# CaliberCos Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [CaliberCos Inc.](/companies/cwd.md) (CIK 1627282)
- Form: 10-Q
- Filed: 2024-08-14
- Accepted by EDGAR: Aug 14, 2024, 17:07 ET
- Period: 2024-06-30
- Accession: 0001627282-24-000101
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1627282/000162728224000101/cwd-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1627282/000162728224000101/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $1.3m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $2.6m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$4.7m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$8.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.22 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.39 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.22 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.39 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 21,811,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 21,677,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$125.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $1.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-06-30 | $195.2m | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $100.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | −$4.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 80,943 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from these forward-looking statements as a result of certain factors. For a complete discussion of such risk factors, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2024. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in the “Part I - Financial Information,” including the related notes to the consolidated financial statements contained therein.*

### Overview

Over the past 15 years, Caliber has grown into a leading diversified alternative asset management firm, managing more than $2.9 billion in assets under management (“AUM”) and assets under development (“AUD”). Caliber’s primary goal is to enhance the wealth of accredited investors seeking to make investments in middle-market assets. We strive to build wealth for our clients by creating, managing, and servicing middle-market investment funds, private syndications, and direct investments. Through our funds, we invest primarily in real estate, private equity, and debt facilities. We market and fundraise to direct channels and to wholesale channels.

We believe that we provide investors attractive risk-adjusted returns by offering a balance of (i) structured offerings and ease of ownership, (ii) a pipeline of investment opportunities, primarily projects that range in value between $5.0 million and $50.0 million, and (iii) an integrated execution and processing platform. Our investment strategy leverages the local market intelligence and real-time data we gain from our operations to evaluate current investments, generate proprietary transaction flow, and implement various asset management strategies.

As an alternative asset manager, we offer a full suite of support services and employ a vertically integrated approach to investment management. Our asset management activities are complemented with transaction and advisory services including development and construction management, acquisition and disposition expertise, and fund formation, which we believe differentiate us from other asset management firms. We earn the following fees from providing these services under our asset management platform:

- Fund set-up fees are a one-time fee for the initial formation, administration, and set-up of fund products we distribute and manage. These fees are recognized at the point in time when the performance under the contract is complete.
- Fund management fees are generally based on 1.0% to 1.5% of the unreturned capital contributions in a particular fund and include reimbursement for costs incurred on behalf of the fund, including an allocation of certain overhead costs. These customer contracts require the Company to provide management services, representing a performance obligation that the Company satisfies over time. With respect to the Caliber Hospitality Trust, the Company earns a fund management fee of 0.70% of the Caliber Hospitality Trust’s enterprise value and is reimbursed for certain costs incurred on behalf of the Caliber Hospitality Trust.
- Financing fees are earned for services the Company performs in securing third-party financing on behalf of our private equity real estate funds. These fees are recognized at the point in time when the performance under the contract is complete, which is essentially upon closing of a loan. In addition, the Company earns fees for guaranteeing certain loans, representing a performance obligation that the Company satisfies over time.
- Real estate development revenues are generally based on 4.0% of the total expected costs of the development or 4.0% of the total expected costs of the construction project for services performed as the principal developer, which include managing and supervising third-party developers and general contractors with respect to the development of the properties owned by the funds. Prior to the commencement of construction, development fee revenue is recognized at a point in time as the related performance obligations are satisfied and the customer obtains control of the promised service, including negotiation, due diligence, entitlements, planning, and design activities. During the construction period, development fee revenue is recognized over time as the performance obligations are satisfied.
- Brokerage fees are earned at a point in time at fixed rates for services performed related to acquisitions, dispositions, leasing, and financing transactions.
- Performance allocations are an arrangement in which we are entitled to an allocation of investment returns, generated within the investment funds which we manage, based on a contractual formula. We typically receive 15.0% to 35.0%, of all cash distributions from (i) the operating cash flow of each fund, after payment to the related fund investors of any accumulated and unpaid priority preferred returns and repayment of preferred capital contributions; and (ii) the cash flow resulting from the sale or refinance of any real estate assets held by each fund, after payment to the related fund investors of any accumulated and unpaid priority preferred returns and repayment of initial preferred capital contributions. Our funds’ preferred returns range from 6.0% to 12.0%, typically 6.0% for common equity or 10.0% to 12.0% for preferred equity, which does not participate in profits. Performance allocations are related to services which have been provided and are recognized when it is determined that they are no longer probable of significant reversal, which is generally satisfied when an underlying fund investment is realized or sold.

