interest rates for these lines of credit ranged from 3.81 % to 10.33 %.

Our indebtedness as of December 31, 2020, was fully collateralized by homes under construction and, to a much smaller extent,

finished lots.

Under the Credit Agreement, the funds available are unsecured and availability is calculated based on work-in-progress inventory value on the Company’s Balance Sheets.

The outstanding lines of credit were paid in full during 2021 (in connection with the Company entering into the Credit Agreement),

are no longer active and the Company does not intend to renew these facilities.

The outstanding balance in the lines of credit were payable upon the delivery of the collateralized individual homes to end-home buyers.

The Company capitalized $ 7,505,214

and $ 2,249,683 as of December 31, 2021 and 2020, respectively, and amortized $ 1,959,943 and $ 2,090,711 of debt issuance costs for the years ended

December 31, 2021 and 2020, respectively.

As of December 31, 2021, the Company extinguished unamortized debt issuance costs of $ 506,466 .

Debt issuance costs related to the Company’s lines of credit and notes payable were $ 5,545,271 and $ 506,466 as of December 31, 2021 and 2020, respectively, included in other assets on the Consolidated Balance Sheets.

On January 25, 2021, the Company entered into a $ 450.0 million syndicated senior unsecured credit facility with Bank of America, N.A.

(the “Credit Agreement”), subsequently repaid $ 340.0 million in outstanding debt and terminated all then-existing construction lines of credit.

Through subsequent amendments to the Credit Agreement in September 2021 (the “Amendments”), additional lenders were added as well as provisions for any existing lender, at the Company’s request, to increase its revolving commitment, add new revolving loan tranches or add new term loan tranches, not to exceed—through an accordion feature— an aggregate of $ 1.1 billion, which would include the exercise of the accordion feature (collectively, the "Existing Credit Agreement").

On June 2, 2022, the Company entered into an agreement to amend and restate its Existing Credit Agreement (the “Amended and Restated Credit Agreement”).

The Amended and Restated Credit Agreement is substantially similar to the Existing Credit Agreement except that the Amended and Restated Credit Agreement, among other things, (i) provides for an increase in the aggregate commitments under the facility from $ 817.5 million to $ 1.1 billion;

(ii) allows the facility to expand to a borrowing base of up to $ 1.6 billion through its accordion feature;

(iii) extends the maturity date from January 25, 2024 to June 2, 2025;

and (iv) transitions the applicable interest rate from a Eurodollar based rate to a Secured Overnight Financing Rate (“SOFR”) based rate, as described below.

Certain of our subsidiaries guaranteed the Company's obligations under the Amended and Restated Credit Agreement.

Under the Amended and Restated Credit Agreement, loans bear interest at the Company’s option of (1) a “Base Rate”, which means, for any day, a fluctuating rate per annum equal to credit spreads of 1.5 % to 2.6 %, which are determined based on the Company’s net debt-to-capitalization ratio, plus the highest of (a) the Federal Funds Rate plus 0.5 %, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” (c) Term SOFR plus 1.0 % and (d) 1.0 %, or (2) a “Term SOFR/Letter of Credit Rate”, which means for any day a fluctuating rate per annum equal to credit spreads of 2.5 % to 3.6 %, which are determined based on the Company’s debt-to-capitalization ratio, plus the adjusted term SOFR rate (based on one, three or six-month interest periods).

On June 30, 2022, the Company received an additional commitment of $ 50.0 million under the terms of the accordion feature.

As of December 31, 2022, available liquidity under the Credit Agreement wa s $ 122.0 million resulting in $ 486.5 million in total liquidity for the Company.

As of December 31, 2022 and 2021, the outstanding balance under the Amended and Restated Credit Agreement was $ 965.0 million and $ 760.0 million, respectively.

Under the Amended and Restated Credit Agreement, the funds available are unsecured and availability under the borrowing base is calculated based on specified percentages of finished lots, construction in process, and finished homes inventory on the Consolidated Balance Sheets.

The Company had capitalized debt issuance costs related to the line of credit and notes payable , net of amortization, of $ 7.3 million and $ 5.5 million as of December 31, 2022 and 2021, respectively, which were included in other assets on the Consolidated Balance Sheets.

The Company amortized $ 3.8 million and $ 2.0 million of debt issuance costs for the years ended December 31, 2022 and 2021, respectively.

The Credit Agreement contains restrictive covenants and financial covenants.

The Company was in compliance with all debt covenants

as of December 31, 2021 and 2020.

The Company was in compliance with all debt covenants as of December 31, 2022 and 2021.

The Company expects to remain in compliance with all debt covenants over the next twelve months.

Notes Payable

Notes payable consisted of the following as of December 31, 2021 and 2020:

Maturity Date

Payment Terms

Effective Rate

Interest is payable monthly

February 28, 2022

Non-interest bearing

April 1, 2022

Interest is payable monthly

July 31, 2022

Interest is payable monthly

March 25, 2023

Interest is payable monthly

Total notes payable

These notes payable relate to our consolidated joint ventures and are non-recourse

to the Company.

Included within notes payable as of December 31, 2020 is a $ 20,000,000 bridge loan from Boston Omaha Corporation, LLC, which was utilized to fund a portion of the purchase price of the H&H Homes acquisition (Note 2).

This note was

paid off subsequent to the execution of the Credit Agreement in January 2021 (Note 3).

The principal balance on all notes payable is payable upon the sale of project specific collateral, and is collateralized by a real estate mortgage

and a limited guarantee ensuring project completeness and the nonexistence of fraudulent acts.

Contractual maturities of notes payable as of December 31, 2021, are as follows:

Maturity of Notes Payable

During the year ended December 31, 2021, there were no material changes in the contractual maturities of our remaining notes payable.

Inventories consist of finished lots, construction in process (“CIP”) and finished homes, including capitalized interest.

In addition, lot option fees related to off-balance sheet

arrangements and due diligence costs related to land development are also capitalized into inventories – finished lots and land.

Finished lots are purchased with the intent of building and selling a home, and are generally purchased just-in-time

for construction.

CIP represents the homebuilding activity associated with both homes to be sold and speculative homes.

CIP includes the cost of the finished lot as well as all of the direct costs incurred to build the home.

The cost of the home is

expensed on a specific identification basis.

As mentioned in Note 11, the Company consolidated several joint ventures that own land and finished lots.

The Company owns a

percentage of these joint ventures, but does not own the underlying assets.

The table below shows the Company’s owned real estate inventory and real estate inventory owned by the joint ventures:

Construction in process and finished homes

Finished lots and land

Inventories owned by the Company

1,044,976,056

Inventories owned by consolidated joint ventures

Total inventories

1,066,661,744

Inventories owned by the Company

as a percentage of total inventories

Construction in process and finished homes

Finished lots and land

In addition, lot option fees related to off-balance sheet arrangements and due diligence costs related to land development are also capitalized into inventory.

Finished lots are purchased with the intent of building and selling a home and are generally purchased just-in-time for construction.

CIP represents the homebuilding activity associated with homes to be sold and speculative homes.

CIP includes the cost of the finished lots and all of the direct costs incurred to build the homes.

The cost of the homes is expensed on a specific identification basis.

Interest is capitalized and included within each inventory category above.

Capitalized interest activity is summarized in the table below for the

years ended December 31, 2021 and 2020:

Capitalized interest activity is summarized in the table below for the years ended December 31, 2022 and 2021 (in thousands):

For the year ended

Capitalized interest at the beginning of the period $ 33,266 $ 21,091

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Interest expensed ( 32 ) ( 672 )

Interest charged to cost of contract revenues earned

Interest charged to homebuilding cost of sales ( 60,595 ) ( 32,508 )

Capitalized interest at the end of the period $ 94,603 $ 33,266

Warranty Reserves

The Company establishes warranty reserves to provide for estimated future expenses as a result of construction and product defects, product recalls

and litigation incidental to its homebuilding business.

Estimates are determined based on management’s judgment considering factors such as historical spend and the most likely current cost of corrective action.

The table below presents the activity related to warranty reserves, which are included in accrued expenses in the accompanying Consolidated Balance Sheets:

Warranty reserves at the beginning of the year

Additions to reserves for new home deliveries

Payments for warranty costs

Warranty reserves at the end of the period

Commitments and Contingencies

Company is currently involved in the appeals phase of

civil litigation related to defective products provided by Weyerhaeuser NR Company (“Weyerhaeuser”) (NYSE:

Legal Proceedings

Weyerhaeuser Lawsuit

The Company was involved in an appeals process of civil litigation related to defective products provided by Weyerhaeuser NR Company (“Weyerhaeuser”) (NYSE:

WY), one of our lumber suppliers.

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On July 18, 2017, Weyerhaeuser issued a press release indicating a recall and potential solution for TJI Joists with Flak Jacket Protection manufactured after December 1, 2016.