Historically, the Company’s operations were organized into three reportable segments: fund management, development, and brokerage. During the year ended December 31, 2023, the Company reevaluated its reportable segments, considering (i) the evolution of the Company after closing its initial public offering and how the Company’s chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, assesses performance and allocates resources, (ii) changes to the budgeting process and in key personnel driven by the Company’s growth initiatives, and (iii) how management reports ongoing company performance to the Board of Directors. With the evolution and growth of the Company, the Company’s CODM assesses performance and resource allocation on an aggregate basis under the Company’s asset management platform, and no longer reviews operating results for development or brokerage activity separately. As such, management concluded that the Company operates through one operating segment.

The Company’s CODM assesses revenue, operating expenses and key operating statistics to evaluate performance and allocate resources on a basis that eliminates the impact of the consolidated investment funds (intercompany eliminations required by U.S. GAAP) and noncontrolling interests. Management concluded that the consolidated investment funds do not meet the requirements in ASC 280, Segment Reporting, of operating segments, as the Company’s CODM does not review the operating results of these investment funds for the purposes of allocating resources, assessing performance or determining whether additional investments or advances will be made to these funds. The investment funds are consolidated based on the requirement in ASC 810, Consolidation, as the Company was determined to be the primary beneficiary of each of these variable interest entities since it has the power to direct the activities of the entities and the right to absorb losses, generally in the form of guarantees of indebtedness that are significant to the individual investment funds.

Caliber was originally founded as Caliber Companies, LLC, an Arizona limited liability company, organized under the laws of Arizona, and commenced operations in January 2009. In November 2014, the Company was reorganized as a Nevada corporation and in June 2018, we reincorporated in the state of Delaware. On our website we make available, free of charge, information about the Company and its’ investments. None of the information on our website is deemed to be part of this report.

### Trends Affecting Our Business

Our business is driven by trends which affect the following:

1\) **Capital formation:** any trend which increases or decreases investors’ knowledge of alternative investments, desire to acquire them, access to acquire them, and knowledge and appreciation of Caliber as a potential provider, will affect our ability to attract and raise new capital. Capital formation also drives investment acquisitions, which contribute to Caliber’s revenues.

2\) **Investment acquisition:** any trend which increases or decreases the supply of middle-market real estate projects or loans, the accessibility of developments or development incentives, or enhances or detracts from Caliber’s ability to access those projects will affect our ability to generate revenue. Coincidentally, investment acquisitions, or the rights to acquire an investment, drive capital formation – creating a flywheel effect for Caliber.

3\) **Project execution:** any trend which increases or decreases the costs of execution on a real estate project, including materials pricing, labor pricing, access to materials, delays due to governmental action, and the general labor market, will affect Caliber’s ability to generate revenues.

Our business depends in large part on our ability to raise capital for our funds from investors. Since our inception, we have continued to successfully raise capital into our funds with our total capital raised through June 30, 2024 of approximately $691.2 million. Our success at raising new capital into our funds is impacted by the extent to which new investors see alternative assets as a viable option for capital appreciation and/or income generation. Since our ability to raise new capital into our funds is dependent upon the availability and willingness of investors to direct their investment dollars into our products, our financial performance is sensitive in part to changes in overall economic conditions that affect investment behaviors. The demand from investors is dependent upon the type of asset, the type of return it will generate (current cash flow, long-term capital gains, or both) and the actual return earned by our fund investors relative to other comparable or substitute products. General economic factors and conditions, including the general interest rate environment and unemployment rates, may affect an investor’s ability and desire to invest in real estate. For example, a significant interest rate increase could cause a projected rate of return to be insufficient after considering other risk exposures. Additionally, if weakness in the economy emerges and actual or expected default rates increase, investors in our funds may delay or reduce their investments; however, we believe our approach to investing and the capabilities that Caliber manages throughout the deal cycle will continue to offer an attractive value proposition to investors.

In June 2023, the United States of America’s House of Representatives unanimously approved legislation that would increase the number of investors who can participate in private offerings of securities by expanding the accredited investor criteria. The Fair Investment Opportunities for Professional Experts Act would expand the definition of accredited investor to include people with certain licenses, education or professional experience. The Accredited Investor Definition Review Act would give the SEC discretion to determine the certifications, designations or credentials investors must possess to be accredited and directs the SEC to review the accredited investor definition every five years. We believe these government actions will increase the size of our potential investor base significantly, however we cannot yet assess the number of newly accredited investors that would have the ability or interest to invest in a Caliber fund.