The press release indicated the TJI Joists used a Flak Jacket coating

that included a formaldehyde-based resin that could be harmful to consumers and produced an odor in certain newly constructed homes.

homes impacted by the harmful and odorous Flak Jacket coating and incurred significant costs directly related to Weyerhaeuser’s defective TJI Joists.

The press release indicated the TJI Joists used a Flak Jacket coating that included a formaldehyde-based resin that could be harmful to consumers and produced an odor in certain newly constructed homes.

We had 38 homes impacted by the potentially harmful and odorous Flak Jacket coating and incurred significant costs directly related to Weyerhaeuser’s defective TJI Joists.

Accordingly, we sought remediation and damages from Weyerhaeuser.

The press release by

Weyerhaeuser had a pronounced impact on our sales and cancellation rates in Colorado.

The press release by Weyerhaeuser had a pronounced impact on our sales and cancellation rates in Colorado.

We filed suit on December 27, 2017—Dream Finders Homes LLC and DFH Mandarin, LLC v.

Weyerhaeuser NR Company, No.

17CV34801 (District Court, City and County of

Denver, State of Colorado)—and included claims against Weyerhaeuser for manufacturer’s liability based on negligence, negligent misrepresentation causing financial loss in a business transaction and fraudulent concealment.

Weyerhaeuser asserted a

counterclaim asserting an equitable claim for unjust enrichment.

After completion of a jury trial on November 18, 2019, the District Court issued a verdict in our favor on our claims, awarding Dream Finders Homes LLC $ 3,000,000 in damages and DFH Mandarin, LLC $ 11,650,000

17CV34801 (District Court, City and County of Denver, State of Colorado)—and included claims against Weyerhaeuser for manufacturer’s liability based on negligence, negligent misrepresentation causing financial loss in a business transaction and fraudulent concealment.

Weyerhaeuser asserted a counterclaim asserting an equitable claim for unjust enrichment.

After completion of a jury trial on November 18, 2019, the District Court issued a verdict in our favor on our claims, awarding Dream Finders Homes LLC $ 3.0 million in damages and DFH Mandarin, LLC $ 11.7 million in damages.

On February 21, 2020, the District Court dismissed Weyerhaeuser’s counterclaim.

Weyerhaeuser appealed the Colorado District Court’s jury verdict and on December 2, 2021, the Colorado Court of Appeals reversed the judgment entered

against Weyerhaeuser for negligence, negligent misrepresentation and fraudulent concealment.

As a result, Dream Finders Homes LLC and DFH Mandarin, LLC filed a petition for writ of certiorari to the Colorado Supreme Court on January 13, 2022 to

appeal the Colorado Court of Appeals ruling —Dream Finders Homes LLC and DFH Mandarin, LLC v.

Weyerhaeuser appealed the Colorado District Court’s jury verdict and on December 2, 2021, the Colorado Court of Appeals reversed the judgment entered against Weyerhaeuser for negligence, negligent misrepresentation and fraudulent concealment.

As a result, Dream Finders Homes LLC and DFH Mandarin, LLC (collectively, “DFH”) filed a petition for writ of certiorari to the Colorado Supreme Court on January 13, 2022 to appeal the Colorado Court of Appeals ruling —Dream Finders Homes LLC and DFH Mandarin, LLC v.

Weyerhaeuser NR Company, Case No.

2022SC24 (Colorado Supreme Court)—and that appeal is currently pending.

We are awaiting the Colorado Supreme Court’s

decision on whether it will grant our petition for writ of certiorari.

We have incurred all costs to date related to the Weyerhaeuser matter and have recognized no gain on the damages awarded to us by the District Court.

In April 2020, the Company received proceeds

from the PPP grant in the amount $ 7,219,794 , which is classified in accrued expenses on the Consolidated Balance Sheets and accounted for

as an in-substance grant.

The Company utilized all of the PPP proceeds to pay payroll and permissible operating expenses.

On June 16, 2021, approximately the total amount of the PPP proceeds were forgiven by the Small Business Association (“SBA”).

As such, the Company has included the PPP proceeds as other income on the Consolidated Statements of Comprehensive Income for the year ended December 31, 2021.

The Company has operating leases primarily associated with office space that is used by divisions outside of the Jacksonville area,

model home sale-leasebacks and a corporate office building sale-leaseback.

This corporate office building lease has a remaining lease term of 12

2022SC24 (Colorado Supreme Court).

On September 12, 2022, the Colorado Supreme Court issued a denial of certiorari.

As a result of the denial of certiorari, the Company recorded a legal accrual of $ 0.9 million as of December 31, 2022 as part of Weyerhaeuser's motion for costs incurred in defense of this case.

Silver Meadows Townhome Owners Association, Inc.

On October 9, 2019, Silver Meadows Townhome Owners Association, Inc.

filed a lawsuit in Boulder County Colorado District Court against DFH Mandarin, LLC (“Mandarin”) and Dream Finders Homes, LLC (collectively with Mandarin, “DFH”), both wholly-owned subsidiaries of the Company, as well as other named defendants.

The lawsuit alleges certain construction and development defects.

Mandarin successfully compelled arbitration.

On March 2, 2022 during arbitration proceedings, the parties settled the matter for $ 12.0 million subject to the execution of a mutually acceptable settlement agreement, including a denial of any admission of liability on behalf of DFH.

DFH’s insurance carrier agreed to pay the policy limit of $ 4.0 million toward the settlement.

In April 2022, the parties executed a mutually acceptable settlement agreement and DFH paid the settlement amount, net of the insurance proceeds received.

In April 2022, DFH also commenced the formal legal process to seek contribution toward DFH’s portion of the settlement amount from responsible subcontractors and vendors who performed work on the project.

As of December 31, 2022 , DFH settled with one subcontractor for contribution toward DFH's amounts paid toward the settlement and continued its

proceedings to collect additional contributions from responsible subcontractors and vendors, which is still in progress as of the date of this filing.

The Company has operating leases primarily associated with office space that is used by divisions outside of the Jacksonville area, model home sale-leasebacks and a corporate office building sale-leaseback in Jacksonville, Florida.

This corporate office building lease has a remaining lease term of 12 years.

The Company also has finance leases for corporate office furniture.

Leases with an initial term of 12 months or less are not recorded on the balance sheet;

the Company recognizes lease expense for

these leases on a straight-line basis over the lease term.

the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Lease and nonlease components for new and reassessed leases are combined.

There are no significant operating or finance leases that have not yet commenced as of December 31, 2022.

include one or more options to renew, with renewal terms that can extend the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term.

The exercise of lease renewal options is at the Company’s sole discretion.

The Company only includes these renewal options in its lease terms if they are

reasonably certain to be exercised.

Finance lease assets are recorded net of accumulated amortization of $ 333,407 and $ 919,552 as of December 31, 2021 and 2020, respectively.

Model Home Sale-Leaseback

On May 30, 2019, the Company sold 11

completed Model Homes for $ 4,417,674 .

The Company simultaneously entered into 11 individual lease agreements.

The Company is responsible for paying the operating expenses associated with the homes while under lease.

The Company is also responsible for preparing and

actively marketing the homes for sale.

The Company recorded a gain related to this transaction in the amount of $ 321,128 .

On December 27, 2019, the Company sold 20

completed Model Homes for $ 9,240,680 .

The Company only includes these renewal options in its lease terms if they are reasonably certain to be exercised.

Finance lease assets are recorded within other assets and are net of accumulated amortization.

On March 24, 2022, the Company sold 93 completed model homes for $ 55.4 million, including the MHI Model Homes.

The Company simultaneously entered into 93 individual lease agreements.

The Company is responsible for paying the operating expenses associated with the homes while under lease.

The Company is also responsible for preparing and

actively marketing the homes for sale.

The Company recorded a gain related to this transaction in the amount of $ 1,928,671 .

For the Years Ended

Classification

Consistent with similar sale and leaseback agreements in previous years, the Company considered the terms of the sale and leaseback arrangement and based on applicable GAAP guidance, concluded the transaction qualifies for sale treatment and that the leases should be classified as operating leases.

The following table shows the lease costs for the years ended December 31, 2022, 2021 and 2020 (in thousands):

For the Years Ended December 31,

Lease Cost Classification 2022 2021 2020

Operating lease cost (1)

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Finance lease cost:

Amortization of right of use assets

Selling, general and administrative expenses

Interest on lease liabilities

Interest expense

Amortization of right of use assets Selling, general and administrative expenses 95 158 158

Interest on lease liabilities Interest expense 7 19 29

Total finance lease cost 102 177 187

Net lease cost $ 11,649 $ 6,580 $ 6,119

Includes short-term leases and variable lease costs which are

The following table shows the maturities of our lease liabilities as of December 31, 2021:

Maturity of Lease Liabilities

(1) Includes short-term leases and variable lease costs which are immaterial.

The following table shows the maturities of our lease liabilities as of December 31, 2022 (in thousands):

Maturity of Lease Liabilities Operating

2023 $ 7,861 $ 35 $ 7,896

2024 5,733 — 5,733

2025 3,700 — 3,700

2026 3,121 — 3,121

2027 1,666 — 1,666

Thereafter 7,386 — 7,386

Total lease payments 29,467 35 29,502

Interest 4,806 1 4,807

Present value of lease liabilities $ 24,661 $ 34 $ 24,695

We use our incremental borrowing rate based on the information

available at the commencement date in determining the present value of lease payments.

(1) We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

During the year ended December 31, 2022, there have been no material changes in our lease liabilities for the next five years.

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Weighted average remaining lease term

Operating leases

Financing leases

Operating leases 6 years 8 years

Financing leases 1 years 2 years

Weighted average discount rate

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Financing leases 7.5 % 7.5 %

Mezzanine Equity, Members’ Equity and Stockholders’ Equity

All of the Company’s outstanding preferred units are classified in mezzanine equity as they can be redeemed in a deemed liquidation of the Company outside of the

Company’s control.

Additionally, prior to the Corporate Reorganization, the Company had certain non-voting common units that could have been redeemed outside the Company’s control, and therefore, were classified in mezzanine equity (the “Redeemable

Common Units Mezzanine”).

In April 2020, the

Company redeemed 1,000 Series C Preferred Units for $ 1,000,000 plus accrued unpaid preferred distributions of $ 62,500 .

Pursuant to the Corporate Reorganization effective January 25, 2021, the Company is authorized to issue 350,000,000 shares of common stock, par value of $ 0.01 per share,

consisting of 289,000,000 shares of Class A common stock and 61,000,000 shares of Class B common stock.

The Board of Directors of the Company (the “Board of Directors”) has the authority to issue one or more series of preferred stock, par value $ 0.01 per share, without

stockholder approval.

As a result of the Corporate Reorganization, all of the outstanding non-voting common units and Series A Preferred Units of DFH LLC converted into 21,255,329 shares of the Company’s Class A common stock and all of the outstanding common units of DFH LLC converted into 60,226,153 shares of the Company’s Class B common stock.

January 27, 2021, the Company redeemed

all of the outstanding Series C Preferred Units for $ 26,000,000 , including $ 500,000 of discounted costs, plus accrued unpaid preferred distributions of $ 200,000 .

Following the Corporate Reorganization, the Company owns all of the voting membership interest of DFH LLC.

Redeemable Series B Preferred Units of DFH LLC

As of December 31, 2021 and 2020, the Company had 7,143 and 7,143 , respectively, of Redeemable Series B Preferred Units (“Series B

Preferred Units”) issued and outstanding with a carrying value of $ 7,095,178 and $ 6,333,036 , respectively.

In the event of a liquidation, dissolution or winding up of DFH LLC, the Series B Preferred Units have a liquidation preference of $ 1,000 per unit and are senior to common units.

The Series B Preferred Units have an 8 % annual cumulative preferred distribution on the

liquidation preference that is payable if and when distributions are declared.

The Series B Preferred units do not participate in discretionary distributions, and each unit has the right to one vote on any matter presented for a vote of the members of DFH LLC.

As of December 31, 2021 and 2020, these units have an aggregate unpaid amount of

cumulative preferred distributions of $ 2,864,834 and $ 2,102,692 ,

respectively, which is $ 401.07 and $ 294.37 , respectively, per unit.

The Series B Preferred Units can be redeemed at

DFH LLC’s option for $ 1,000 per unit

plus any accrued and unpaid preferred distributions per unit at any time prior to December 31, 2022.

The units may also be redeemed at the option of the holder upon a sale of DFH LLC for $ 1,000 per unit plus any accrued and unpaid preferred distributions.

As the units are not currently

probable of becoming redeemable outside the Company’s control, no accretion has been recorded.

Series A Convertible

Preferred Stock of the Company

On September 29, 2021, the Company filed a

Certificate of Designations with the State of Delaware establishing 150,000 shares of Series A Convertible Preferred Stock with an

initial liquidation preference of $ 1,000 per share and a par value $ 0.01 per share (the “Convertible Preferred Stock”) and sold 150,000 shares of

Convertible Preferred Stock for an aggregate purchase price of $ 150,000,000 .

The Company used the proceeds from the sale of the

Convertible Preferred Stock to fund a portion of the MHI acquisition (See Note 2).

Pursuant to the Certificate of Designations, the

Convertible Preferred Stock ranks senior to the Company’s Class A and B common stock with respect to dividends and distributions on liquidation, winding-up and dissolution.

Upon a liquidation, dissolution or winding up of the Company, each share of

Convertible Preferred Stock will be entitled to receive the initial liquidation preference of $ 1,000 per share, subject to adjustment, plus

all accrued and unpaid dividends thereon.

In addition, the Convertible Preferred Stock has the following terms:

Cumulative Dividends:

The Convertible Preferred Stock accumulates cumulative dividends at a rate

per annum equal to 9.00 % payable quarterly in arrears.

The Convertible Preferred Stock is perpetual with call and conversion rights.

The Convertible Preferred Stock is not convertible by the Purchasers in the first five years following issuance, with the exception of the acceleration of

the Conversion Right (as defined below) upon breach of the protective covenants (described below).

The Company can call the outstanding Convertible Preferred Stock at any time for one-hundred and two percent ( 102 %) of its liquidation preference during the fourth year following its issuance and for one-hundred and one percent ( 101 %) of its liquidation preference during the fifth year following its issuance (in each case, for the avoidance of doubt, plus accrued but unpaid dividends, if any).

to the fifth anniversary of its issuance, a Purchaser can convert the Convertible Preferred Stock into Class A common stock of the Company (the “Conversion Right”).

The conversion price will be based on the average of the trailing 90 days’ closing price of Class A common stock of the Company, less 20 % of the average and subject to a floor conversion price of $ 4.00

(the “Conversion Discount”).

Protective Covenants:

The protective covenants of the Convertible Preferred Stock require the

Company to maintain compliance with all covenants related to (i) the Credit Agreement, as may be further amended from time to time;

provided that any amendment, restatement, modification or waiver of the Credit Agreement that would

adversely and materially affect the rights of the Purchasers will require the written consent of holders of a majority of the then-outstanding shares of Convertible Preferred Stock;

and (ii) any agreement between the Company and any

Purchaser (the covenants referred to in clauses (i) and (ii), collectively, the “Protective Covenants”).

Non-compliance beyond any applicable cure period with the Protective Covenants (in the case of the Protective Covenants related to

the Credit Agreement) will accelerate the Conversion Right, and in the event of such acceleration that occurs before the fifth anniversary following the issuance of the Convertible Preferred Stock, the “Conversion Discount” shall be

increased from 20 % to 25 %.

Voting Rights:

Except as may be expressly required by Delaware law, the shares of Convertible Preferred Stock have no voting rights.

Redemption in a Change of Control:

The Convertible Preferred Stock will be redeemed, contingent upon and concurrently with the consummation of a change of control of the Company.

of Convertible Preferred Stock will be redeemed in a change of control of the Company at a price, in cash, equal to the liquidation preference, subject to adjustment, plus all accumulated and unpaid dividends, plus, if the change of control

occurs before the fourth anniversary of the date of issuance of the Convertible Preferred Stock, a premium equal to the dividends that would have accumulated on such share of Convertible Preferred Stock from and after the change of control

redemption date and through the fourth anniversary of the issuance of the Convertible Preferred Stock.

Pursuant to the terms of

the Certificate of Designations, unless and until approval of the Company’s stockholders is obtained as contemplated by Nasdaq listing rules, no shares of Class A common stock will be issued or delivered upon conversion of any Convertible Preferred

Stock to the extent that such issuance would (i) result in the holder beneficially owning in excess of 19.99 % of the outstanding Class A

common stock as of the date of the Certificate of Designations or (ii) exceed 19.99 % of the outstanding shares of Class A and Class B

common stock combined as of the date of the Certificate of Designations.

In addition, in

connection with the sale of the Convertible Preferred Stock, on September 29, 2021, the Company and the Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company

granted the Purchasers certain registration rights.

Under the Registration Rights Agreement, the Company is required to register the Convertible Preferred Stock owned by the Purchasers and the shares of Class A common stock issuable upon conversion

of such shares equal to 19.99 % of the outstanding shares of Class A common stock for resale within the earlier of (i) three business days after the filing of the Company’s Form 10-K for the fiscal year ended December 31, 2021 and (ii) six months after September 29, 2021.

If the Company fails to comply with its registration requirements under the Registration Rights Agreement, the

Purchasers, in addition to any regular dividends, will be entitled to an additional 2 % per annum dividend for an additional quarter

period on the Convertible Preferred Stock if the breach is cured within 30 days and for each additional 30 day period in which the Company fails to cure such breach, each Purchaser will be entitled to an additional 2 % per annum for an additional quarter period until cured.