While we have had historical successes, there can be no assurance that fundraising for our new and existing funds will experience similar success. If we were unable to raise such capital, we would be unable to deploy such capital into investments, which would materially reduce our revenues and cash flow and adversely affect our financial condition.

We remain confident about our ability to find, identify, and source new investment opportunities that meet the requirements and return profile of our investment funds despite headwinds associated with increased asset valuations, competition and increased overall cost of credit. We continue to identify strategic acquisitions on off-market terms and anticipate that this trend will continue. We are at a point in our investment cycle where some of our funds have begun to exit significant parts of their portfolios while other are approaching a potential harvesting phase. We have complemented these cycles with other newer funds that will maintain management fees while providing continued sources of activity.

In February 2023, we expanded our access to institutional capital by entering into an agreement with Skyway Capital Markets to serve as a managing broker-dealer for our primary investment products. The agreement designates Skyway to assist us to raise capital primarily from third party broker-dealers and registered investment advisors, many of which have an existing business relationship with Skyway. Skyway will assist us in our efforts to hire, train and manage a national wholesaling team, secure selling agreements, and provide appropriate due diligence to advisors distributing our funds. Our current managing broker-dealer will remain engaged with us to supervise and manage our existing private client sales team and to join Skyway as a selling group member.

Acquiring new assets includes being able to negotiate favorable loans on both a short and long-term basis. We strive to forecast and project our returns using assumptions about, among other things, the types of loans that we might expect the market to extend for a particular type of asset. This becomes more complex when the asset also requires construction financing. We may also need to refinance existing loans that are due to mature. Factors that affect these arrangements include the interest rate and economic environment, the estimated fair value of real property, and the profitability of the asset’s historical operations. These capital market conditions may affect the renewal or replacement of our credit agreements, some of which have maturity dates occurring within the next 12 months. Obtaining such financing is not guaranteed and is largely dependent on market conditions and other factors.

The advancement of real estate investment-oriented technology, sometimes referred to as “proptech” offers Caliber the benefit of new and innovative technologies to better execute on capital formation strategies, investment acquisition strategies, and investment management strategies. In recent years, Caliber has added to its technology stack with systems that we believe lead the market in their specific ability to enhance execution on our projects. Several of these technologies seek to incorporate investments in artificial intelligence, which we believe will be a prevailing trend in helping Caliber to enhance its project execution going forward.

Regional conflicts and instability, such as those in Israel and Ukraine, can have significant impacts on global markets and economies and investor perception and tolerance for risk. These conflicts could lead to increased volatility in financial markets, disrupt supply chains, and change investor appetite for investments in alternative assets.

### Business Environment

Global markets are experiencing significant volatility driven by concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty. The annual inflation rate in the United States increased to 9.1% in June 2022, the highest rate since November 1981, but decreased to 3.0% in June 2024. As a result, from January 1, 2022 through July 30, 2024, the Federal Reserve increased the federal funds rate by 525 basis points. The rising interest rates, coupled with periods of significant equity and credit market volatility may potentially make it more difficult for us to find attractive opportunities for our funds to exit and realize value from their existing investments. Historically, inflation has tended to favor new capital formation for Caliber’s funds, as investors seek opportunities that can hedge against rising costs, such as real estate investments. In addition, the increase in interest rates has put pressure on owners of existing real estate to sell assets as their loans mature. Combined with a shrinking pool of buyers, the commercial and residential real estate markets in our favored geographies are moving away from a seller’s market and closer to a buyer’s market. It remains to be seen if a stressed or distressed market may emerge, similar to Caliber’s early years of operations. In both a buyer’s market and a stressed or distressed market, Caliber expects its business model to outperform, as our direct access to investor capital and our ability to invest in a variety of asset classes allows Caliber to move with the market and take advantage of potentially attractive prices. For project execution, inflation has increased the cost of nearly all building materials and labor types, increasing the cost of construction and renovation of our funds’ assets.

### Key Financial Measures and Indicators

Our key financial measures are discussed in the following pages. Additional information regarding these key financial measures and our other significant accounting policies can be found in Note 2 – Summary of Significant Accounting Policies in the notes to our accompanying consolidated financial statements included herein.

### Total Revenue

We generate the majority of our revenue in the form of asset management fee revenues and performance allocations. Included within our consolidated results, are the related revenues of certain consolidated VIEs.

### Total Expenses

Total expenses include operating costs, general and administrative, marketing and advertising and depreciation and amortization. Included within our consolidated results, are the related expenses of consolidated VIEs.

### Other Income (Expenses)

Other income (expenses) include interest expense and interest income.