In addition, the Purchaser has rights to demand the registration of the Convertible Preferred Stock and the shares

of Class A common stock in certain instances.

Equity-Based Compensation

Dream Finders Homes, Inc.

On January 20, 2021, the Board of Directors approved and adopted the

2021 Equity Incentive Plan (the “2021 Plan”).

The 2021 Plan is administered by the Compensation Committee of the Board of Directors, and authorizes the Company to grant incentive stock-based awards.

The Company granted 759,709 restricted stock grants to certain executives and directors, which had a weighted-average grant date fair value of $ 23.15 per share, in conjunction with the adoption of the 2021 Plan.

These stock grants vest over a period of three years of continuous service, commencing on the date of the grant and vesting ratably in one third increments at the end of each year of a three-year term.

The fair value of these grants was derived by using the closing stock price on the date of the grant.

Expense related to equity-based compensation

under the 2021 Plan was $ 5,233,676 and $ 0

for the year ended December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the total unrecognized compensation expense under the 2021 Plan was $ 16,690,354 and $ 0 , respectively.

The unrecognized compensation expense will be recognized over a

weighted-average period of 2.0 years.

The Company’s restricted

stock awards as of December 31, 2021 and changes during the year then ended are presented below:

Weighted Average

Outstanding - December 31, 2020

Outstanding - December 31, 2021

Dream Finders

As of December 31, 2020, the Company had 3,532 non-vested, non-voting units issued to employees, valued at $ 4,741,657 , which converted into shares of the Company’s Class A common stock on January 21, 2021.

As a result, the Company expensed the remaining

unrecognized stock compensation expense associated with these units in the amount of $ 1,240,309 for the year ended December 31, 2021.

Expense related to equity-based compensation for these units was $ 697,054 for the year ended December 31, 2020.

There were no outstanding non-vested, non-voting units at December 31, 2021.

Variable Interest Entities and Investments in Other Entities

Company holds investments in certain limited partnerships and similar entities that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located, which are considered

variable interests.

The Company also has an interest in an unconsolidated variable interest entity (“VIE”), Jet LLC, where the primary activities include underwriting, originating and selling home mortgages.

The aforementioned investments together

with Jet LLC, comprise the Company’s VIEs.

Variable Interest Entities

The Company holds investments in certain limited partnerships and similar entities that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located, which are considered variable interests.

The Company also has an interest in Jet Home Loans LLC (“Jet Home Loans” or “Jet LLC”), where the primary activities include underwriting, originating and selling home mortgages.

The Company’s investments create a variable interest in a variable interest entity (“VIE”), depending on the contractual terms of the arrangement.

Additionally, the Company, in the ordinary course of business, enters into option contracts with third parties and unconsolidated entities for the ability to acquire rights to finished lots for the construction of homes.

Under these contracts, the Company typically makes a specified earnest money deposit in consideration for the right to purchase finished lots in the future, usually at a predetermined price.

The VIEs are funded by initial capital contributions from the Company, as well as its other partners, and generally do not have significant debt.

The primary risk of loss associated with the Company’s

involvement in these VIEs is limited to the Company’s initial capital contributions due to bankruptcy or insolvency of the VIE;

however, management has deemed the likelihood of this as remote.

The maximum exposure to loss related to the VIEs is

disclosed below for both consolidated and unconsolidated VIEs, which equals the Company’s capital investment in each entity.

In some cases, an unrelated third party is the general partner or managing member and, in others, the general partner or managing member is a related party.

analyzed the Company’s investments first under the variable interest model to determine if they are VIEs and, if so, whether the Company is the primary beneficiary.

Management consolidates the entity if the Company is the primary beneficiary or if a

standalone primary beneficiary does not exist and the Company and its related parties collectively meet the definition of a primary beneficiary.

If the joint venture does not qualify as a VIE under the variable interest model, management then

evaluates the entity under the voting interest model to assess if consolidation is appropriate.

The assets of a VIE can only be used to satisfy the obligations of that specific VIE, even for assets that are included within the Consolidated Balance Sheets.

and its partners do not have an obligation to make capital contributions to the VIEs and there are no liquidity arrangements or other agreements that could require the Company to provide financial support to the VIEs.

Furthermore, the creditors of

the VIEs have no recourse to the Company’s general credit.

The primary risk of loss associated with the Company’s involvement in these VIEs is limited to the Company’s initial capital contributions due to bankruptcy or insolvency of the VIE;

however, management has deemed the likelihood of this as remote.

The maximum exposure to loss related to the VIEs is disclosed below for both consolidated and unconsolidated VIEs, which equals the Company’s capital investment in each entity.

Consolidated VIEs

For VIEs that the Company does consolidate, management has the power to direct the activities that most significantly impact the VIE’s economic performance.

typically serves as the party with homebuilding expertise in the VIE.

The Company typically serves as the party with homebuilding expertise in the VIE.

The Company does not guarantee the debts of the VIEs, and creditors of the VIEs have no recourse against the Company.

There were no new consolidated VIEs during the years ended December 31, 2022, 2021 or 2020.

The table below displays the carrying amounts of the assets and liabilities related to the consolidated VIEs:

The table below displays the carrying amounts of the assets and liabilities related to the consolidated VIEs (in thousands):

Consolidated 2022 2021

Assets $ 13,344 $ 30,830

Liabilities $ 4,787 $ 10,203

Unconsolidated VIEs

For VIEs that the Company does not consolidate, the power to direct the activities that most significantly impact the VIE’s economic performance is held by a third party.

These entities are accounted for as equity method investments and, other than Jet Home Loans, are not individually significant.

The amount of retained earnings that represents undistributed earnings of 50-percent-or-less-owned entities accounted for

by the equity method was $ 9,972,266 and $ 2,966,644

as of December 31, 2021 and 2020, respectively.

There were no significant entities that were deconsolidated during the years ended December 31, 2021 or 2020.

The Company’s maximum exposure to loss is limited to its investment in the entities because

the Company is not obligated to provide any additional capital to or guarantee any of the unconsolidated VIEs’ debt.

The table below shows the Company’s investment in the unconsolidated VIEs:

For VIEs that the Company does not consolidate, the Company does not hold the power to direct the activities that most significantly impact the VIE’s economic performance.

The Company’s maximum exposure to loss is limited to its investment in the entities because the Company is not obligated to provide them any additional capital and does not guarantee any of the unconsolidated VIEs’ debt.

The table below shows the Company’s investments in the unconsolidated VIEs (in thousands):

Unconsolidated 2022 2021

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The Company generally does not engage in the land development business.

Instead, we employ an asset-light land financing strategy, providing us optionality to purchase

lots on a ‘‘just-in-time’’ basis for construction and affording us flexibility to acquire lots at a rate that matches the expected sales pace in a given community.

We primarily employ two variations of our asset-light land financing strategy, finished lot option contracts and land bank option contracts, pursuant to which we secure the right to purchase

finished lots at predetermined market prices from various land sellers and land bank partners, by paying deposits based on the aggregate purchase price of the finished lots (typically 10 % or less in the case of finished lot option contracts and 15 %

or less in the case of land bank option contracts).

These option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled for any reason, and our sole legal obligation and economic loss as a result of such

forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and, in the case of land bank option contracts, any related fees paid to the land bank partner.

Instead, we employ an asset-light land financing strategy, providing us optionality to purchase lots on a ‘‘just-in-time’’ basis for construction and affording us flexibility to acquire lots at a rate that matches the expected sales pace in a given community.

We primarily employ two variations of our asset-light land financing strategy, finished lot option contracts and land bank option contracts, pursuant to which we secure the right to purchase finished lots at predetermined market prices from various land sellers and land bank partners, by paying deposits based on the aggregate purchase price of the finished lots.

These option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled for any reason, and our sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and, in the case of land bank option contracts, our loss is limited to the related lot option fees paid to the land bank partner, any potential performance obligations, management of the land development to completion and any cost overruns relative to the project .

None of the creditors of any of the land bank entities with which we enter into lot option contracts have recourse to our general credit.

We generally do not have any

specific performance obligations to purchase a certain number or any of the lots or guarantee any of the land bankers’ financial or other liabilities.

We are not involved in the design or creation of the land bank entities from which we purchase lots

under lot option contracts.

The land bankers’ equity holders have the power to direct 100 % of the operating activities of the land bank

We generally do not have any specific performance obligations to purchase a certain number or any of the lots or guarantee any of the land bankers’ financial or other liabilities.

We are not involved in the design or creation of the land bank entities from which we purchase lots under lot option contracts.

The land bankers’ equity holders have the power to direct 100 % of the operating activities of the land bank entity.

We have no voting rights in any of the land bank entities.

The sole purpose of the land bank entity’s activities is to generate positive cash flow returns for such entity’s equity holders.

Further, we do not share in any of the profit or loss

generated by the project’s development.

The profits and losses are passed directly to the land banker’s equity holders.

Further, we do not share in any of the profit or loss generated by the project’s development.

The profits and losses are passed directly to the land bankers’ equity holders.

The deposit placed by us pursuant to the lot option contracts is deemed to be a variable interest in the respective land bank entities.

Certain of those land bank entities

are deemed to be VIEs.

Certain of those land bank entities are deemed to be VIEs.

Therefore, the land bank entities with which we enter into lot option contracts are evaluated for possible consolidation by the Company.

We believe the activities that most significantly impact a land bank entity’s economic

performance are the operating activities of the land bank entity.

In the case of development projects, unless and until a land bank entity delivers finished lots for sale, the land bank entity’s equity investors bear the risk of land ownership and do

not earn any revenues.

We believe the activities that most significantly impact a land bank entity’s economic performance are the operating activities of the land bank entity.

In the case of development projects, unless and until a land bank entity delivers finished lots for sale, the land bank entity’s equity investors bear the risk of land ownership and do not earn any revenues, except for lot option fees paid by the Company.

The operating development activities are managed by the land bank entity’s equity investors.

We possess no more than limited protective legal rights through the lot option contracts in the specific finished lots that we are purchasing, and we possess no participative rights in the land bank entities.

Accordingly, we do not have the power to direct the activities of a land bank entity that most

significantly impact its economic performance.

For the aforementioned reasons, the Company concluded that it is not the primary beneficiary of the land bank entities with which it enters into lot option contracts, and therefore the Company does not

consolidate any of these VIEs.

The Company’s total risk of loss related to finished lot option and land bank option contracts was $ 274,868,933

and $ 70,130,710 as of December 31, 2021 and 2020, respectively.

Asset Purchase of Joint Venture Interests

December 2018, the Company purchased the membership interests of its joint venture partner in PSJ JV Owner LLC, HM7 JV Owner LLC and ANT JV Owner LLC.

After the transaction, the Company owned 100 % of these companies, and received all income, expenses and margin.

Since all of the identified assets in these companies were their land assets and no systems, people or

processes were acquired, the transactions were accounted for as an asset purchase.

The combined purchase price of these entities was $ 27,532,174 ,

net of the Company’s outstanding equity investment in joint ventures, which was paid to the former owner in January 2019.

As such, for the year ended December 31, 2019, there is a cash outflow from operating activities of $ 27,532,174 included within the accounts payable and accrued expenses line item in the Consolidated Statements of Cash Flows.

We possess no more than limited protective legal rights through the lot option contracts in the specific finished lots we are purchasing, and we possess no participative rights in the land bank entities.

Accordingly, we do not have the power to direct the activities of a land bank entity that most significantly impact its economic performance.

The Company’s risk of loss related to finished lot option and land bank option deposits and related fees and interest was $ 461.6 million as of December 31, 2022.

The Company is a corporation subject to U.S.

federal income taxes, in addition to state and local income taxes.

As the Company became subject to tax as a corporation in 2021, no provision for federal or state income taxes was made prior to 2021 and, therefore, there are no comparative balances relating to corporate income taxes for the 2020 period herein.

Income tax expense for the years ended December 31, 2022 and 2021, consists of the following (in thousands):

Current expense:

Federal $ 66,473 $ 26,336

State 15,680 5,088

Total current expense 82,153 31,424

Deferred expense:

Federal 5 ( 3,305 )

State ( 299 ) ( 664 )

Total deferred (benefit) ( 294 ) ( 3,969 )

Total income tax expense $ 81,859 $ 27,455

The following table reconciles the statutory federal income tax rate to the effective income tax rate:

Income taxes at federal statutory rate 21.0 % 21.0 %

State and local income taxes, net of federal tax 3.5 2.4

Federal tax credits ( 3.9 ) ( 5.9 )

Non-deductible executive compensation 1.3 0.8

Other 1.1 0.2

Effective rate 23.0 % 18.5 %

The significant components of deferred income tax assets and liabilities as of December 31, 2022 and 2021, consist of the following (in thousands):

Deferred tax assets:

Property and equipment, net $ 1,085 $ 238

Contingent consideration 4,145 1,805

Equity-based compensation 246 1,265

Right-of-use liabilities 5,809 —

Other 1,408 1,512

Total deferred tax asset 12,693 4,820

Deferred tax liabilities:

Property and equipment, net ( 2,423 ) ( 588 )

Right-of-use assets ( 5,674 ) —

Other ( 70 ) —

Total deferred tax liability ( 8,167 ) ( 588 )

Net deferred income tax asset $ 4,526 $ 4,232

Management believes that we will have sufficient future taxable income to make it more likely than not that the net deferred tax assets will be realized.

As of December 31, 2022 and 2021, the Company had no valuation allowance recorded against deferred tax assets, no uncertain tax positions that qualify for inclusion in our consolidated financial statements, and we have not recognized or accrued for any interest or penalties.

Segment Reporting

The Company operates in the homebuilding business and is organized and reported by division.

There are twelve operating segments and eight reportable segments:

(i) Jacksonville,

(ii) Colorado, (iii) Orlando, (iv) Washington DC (“DC Metro”), (v) the Carolinas, (vi) Texas, (vii) Jet Home Loans LLC (“Jet”), the Company’s mortgage operations, and (viii) Other.

The Company includes Century Homes operations acquired within the

Orlando segment and the MHI operations comprises the Texas segment.

The revenues of each remaining operating segment are not material and are therefore combined into an “Other” category for the purposes of segment reporting.

The corporate component

of the Company’s operations, which is not considered an operating segment, is also included in the “Other” category.

In accordance with ASC Topic 280, Segment Reporting, operating segments are defined as components of an enterprise for which separate financial information is available

that is evaluated regularly by the chief operating decision-makers (“CODMs”) in deciding how to allocate resources and in assessing performance.

The Company’s CODM primarily evaluates performance based on the number of homes closed, average sales

price and financial results.

Segment profitability is primarily measured by income before taxes.

The Company’s homebuilding operations employ an asset-light business model with a focus on the design, construction and sale of single-family entry-level and first-time

move-up homes.

On October 1, 2020, an unrelated party, FBC Mortgage, Inc., an Orlando-based mortgage lender, purchased Prime Lending Corp.’s membership interest in Jet for book value.

The Company’s mortgage operations are conducted through Jet, which is a licensed home mortgage broker that underwrites, originates and sells mortgages to FBC Mortgage LLC.

The Company owns 49.9 % of Jet, and FBC Mortgage, LLC owns the remaining 50.1 %.

Jet is accounted

for as an equity method investment.

Summarized financial information relating to the Company’s reportable segments is shown in the following tables.

Operational results of each reportable segment are not

necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.

The following tables summarize home sale revenues and net and comprehensive income by segment for the years ended December 31, 2021, 2020 and 2019

as well as total assets and goodwill by segment as of December 31, 2021 and 2020:

The Company primarily operates in the homebuilding business and is organized and reported by division.

There are six reportable segments:

(i) Jacksonville, (ii) Colorado, (iii) Orlando, (iv) The Carolinas, (v) Texas and (vi) Jet LLC, the Company’s mortgage operations.

The Company includes the Century Homes operations within the Orlando segment and the MHI operations comprise the Texas segment, and excludes legacy Austin, Texas operations.

The remaining operating segments are combined into the “Other” category, along with the corporate component, which is not considered an operating segment.

As of December 31, 2022, DC Metro, which was previously its own reportable segment comprising our homebuilding operations in the Washington D.C.

metropolitan area, has been included in Other.

It no longer meets the quantitative thresholds prescribed by ASC 280 Segment Reporting warranting separate disclosure, individually or in the aggregate with the Other segment.

The current and comparative disclosures below reflect this change in segment reporting as of and for the years ended December 31, 2022 and 2021.