### Results of Operations

### Comparison of the Consolidated Results of Operations for the Three Months Ended June 30, 2024 and 2023

Our consolidated results of operations are impacted by the timing of consolidation, deconsolidation, and operating performance of our consolidated and previously consolidated funds. Periods presented may not be comparable due to the consolidation or deconsolidation certain funds. In particular, the Company deconsolidated Caliber Hospitality, LP, the Caliber Hospitality Trust, and their consolidated subsidiaries, and Elliot during the six months ended June 30, 2024. The following table and discussion provide insight into our consolidated results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

| Revenues | Three Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Asset management revenues | $3,226 | $1,894 | $1,332 | 70.3% |
| Performance allocations | 16 | 12 | 4 | 33.3% |
| Consolidated funds – hospitality revenues | 2,894 | 16,273 | (13,379) | (82.2)% |
| Consolidated funds – other revenues | 2,043 | 2,266 | (223) | (9.8)% |
| Total revenues | 8,179 | 20,445 | (12,266) | (60.0)% |
| **Expenses** |  |  |  |  |
| Operating costs | 5,535 | 6,820 | (1,285) | (18.8)% |
| General and administrative | 2,079 | 1,426 | 653 | 45.8% |
| Marketing and advertising | 227 | 325 | (98) | (30.2)% |
| Depreciation and amortization | 144 | 137 | 7 | 5.1% |
| Consolidated funds – hospitality expenses | 3,312 | 20,749 | (17,437) | (84.0)% |
| Consolidated funds – other expenses | 1,358 | 1,949 | (591) | (30.3)% |
| Total expenses | 12,655 | 31,406 | (18,751) | (59.7)% |
| Other income, net | 318 | 546 | (228) | (41.8)% |
| Interest income | 157 | 96 | 61 | 63.5% |
| Interest expense | (1,315) | (1,261) | (54) | 4.3% |
| **Net loss before income taxes** | (5,316) | (11,580) | 6,264 | (54.1)% |
| Benefit from income taxes | — | — | — | 0.0% |
| **Net loss** | (5,316) | (11,580) | 6,264 | (54.1)% |
| Net loss attributable to noncontrolling interests | (586) | (5,854) | 5,268 | (90.0)% |
| **Net loss attributable to CaliberCos Inc.** | $(4,730) | $(5,726) | $996 | (17.4)% |

For the three months ended June 30, 2024 and 2023, total revenues were $8.2 million and $20.4 million, respectively, representing a period-over-period decrease of 60.0%, which was primarily due to a decrease in consolidated fund revenues. This decrease was primarily due to the deconsolidation of Caliber Hospitality, LP and the Caliber Hospitality Trust in March 2024 and was partially offset by an increase in asset management revenue due to an increase in fund management revenues. See the Segment Analysis section below in which revenues are presented on a basis that deconsolidates our consolidated funds. As a result, segment revenues are different than those presented on a consolidated basis in accordance with U.S. GAAP basis because these fees are eliminated in consolidation when they are derived from a consolidated fund.

For the three months ended June 30, 2024 and 2023, total expenses were $12.7 million and $31.4 million, respectively, representing a period-over-period decrease of 59.7%. The increase was primarily due to an decrease in consolidated fund expenses which was primarily due to the deconsolidation of Caliber Hospitality, LP and Caliber Hospitality Trust in March 2024.

### Comparison of the Unconsolidated Results of Operations for the Three Months Ended June 30, 2024 and 2023

The following table and discussion provide insight into our unconsolidated results of operations of the asset management platform for the three months ended June 30, 2024 and 2023 (in thousands). Unconsolidated revenues and expenses are presented on a basis that deconsolidates our consolidated funds (intercompany eliminations) and eliminates noncontrolling interest. As a result, unconsolidated revenues are different than those presented on a consolidated basis in accordance with U.S. GAAP because fee revenue is eliminated in consolidation when it is derived from a consolidated fund and due to the exclusion of the fund revenue recognized by the consolidated funds. Furthermore, unconsolidated expenses are also different than those presented on a consolidated U.S. GAAP basis due to the exclusion of fund expenses that are paid by the consolidated funds. See the Non-GAAP Measures section below for reconciliations of the unconsolidated results to the most comparable U.S. GAAP measure.