The following tables summarize revenues and net and comprehensive income by segment for the years ended December 31, 2022, 2021 and 2020 as well as total assets and goodwill by segment as of December 31, 2022 and 2021 (in thousands):

For the Years Ended

2022 2021 2020

Jacksonville $ 679,321 $ 452,891 $ 430,811

Colorado 169,378 114,260 122,275

Orlando 304,767 244,143 124,769

The Carolinas 482,646 370,477 89,324

Texas 1,325,274 361,138 —

Jet Home Loans 26,399 28,056 28,629

Total segment revenues

380,949 381,001 366,628

1,162,435,561

Total segment revenues 3,368,734 1,951,966 1,162,436

Reconciling items from equity method investments ( 26,399 ) ( 28,056 ) ( 28,629 )

Consolidated revenues $ 3,342,335 $ 1,923,910 $ 1,133,807

1,923,909,806

1,133,806,607

For the Years Ended

Net and comprehensive income:

2022 2021 2020

Jacksonville $ 86,872 $ 55,578 $ 41,380

Colorado 17,740 3,971 14,052

Orlando 32,070 15,937 10,680

The Carolinas 25,965 14,623 6,034

Texas 112,855 21,797 —

Jet Home Loans 3,655 10,630 15,921

1,004 18,679 4,376

Total segment net and comprehensive income 280,161 141,215 92,443

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As of December 31, 2022 2021 2022 2021

Jacksonville $ 300,491 $ 207,502 $ — $ —

Colorado 187,813 116,121 — —

Orlando 276,720 131,882 1,795 1,795

The Carolinas 311,469 247,250 16,853 16,853

Texas 793,219 743,306 141,071 141,070

Jet Home Loans 96,108 77,074 — —

Total segment

494,150 441,910 12,488 12,209

Total segments 2,459,970 1,965,045 172,207 171,927

Reconciling items from equity method investments ( 88,833 ) ( 70,797 ) — —

1,894,247,623

Other includes the Company’s title operations, homebuilding operations in non-reportable segments, operations of the

corporate component and corporate assets such as cash and cash equivalents, cash held in trust, prepaid insurance, operating and financing leases, lot deposits, goodwill, as well as property and equipment.

As a result of the IPO and the Corporate Reorganization completed in January 2021, we own all of the Common Units of DFH LLC, which is treated as a

partnership for U.S.

federal and most applicable state and local income tax purposes.

As a partnership, DFH LLC is generally not subject to U.S.

federal and certain state and local income taxes.

Any taxable income or loss generated by DFH LLC

is passed through to and included in the taxable income or loss of its member, Dream Finders Homes, Inc., in accordance with the terms of the Operating Agreement.

The Company is a corporation subject to U.S.

federal income taxes, in addition to

state and local income taxes, based on our share of DFH LLC’s pass-through taxable income.

As of the 2021 tax year, the Company will file a consolidated U.S.

federal corporate income tax return, as well as state and local tax returns in all

jurisdictions where it maintains operations.

As the Company became subject to tax as a corporation in 2021, no provision for federal or state income taxes was made prior to 2021 and therefore, there are no comparative balances relating to

corporate income taxes for the 2020 or 2019 periods herein.

Income tax expense for the year ended December 31, 2021 consists of the following:

Current expense:

Total current expense

Deferred expense:

Total deferred (benefit)

Total income tax expense

The following table reconciles the statutory federal income tax rate to the effective income tax rate:

Income taxes at federal statutory rate

State and local income taxes, net of federal tax

Federal tax credits

Non-deductible executive compensation

Effective rate

The significant components of deferred income tax assets and liabilities as of December 31, 2021 consist of the following:

Deferred tax assets:

Property and equipment, net

Intangible assets

Contingent consideration valuation

Stock options

Warranty reserve

Deferred tax liabilities:

Property and equipment, net

Net deferred income tax asset

Deferred tax assets arise principally as a result of various accruals required for financial reporting purposes which are not

currently deductible for tax return purposes.

Management believes that we will have sufficient future taxable income to make it more likely than not that the net deferred tax assets will be realized.

As of December 31, 2021, the Company had no valuation allowance recorded against deferred tax assets.

the Company did not exist at such time and DFH LLC was treated as a partnership

generally not subject to U.S.

federal and most applicable state and local income taxes.

As of December 31, 2021and 2020, we have no uncertain tax positions that qualify for inclusion in our consolidated financial statements.

Consolidated $ 2,371,137 $ 1,894,248 $ 172,207 $ 171,927

(1) Other includes the Company’s title operations, homebuilding operations in non-reportable segments, operations of the corporate component and corporate assets such as cash and cash equivalents, cash held in trust, prepaid insurance, operating and financing leases, as well as property and equipment.

Fair Value Disclosures

Fair value represents the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date using.

Fair value represents the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair values are determined using a fair value hierarchy based on the inputs used to measure fair value.

Level 1 inputs are unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 inputs

are inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs are inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable and significant to the fair value.

The following table presents a summary of the change in fair value measurement of contingent consideration, which is based on

Level 3 inputs and is the only asset or liability measured at fair value on a recurring basis:

The following table presents a summary of the change in fair value measurement of contingent consideration, which is based on Level 3 inputs and is the only asset or liability measured at fair value on a recurring basis (in thousands):

Beginning balance, December 31, 2021

Contingent consideration adjustments related to prior year acquisitions

Contingent consideration increase related to current year acquisition

Fair value adjustments related to prior year acquisitions 11,053

Contingent consideration payments ( 19,981 )

Ending balance, December 31, 2022

Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets and

The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and construction lines of credit, approximate their carrying amounts due to the short-term nature of these instruments.

Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets and inventory.

The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, notes payable and customer deposits, approximate their carrying amounts due to the short-term nature of these instruments.

The fair value of the construction lines of credit approximate their carrying amounts since they are subject to short-term fixed interest rates that reflect current market rates.

Related Party Transactions

During the years ended December 31, 2021, 2020 and 2019, the Company entered into or participated in related party transactions.

The majority of these transactions were

entered into to secure finished lots for homebuilding.

In addition, the Company has built and sold homes for employees and members of their immediate families.

Consolidated Joint Ventures

The Company has entered into joint venture arrangements to acquire land, finished lots and build homes.

Certain members of the Company, directors and members of

management, have invested in these joint ventures and some are limited partners in these joint ventures DFH Investors LLC (which owned 15,400

Series A Preferred Units, representing 11.65 % of the membership interest in DFH LLC, prior to the Corporate Reorganization) is the

managing member of certain of these joint ventures.

The joint ventures are consolidated for accounting purposes.

Details of each are included in Note 1.

The Company enters into or participates in related party transactions.

The majority of these transactions are entered into to secure finished lots for the construction of new homes.

Consolidated VIEs

The Company has arrangements to acquire land, develop finished lots and build homes.

Certain stockholders, directors and members of management of the Company, have invested in these VIEs and some are limited partners in these VIEs.

DFH Investors LLC is the managing member of certain of these VIEs.

The VIEs are consolidated for accounting purposes (see Note 7) .

DF Residential I, LP

DF Residential I, LP (Fund I) is a real estate investment vehicle, organized for the purpose of acquiring and developing finished lots.

Dream Finders Homes LLC, has

entered into six joint ventures and ten

land bank projects with Fund I since its formation in January 2017.

DF Capital Management, LLC (“DF Capital”) is the investment manager in Fund I.

DF Residential I, LP (Fund I) is a real estate investment vehicle, organized to acquire and develop finished lots.

Dream Finders Homes LLC, has entered into six joint ventures and ten land bank projects with Fund I since its formation in January 2017.

DF Capital Management, LLC (“DF Capital”) is the investment manager of Fund I.

The Company owns a 49 % membership interest in DF Capital.

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Certain directors and executive officers have made investments in Fund I as limited partners.

In addition, certain members of

management have made investments in Fund I.

The total committed capital in Fund I was $ 36,706,163 as of December 31, 2021 and 2020.

Collectively, the Company’s directors, executive officers and members of management have invested $ 8,725,000 or 23.77 % of the total committed capital of Fund I as of December 31, 2021 and 2020.

In addition, certain members of management have made investments in Fund I.

The general partner of Fund I is DF Management GP, LLC (“DF Management”).

Dream Finders Homes LLC is one of four members of DF Management with a 25.8 % membership interest.

Certain members of DFH Investors LLC, including one of the Company’s directors, have a 65.33 % membership interest.

Collectively, Dream Finders Homes LLC and DFH Investors LLC have invested $ 1,400,000 in Fund I as of December 31, 2021 and 2020.

This investment represents 3.81 %

of the total committed Capital in Fund I of $ 36,706,163 .

The total committed capital in Fund I, which was fully committed in 2019, is $ 36.7 million.

Collectively, the Company’s directors, executive officers and members of management invested $ 8.7 million or 23.8 % of the total committed capital in Fund I.

Additionally, Dream Finders Homes LLC and DFH Investors LLC, collectively invested $ 1.4 million or 3.8 % of the total committed capital of Fund I.

DF Residential II, LP

DF Residential II, LP, a Delaware limited partnership (“Fund II”) initiated its first close on March 11, 2021.

DF Residential II, LP (“Fund II”) initiated its first close on March 11, 2021.

DF Management GP II, LLC, a Florida limited liability company, serves as the general partner of Fund II (the “General Partner”).

Fund II raised total capital commitments of $ 322,090,000 and was fully committed as of January 2022.

Fund II raised total capital commitments of $ 322.1 million and was fully committed as of January 2022.

DF Capital is the investment manager of Fund II.

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The General Partner is controlled by unaffiliated parties.