| Revenues | Three Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Asset management revenues | $4,179 | $3,348 | $831 | 24.8% |
| Performance allocations | 33 | 24 | 9 | 37.5% |
| Total revenues | 4,212 | 3,372 | 840 | 24.9% |
| **Expenses** |  |  |  |  |
| Operating costs | 5,760 | 6,731 | (971) | (14.4)% |
| General and administrative | 2,091 | 1,398 | 693 | 49.6% |
| Marketing and advertising | 227 | 326 | (99) | (30.4)% |
| Depreciation and amortization | 119 | 92 | 27 | 29.3% |
| Total expenses | 8,197 | 8,547 | (350) | (4.1)% |
| Other income, net | 490 | 297 | 193 | 65.0% |
| Interest income | 170 | 497 | (327) | (65.8)% |
| Interest expense | (1,315) | (1,260) | (55) | 4.4% |
| **Net loss before income taxes** | (4,640) | (5,641) | 1,001 | (17.7)% |
| Benefit from income taxes | — | — | — | 0.0% |
| **Net loss** | $(4,640) | $(5,641) | $1,001 | (17.7)% |

For the three months ended June 30, 2024 and 2023, total revenues were $4.2 million and $3.4 million, respectively, representing a period-over-period increase of 24.9%. The table below (in thousands) compares the revenues earned for providing services under the Company’s asset management platform as described in the Revenue Recognition section of Note 2 – Summary of Significant Accounting Policies for the three months ended June 30, 2024 to the revenues earned for the same period in 2023.

|  | Three Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Fund set-up fees | $665 | $9 | $656 | 7,288.9% |
| Fund management fees | 2,665 | 2,369 | 296 | 12.5% |
| Financing fees | 80 | 150 | (70) | (46.7)% |
| Development and construction fees | 328 | 657 | (329) | (50.1)% |
| Brokerage fees | 441 | 163 | 278 | 170.6% |
| Total asset management | 4,179 | 3,348 | 831 | 24.8% |
| Performance allocations | 33 | 24 | 9 | 37.5% |
| Total unconsolidated revenue | $4,212 | $3,372 | $840 | 24.9% |

The increase in fund set-up fees is due to the recognition of revenue earned related to two new fund offerings during the three months ended June 30, 2024.

The increase in fund management fees is related to an increase of managed capital and fees earned from the Caliber Hospitality Trust related to the acquisition of one hotel property. Fund management fees were based on 1.0% to 1.5% of the unreturned capital contributions in each fund and a fund management fee of 0.7% of the Caliber Hospitality Trust’s enterprise value.

The decrease in development and construction fees is primarily due to the completion of three development projects, offset by an increase in construction activities related to one development project.

For the three months ended June 30, 2024 and 2023, total expenses were $8.2 million and $8.5 million, respectively, representing a period-over-period decrease of 4.1%. The decrease was primarily due to a decrease in operating costs due to a decrease in stock compensation expense and a decrease in accrued bonuses, partially offset by an increase in general and administrative expenses due to increased legal and accounting fees.

### Comparison of the Consolidated Results of Operations for the Six Months Ended June 30, 2024 and 2023

Our consolidated results of operations are impacted by the timing of consolidation, deconsolidation, and operating performance of our consolidated and previously consolidated funds. Periods presented may not be comparable due to the consolidation or deconsolidation certain funds. In particular, the Company deconsolidated Caliber Hospitality, LP, the Caliber Hospitality Trust, and their consolidated subsidiaries, and Elliot during the six months ended June 30, 2024. The following table and discussion provide insight into our consolidated results of operations for the six months ended June 30, 2024 and 2023 (in thousands):

| Revenues | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Asset management revenues | $6,396 | $3,930 | $2,466 | 62.7% |
| Performance allocations | 182 | 2,438 | (2,256) | (92.5)% |
| Consolidated funds – hospitality revenues | 21,039 | 39,482 | (18,443) | (46.7)% |
| Consolidated funds – other revenues | 3,513 | 4,117 | (604) | (14.7)% |
| Total revenues | 31,130 | 49,967 | (18,837) | (37.7)% |
| **Expenses** |  |  |  |  |
| Operating costs | 10,797 | 11,324 | (527) | (4.7)% |
| General and administrative | 4,019 | 3,242 | 777 | 24.0% |
| Marketing and advertising | 333 | 678 | (345) | (50.9)% |
| Depreciation and amortization | 290 | 269 | 21 | 7.8% |
| Consolidated funds – hospitality expenses | 20,094 | 41,032 | (20,938) | (51.0)% |
| Consolidated funds – other expenses | 4,430 | 3,874 | 556 | 14.4% |
| Total expenses | 39,963 | 60,419 | (20,456) | (33.9)% |
| Other income, net | 590 | 1,065 | (475) | 44.6% |
| Interest income | 274 | 194 | 80 | 41.2% |
| Interest expense | (2,609) | (2,092) | (517) | 24.7% |
| **Net loss before income taxes** | (10,578) | (11,285) | 707 | (6.3)% |
| Benefit from income taxes | — | — | — | 0.0% |
| **Net loss** | (10,578) | (11,285) | 707 | (6.3)% |
| Net loss attributable to noncontrolling interests | (2,043) | (4,352) | 2,309 | (53.1)% |
| **Net loss attributable to CaliberCos Inc.** | $(8,535) | $(6,933) | $(1,602) | 23.1% |