Company’s investment commitment in Fund II is $ 3,000,000 or 0.9 % of the total expected capital commitment of Fund II of $ 322,090,000 .

On March 11, 2021, the Company entered into land bank financing arrangements and a Memorandum of Right of First Offer with Fund II, under which Fund II has an exclusive right of first offer on any land bank financing projects up to $ 20,000,000 that meet its investment criteria and are undertaken by the Company during Fund II’s

investment period.

Certain directors, executive officers and other officers have made investment commitments as

limited partners in Fund II in an aggregate amount $ 33,900,000 and $ 0 , or 10.5 % and 0.0 %, as of December 31, 2021 and 2020, respectively, of the total expected capital commitment of Fund II.

The Company’s investment commitment in Fund II is $ 3.0 million or 0.9 % of the total committed capital of Fund II.

On March 11, 2021, the Company entered into land bank financing arrangements and a Memorandum of Right of First Offer with Fund II, under which Fund II has an exclusive right of first offer on any land bank financing projects that meet its investment criteria and are undertaken by the Company during Fund II’s investment period.

Certain directors, executive officers and members of management have made investment commitments as limited partners in Fund II in an aggregate amount of $ 133.9 million or 41.6 % of the total committed capital of Fund II as of December 31, 2022, inclusive of a $ 100.0 million commitment from Rockpoint Group, LLC discussed below.

As of December 31, 2021, these investment commitments were $ 33.9 million or 10.5 % of the total committed capital of Fund II.

Land Bank Transactions with DF Capital

After Fund I was fully committed, DF Capital provided land bank financing in a total of seven further projects and subsequently raised additional commitments from limited partners in Fund I as well as other parties.

One of the Company’s officers, invested $ 180,000 in one of these funds managed by DF Capital as a limited partner in 2019.

As of December 31, 2021, funds managed by DF Capital (other than Fund I

and Fund II) controlled an additional 347 lots as a result of these transactions outside of Fund I and Fund II.

As of December 31, 2020,

funds managed by DF Capital (other than Fund I and Fund II) controlled an additional 595 lots as a result of these transactions outside of

Fund I and Fund II.

During the years ended December 31, 2021 and 2020, the Company purchased 248 and 140 of these lots and the outstanding lot deposit balance in relation to these projects was $ 3,676,096 and $ 6,200,000 , respectively.

In addition, the Company

paid lot option fees related to these transactions of $ 293,812 , $ 974,250 and $ 106,394 for the years ended December 31, 2021, 2020

and 2019, respectively.

Land Bank Transactions with LB Parker Owners, LLC

On August 10, 2021, the Company entered into a land banking transaction with LB Parker Owners, LLC, a Delaware limited liability company, which is beneficially owned by Rockpoint Group,

LLC (“Rockpoint”) in connection with the Company’s acquisition and development of certain residential real property located in Parker, Colorado known as “Looking Glass” pursuant to which LB Parker Owners, LLC provided $ 3,300,000 for the acquisition of the real property.

Walton III is the founding

principal of Rockpoint and also a member of the Company’s Board of Directors, its Audit Committee and its Compensation Committee.

Jet Home Loans

Jet performs mortgage origination activities for the Company.

Jet underwrites and originates home mortgages for Company customers and non-Company

The Company owns 49.9 % of Jet, but is not the primary beneficiary.

Jet is accounted for under the equity method and is a

related party of the Company, accounted for in its own segment (see Note 13).

DF Capital raised additional commitments from limited partners through deals other than Fund I and Fund II, which provided land bank financing for specific projects.

One of the Company’s officers invested $ 0.2 million in one of these funds managed by DF Capital as a limited partner in 2019.

The Company continues to purchase lots controlled by these funds.

As of December 31, 2022 and 2021, the Company had $ 58.6 million in outstanding lot deposits primarily related to Fund II and other land bank transaction deals, and $ 3.7 million in outstanding lot deposits primarily related to other land bank transaction deals, respectively, in relation to DF Capital projects.

Transactions with Rockpoint Group, LLC and affiliates

From time to time, the Company enters into land bank option contracts with Rockpoint Group, LLC (“Rockpoint”) or its affiliates in connection with the Company’s acquisition and development of land.

Rockpoint or its affiliate provides the funding for the land acquisition and the Company secures the right to purchase finished lots at market prices by paying deposits based on the aggregate purchase price of the finished lots and any related fees, similar to land bank option contracts with non-related, third-party land bankers.

Walton III is the founding principal of Rockpoint and a member of the Company’s Board of Directors.

On February 15, 2022, DFH entered into a Memorandum of Right of First Offer with Rockpoint, under which Rockpoint has an exclusive right of first offer on certain land bank financing projects that meet certain criteria and are undertaken by the Company during Fund II’s investment period.

On the same date, Rockpoint provided funding relating to its $ 100.0 million commitment to Fund II.

Jet LLC performs mortgage origination activities for the Company including underwriting and originating home mortgages for Company customers and non-Company customers.

The Company owns 49.9 % of Jet LLC, but is not the primary beneficiary.

Jet LLC is accounted for under the equity method and is a related party of the Company (see Note 9 ).

Corporate Reorganization

Prior to the Corporate Reorganization, the Company had issued non-voting common units, common units, Series A and C Preferred Units, all of which were classified in mezzanine equity.

On January 27, 2021, shortly after the Corporate Reorganization, the Company redeemed all of the outstanding Series C Preferred Units for $ 26.0 million, including accrued unpaid preferred distributions .

Following the Corporate Reorganization, the Company owns all of the voting membership interest of DFH LLC.

The Board of Directors of the Company (the “Board of Directors”) has the authority to issue one or more series of preferred stock, par value $ 0.01 per share, without stockholder approval.

Series B Preferred Units of DFH LLC

As of December 31, 2022 and 2021, the Company had 7,143 and 7,143 , respectively, of Series B Preferred Units (“Series B Preferred Units”) issued and outstanding with a carrying value of $ 7.9 million and $ 7.1 million, respectively, which includes cumulative undeclared and unpaid distributions.

In the event of a liquidation, dissolution or winding up of DFH LLC, the Series B Preferred Units have a liquidation preference of $ 1,000 per unit and are senior to common units.

The Series B Preferred Units have an 8 % annual cumulative preferred distribution on the liquidation preference that is payable if and when distributions are declared.

The Series B Preferred units do not participate in discretionary distributions.

As of December 31, 2022 and 2021, these units have an aggregate unpaid amount of cumulative preferred distributions of $ 3.7 million and $ 2.9 million, respectively, which is $ 516.56 and $ 401.07 , respectively, per unit.

The Series B Preferred Units shall automatically be deemed to be cancelled when a holder of a Series B Preferred Unit receives aggregate distributions from DFH LLC on a Series B Preferred Unit equal to the sum of (i) $ 1,000 per unit and (ii) the unreturned capital contributions per unit plus an 8 % per annum cumulative preferred return (the “Series B Distribution Amount”).

In the event of a liquidation or dissolution of DFH LLC, the holders of Series B Preferred Units shall have preference over the Company’s membership interest in DFH LLC.

Further, in the event of (i) a sale of substantially all of DFH LLC’s assets or (ii) a merger or reorganization resulting in the members of DFH LLC immediately prior to such transaction no longer beneficially owning at least 50 % of the voting power of DFH LLC, the holders of the Series B Preferred Units may demand redemption of their Series B preferred units at a price equal to the Series B Distribution Amount (less prior distributions on such shares).

The Series B Preferred Units are not convertible into the Company’s common stock.

Series A Convertible Preferred Stock of the Company

On September 29, 2021, the Company filed a Certificate of Designations with the State of Delaware establishing 150,000 shares of Series A Convertible Preferred Stock with an initial liquidation preference of $ 1,000 per share and a par value $ 0.01 per share (the “Convertible Preferred Stock”) and sold 150,000 shares of Convertible Preferred Stock for an aggregate purchase price of $ 150.0 million.

The Company used the proceeds from the sale of the Convertible Preferred Stock to fund a portion of the MHI acquisition (See Note 2 ).

Pursuant to the Certificate of Designations, the Convertible Preferred Stock ranks senior to the Company’s Class A and B common stock with respect to dividends and distributions on liquidation, winding-up and dissolution.

Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive the initial liquidation preference of $ 1,000 per share, subject to adjustment, plus all accrued and unpaid dividends thereon.

In addition, the Convertible Preferred Stock has the following terms:

• Cumulative Dividends:

The Convertible Preferred Stock accumulates cumulative dividends at a rate per annum equal to 9 % payable quarterly in arrears.

The Convertible Preferred Stock is perpetual with call and conversion rights.

The Convertible Preferred Stock is not convertible by the Purchasers in the first five years following issuance, with the exception of the acceleration of the Conversion Right (as defined below) upon breach of the protective covenants (described below).

Subsequent to the fifth anniversary of its issuance, a Purchaser can convert the Convertible Preferred Stock into Class A common stock of the Company (the “Conversion Right”).