For the six months ended June 30, 2024 and 2023, total revenues were $31.1 million and $50.0 million, respectively, representing a period-over-period decrease of 37.7%, which was primarily due to a decrease in consolidated fund revenues. This decrease was primarily due to the deconsolidation of Caliber Hospitality, LP and the Caliber Hospitality Trust in March 2024. See the Segment Analysis section below in which revenues are presented on a basis that deconsolidates our consolidated funds. As a result, segment revenues are different than those presented on a consolidated basis in accordance with U.S. GAAP basis because these fees are eliminated in consolidation when they are derived from a consolidated fund.

For the six months ended June 30, 2024 and 2023, total expenses were $40.0 million and $60.4 million, respectively, representing a period-over-period decrease of 33.9%. The increase was primarily due to an decrease in consolidated fund expenses which was primarily due to the deconsolidation of Caliber Hospitality, LP and Caliber Hospitality Trust in March 2024.

### Comparison of the Unconsolidated Results of Operations for the Six Months Ended June 30, 2024 and 2023

The following table and discussion provide insight into our unconsolidated results of operations of the asset management platform for the six months ended June 30, 2024 and 2023 (in thousands).

| Revenues | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Asset management revenues | $8,734 | $7,273 | $1,461 | 20.1% |
| Performance allocations | 204 | 2,450 | (2,246) | (91.7)% |
| Total revenues | 8,938 | 9,723 | (785) | (8.1)% |
| **Expenses** |  |  |  |  |
| Operating costs | 11,244 | 11,188 | 56 | 0.5% |
| General and administrative | 4,040 | 3,008 | 1,032 | 34.3% |
| Marketing and advertising | 333 | 679 | (346) | (51.0)% |
| Depreciation and amortization | 302 | 124 | 178 | 143.5% |
| Total expenses | 15,919 | 14,999 | 920 | 6.1% |
| Other income, net | 942 | 145 | 797 | 549.7% |
| Interest income | 455 | 749 | (294) | (39.3)% |
| Interest expense | (2,610) | (2,092) | (518) | 24.8% |
| **Net loss before income taxes** | (8,194) | (6,474) | (1,720) | 26.6% |
| Benefit from income taxes | — | — | — | 0.0% |
| **Net loss** | $(8,194) | $(6,474) | $(1,720) | 26.6% |

For the six months ended June 30, 2024 and 2023, total revenues were $8.9 million and $9.7 million, respectively, representing a period-over-period decrease of 8.1%. The table below (in thousands) compares the revenues earned for providing services under the Company’s asset management platform as described in the Revenue Recognition section of Note 2 – Summary of Significant Accounting Policies for the six months ended June 30, 2024 to the revenues earned for the same period in 2023.

|  | Six Months Ended June 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Fund set-up fees | $671 | $72 | $599 | 831.9% |
| Fund management fees | 5,228 | 4,679 | 549 | 11.7% |
| Financing fees | 152 | 477 | (325) | (68.1)% |
| Development and construction fees | 1,982 | 1,612 | 370 | 23.0% |
| Brokerage fees | 701 | 433 | 268 | 61.9% |
| Total asset management | 8,734 | 7,273 | 1,461 | 20.1% |
| Performance allocations | 204 | 2,450 | (2,246) | (91.7)% |
| Total unconsolidated revenue | $8,938 | $9,723 | $(785) | (8.1)% |

The increase in fund set-up fees is due to the recognition of revenue earned related to two new fund offerings during the six months ended June 30, 2024.

The increase in fund management fees is related to an increase of managed capital and fees earned from the Caliber Hospitality Trust related to the acquisition of one hotel property. Fund management fees were based on 1.0% to 1.5% of the unreturned capital contributions in each fund and a fund management fee of 0.7% of the Caliber Hospitality Trust’s enterprise value.

The decrease in performance allocations is is due to the carried interest earned related to the contribution of the hospitality assets to Caliber Hospitality, LP in March 2023.

For the six months ended June 30, 2024 and 2023, total expenses were $15.9 million and $15.0 million, respectively, representing a period-over-period increase of 6.1%. The increase was primarily due to an increase in general and administrative expenses related to software expense, legal and accounting fees and investor and public relations expenses.

Other income, net was $0.9 million for the six months ended June 30, 2024, as compared to $0.1 million for the six months ended June 30, 2023. The increase is primarily due to an increase in rental and reimbursement revenue from space leased at the Company’s corporate headquarters.

For the six months ended June 30, 2024 and 2023, interest expense was $2.6 million and $2.1 million, respectively. The increase was primarily due to the increase in the weighted average corporate notes outstanding during the six months ended June 30, 2024, as compared to the same period in 2023.

### Investment Valuations

The investments that are held by our funds are generally considered to be illiquid and have no readily ascertainable market value. We value these investments based on our estimate of their fair value as of the date of determination. We estimate the fair value of our fund’s investments based on several inputs built within forecasting models. The models generally rely on discounted cash flow analysis and other techniques and may include independently sourced market parameters. The material estimates and assumptions used in these models include the timing and expected amounts of cash flows, income and expenses for the property, the appropriateness of discount rates used, overall capitalization rate, and, in some cases, the ability to execute, estimated proceeds and timing of expected sales and financings. Most of our assets utilize the income approach to value the property. Where appropriate, management may obtain additional supporting evidence of values from methods generally utilized in the real estate investment industry, such as appraisal reports and broker price opinion reports.

With respect to the underlying factors that led to the change in fair value in the current year, we identify assets that are undervalued and/or underperforming as part of our acquisition strategy. Such assets generally undergo some form of repositioning soon after our acquisition to help drive increased appreciation and operating performance. Once the repositioning is complete, we focus on increasing the asset’s net operating income, thereby further increasing the value of the asset. By making these below-market acquisitions, adding value through development activities, and increasing free cash flow with proper management all represent a material component to our core business model.

A unique feature of Caliber’s funds is the discretion given to Caliber’s management team to decide when to sell assets and when to hold them. We believe this discretion allows Caliber to avoid selling properties that, while their business plan may have matured, the market will not pay an attractive price in the current environment. Avoiding selling at a time of disruption, such as all of 2020, is critical to preserving the value of our assets, our carried interest, our ongoing revenues, and our clients’ capital. While this is management’s expectation, there can be no assurance these outcomes will occur.

### Assets Under Management

AUM refers to the assets we manage or sponsor. We monitor two types of information regarding our AUM:

i. Managed Capital – we define this as the total capital we fundraise from our customers as investments in our funds. It also includes fundraising into our corporate note program, the proceeds of which were used, in part, to invest in or loan to our funds. We use this information to monitor, among other things, the amount of ‘preferred return’ that would be paid at the time of a distribution and the potential to earn a performance fee over and above the preferred return at the time of the distribution. Our fund management fees are based on a percentage of managed capital or a percentage of assets under management, and monitoring the change and composition of managed capital provides relevant data points for Caliber management to further calculate and predict future earnings.

ii. Fair Value (“FV”) AUM – we define this as the aggregate fair value of the real estate assets we manage and from which we derive management fees, performance revenues and other fees and expense reimbursements. We estimate the value of these assets quarterly to help make sale and hold decisions and to evaluate whether an existing asset would benefit from refinancing or recapitalization. This also gives us insight into the value of our carried interest at any point in time. We also utilize FV AUM to predict the percentage of our portfolio which may need development services in a given year, fund management services (such as refinance), and brokerage services. As we control the decision to hire for these services, our service income is generally predictable based upon our current portfolio AUM and our expectations for AUM growth in the year forecasted. As of June 30, 2024, we had total FV AUM of approximately $773.2 million.

Although we believe we are utilizing generally accepted methodologies for our calculation of Managed Capital and FV AUM, it may differ from our competitors, thereby making these metrics non-comparable to our competitors.

### Managed Capital

The table below summarizes the activity of the managed capital for the six months ended June 30, 2024 (in thousands):

|  | Managed Capital |
| --- | ---: |
| Balance as of December 31, 2023 | $437,625 |
| Originations | 19,099 |
| Redemptions | (2,819) |
| Balance as of March 31, 2024 | $453,905 |
| Originations | 18,936 |
| Redemptions | (3,041) |
| Balance as of June 30, 2024 | $469,800 |

The following table summarizes managed capital for our investment fund portfolios as of June 30, 2024 and December 31, 2023 (in thousands):

| Real Estate | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Hospitality | $43,660 | $43,660 |
| Caliber Hospitality Trust(1) | 95,817 | 70,747 |
| Residential | 89,713 | 74,224 |
| Commercial | 161,697 | 155,004 |
| Total Real Estate(2) | 390,887 | 343,635 |
| Credit(3) | 70,972 | 84,588 |
| Other(4) | 7,941 | 9,402 |
| Total | $469,800 | $437,625 |

(1) The Company earns a fund management fee of 0.70% of the Caliber Hospitality Trust’s enterprise value and is reimbursed for certain costs incurred on behalf of the Caliber Hospitality Trust.