• Protective Covenants:

The protective covenants of the Convertible Preferred Stock require the Company to maintain compliance with all covenants related to (i) the Credit Agreement, as may be further amended from time to time;

provided that any amendment, restatement, modification or waiver of the Credit Agreement that would adversely and materially affect the rights of the Purchasers will require the written consent of holders of a majority of the then-outstanding shares of Convertible Preferred Stock;

and (ii) any agreement between the Company and any Purchaser (the covenants referred to in clauses (i) and (ii), collectively, the “Protective Covenants”).

Non-compliance beyond any applicable cure period only with the Protective Covenants related to the Credit Agreement will accelerate the Conversion Right, and in the event of such acceleration that occurs before the fifth anniversary following the issuance of the Convertible Preferred Stock, the “Conversion Discount” shall be increased from 20 % to 25 %.

• Voting Rights:

Except as may be expressly required by Delaware law, the shares of Convertible Preferred Stock have no voting rights.

• Redemption in a Change of Control:

The Convertible Preferred Stock will be redeemed, contingent upon and concurrently with the consummation of a change of control of the Company.

Shares of Convertible Preferred Stock will be redeemed in a change of control of the Company at a price, in cash, equal to the liquidation preference, subject to adjustment, plus all accumulated and unpaid dividends, plus, if the change of control occurs before the fourth anniversary of the date of issuance of the Convertible Preferred Stock, a premium equal to the dividends that would have accumulated on such share of Convertible Preferred Stock from and after the change of control redemption date and through the fourth anniversary of the issuance of the Convertible Preferred Stock.

Pursuant to the terms of the Certificate of Designations, unless and until approval of the Company’s stockholders is obtained, no shares of Class A common stock will be issued or delivered upon conversion of any Convertible Preferred Stock to the extent that such issuance would (i) result in the holder beneficially owning in excess of 19.99 % of the outstanding Class A common stock as of the date of the Certificate of Designations or (ii) exceed 19.99 % of the outstanding shares of Class A and Class B common stock combined as of the date of the Certificate of Designations.

In addition, in connection with the sale of the Convertible Preferred Stock, on September 29, 2021, the Company and the Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company granted the Purchasers certain registration rights.

Under the Registration Rights Agreement, the Company is required to register the Convertible Preferred Stock owned by the Purchasers and the shares of Class A common stoc k issuable upon conversion of such shares equal to 19.99 % of the outstanding shares of Class A common stock for resale, which registration statement was filed and declared effective during March 2022.

Equity-Based Compensation

The Company is authorized to grant up to an aggregate of 9.1 million of stock-based awards under the 2021 Equity Incentive Plan (the “2021 Plan”), which is administered by the Compensation Committee of the Board of Directors.

The Company grants restricted stock to certain executives, directors and members of management, primarily as incentive awards.

These stock grants typically vest over a period of three to five years of continuous service, commencing on the date of the grant and vesting ratably in approximately one-third or one-fifth increments at the end of each year of the term.

The fair value of these grants is derived by using the closing stock price on the date of the grant.

Expense, net of forfeitures related to equity-based compensation under the 2021 Plan was $ 6.8 million and $ 5.2 million for the year ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the total unrecognized compensation expense under the 2021 Plan was $ 11.3 million and $ 16.7 million, respectively.

The unrecognized compensation expense will be recognized over a weighted-average period of two years .

The Company’s restricted stock awards as of December 31, 2022 and changes during the year then ended are presented below (in thousands, except share amounts):

Shares Weighted Average Grant Date Fair Value

Outstanding - December 31, 2021

721,598 $ 16,690

Granted 486,264 8,301

Forfeited ( 76,752 ) ( 1,361 )

Vested ( 238,554 ) ( 5,518 )

Outstanding - December 31, 2022

892,556 $ 18,112

Earnings per Share

The following weighted-average shares and share equivalents were used to calculate basic and diluted earnings per share for the year ended December 31,

The following weighted-average shares and share equivalents were used to calculate basic and diluted earnings per share (“EPS”) for the years ended December 31, 2022, and 2021 (in thousands, except share amounts):

For the Years Ended December 31,

Net and comprehensive income attributable to Dream Finders Homes, Inc.

$ 262,313 $ 121,133

Preferred dividends (1)

( 14,513 ) ( 4,845 )

Loss prior to reorganization attributable to DFH LLC members (2)

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Weighted-average number of shares outstanding - diluted 106,691,248 95,313,593

The Corporate Reorganization created the current

capital structure of DFH, Inc.

(1) For the diluted earnings per share calculation, $ 13.7 million and $ 3.5 million in preferred dividends associated with convertible preferred stock that are assumed to be converted have been added back to the numerator for the year ended December 31, 2022 an d 2021, respectively.

The remaining amounts of preferred dividends that are not added back to the numerator are associated with paid-in-kind dividends for preferred mezzanine equity which is not convertible into the Company’s common stock.

(2) The Company calculated EPS for the year ended December 31, 2021 prospectively for the period subsequent to the Company’s IPO and Corporate Reorganization, based on net income attributable to common stockholders for the period January 21, 2021 through December 31, 2021 over the weighted average shares outstanding for the same period.

Therefore, the net income per share for DFH, Inc.

is not shown for the fiscal years ended December 31, 2020 or 2019.

In addition, the basic and diluted net income per share only includes earnings subsequent to

January 21, 2021, the date of the Corporate Reorganization.

net income per share is calculated by dividing net income attributable to DFH, Inc.

for the period subsequent to the Corporate Reorganization, by the weighted-average number of shares of Class A common stock and Class B common stock outstanding for

The total outstanding shares of common stock are made up of Class A common stock and Class B common stock, which participate equally in their ratable ownership share of the Company.

Diluted net income per share has been calculated in a

manner consistent with that of basic net income per share while giving effect to shares of potentially dilutive restricted stock grants outstanding during the period and the convertible preferred stock.

were no anti-dilutive shares for the year ended December 31, 2021.

Subsequent Events

The Company has evaluated subsequent events through March 16, 2022, the date the financial statements were issued, and

no matters were identified requiring recognition or disclosure in the financial statements, except for events described below.

On October 9, 2019, Silver Meadows Townhome Owners Association, Inc.

filed a lawsuit in Boulder County Colorado District

Court against DFH Mandarin, LLC (“Mandarin”) and Dream Finders Homes, LLC (collectively with Mandarin, “DFH”), both wholly owned subsidiaries of the Company, as well as other named defendants.

The lawsuit alleges certain construction and development

Mandarin successfully compelled arbitration.

On March 2, 2022 during arbitration proceedings, the parties settled the matter for $ 12,000,000

subject to the execution of a mutually acceptable settlement agreement, which will include a denial of any admission of liability on behalf of DFH.

DFH’s insurance carrier agreed to pay the policy limit of $ 4,000,000 toward the settlement.

The settlement payment shall be due no later than May 1, 2022.

DFH will seek contribution toward the settlement amount from subcontractors and

other vendors who performed work on the project.

On January 31, 2021, the Company, through its subsidiaries Dream Finders Holdings LLC, a

Florida limited liability company, and DFH Coventry, LLC, a Florida limited liability company, made a cash payment of $ 35 million for

the assets, rights and properties, and certain liabilities of MHI Models, Ltd., a Texas limited partnership.

The post-close consideration payment completed the asset purchase transaction in relation to the MHI acquisition.

Transaction costs were

not material and were expensed as incurred.

On February 15, 2022, Rockpoint, whose founding principal, William H.

is on the DFH Board of Directors, its Audit Committee and its Compensation Committee, committed $ 100,000,000 to Fund II.

date, DFH also entered into a Memorandum of Right of First Offer with Rockpoint, under which Rockpoint has an exclusive right of first offer on certain land bank financing projects that meet certain criteria and are undertaken by the Company during

Fund II’s investment period.

is not shown for the fiscal year ended December 31, 2020.

Basic earnings per share is calculated by dividing net income available to common stockholders for the period by the weighted-average number of shares of Class A common stock and Class B common stock outstanding for the period, which participate equally in their ratable ownership of the Company.

Diluted shares were calculated by using the treasury stock method for restricted stock grants and the if‐converted method for the convertible preferred stock.

Diluted earnings per share gives effect to shares of potentially dilutive restricted stock grants outstanding during the period and the convertible preferred stock and the associated preferred dividends.

Since the conversion price of the Company’s Convertible Preferred Stock is based on the average trailing 90 days’ closing price of Class A common stock, changes in the price of the Class A common stock may significantly affect, as it did in 2022, the number of additional assumed common shares outstanding under the if-converted method for diluted earnings per share, even when the number of Convertible Preferred Stock shares outstanding is unchanged.

There were no anti-dilutive shares for the years ended December 31, 2022 and 2021.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data