(2) Beginning during the year ended December 31, 2023, the Company includes capital raised from investors in CaliberCos Inc. through corporate note issuances that was further invested in our funds in Managed Capital. As of June 30, 2024 and December 31, 2023, the Company had invested $18.8 million and $18.3 million, respectively, in our funds.

(3) Credit managed capital represents loans made to Caliber’s investment funds by the Company and our diversified funds. As of June 30, 2024 and December 31, 2023, the Company had loaned $1.1 million and $8.5 million to our funds.

(4) Other managed capital represents undeployed capital held in our diversified funds.

Managed capital for the Caliber Hospitality Trust increased by $25.1 million during the six months ended June 30, 2024, primarily representing: the issuance of $9.6 million of Caliber Hospitality, LP operating partnership units in exchange for the contribution of a hotel from L.T.D. on March 7, 2024 (the first of nine committed hotels from L.T.D.’s portfolio) and $15.5 million of investments in Caliber Hospitality Trusts’s non-voting preferred stock.

Managed capital for our residential investment funds increased by $15.5 million during the six months ended June 30, 2024, representing: (i) $6.6 million in capital raised into our residential assets offset by $0.9 million of redemptions, and (ii) $9.8 million contributed by our diversified funds.

Managed capital for our commercial investment funds increased $6.7 million during the six months ended June 30, 2024, representing: (i) $6.4 million in capital raised into our commercial assets, offset by $2.4 million of redemptions to support one commercial ground-up build and acquisition in Arizona and two commercial ground-up builds and acquisitions in Colorado and (ii) $5.0 million contributed by our diversified funds offset by $2.5 million return of capital to support seven commercial ground-up builds and acquisitions in Arizona. The scope of investments included tenant improvements, land development, and acquiring existing operating commercial properties.

During the six months ended June 30, 2024, our diversified funds deployed $10.9 million into our various real estate investments, which was offset by $17.1 million of repayments of outstanding notes receivable. The Company deployed $0.1 million directly into real estate investments in the form of notes receivable, which was offset by $7.5 million of repayments of outstanding notes receivable.

As of June 30, 2024, we held $7.9 million of other managed capital, which included a $3.2 million private equity investment in a local start-up business and $4.7 million of undeployed cash and pursuit costs, compared to $9.4 million of other managed capital, which included a $3.2 million private equity investment in a local start-up business and $6.2 million of undeployed cash and pursuit costs held as of December 31, 2023.

### FV AUM

Our FV AUM increased primarily due to the L.T.D. hotel contribution into the Caliber Hospitality Trust. The table below details the activities that had an impact on our FV AUM, during the six months ended June 30, 2024 (in thousands).

|  |  |
| --- | ---: |
| Balances as of December 31, 2023 | $741,190 |
| CHT contribution | 29,900 |
| Construction and net market appreciation | 10,971 |
| Assets sold(1) | (12,771) |
| Credit(2) | (781) |
| Other(3) | (1,771) |
| Balances as of March 31, 2024 | 766,738 |
| Assets acquired(4) | 14,000 |
| Construction and net market appreciation | 27,994 |
| Assets sold or disposed(1) | (22,994) |
| Credit(2) | (12,835) |
| Other(3) | 310 |
| Balances as of June 30, 2023 | $773,213 |

The following table summarizes FV AUM of our investment fund portfolios as of June 30, 2024 and December 31, 2023 (in thousands):

| Real Estate | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Hospitality | $68,000 | $67,200 |
| Caliber Hospitality Trust | 234,300 | 201,600 |
| Residential | 140,700 | 138,000 |
| Commercial | 251,300 | 240,400 |
| Total Real Estate | 694,300 | 647,200 |
| Credit(3) | 70,972 | 84,588 |
| Other(4) | 7,941 | 9,402 |
| Total | $773,213 | $741,190 |

(1) Assets sold during the six months ended June 30, 2024 include a commercial asset, lot sales related to two development assets in Colorado, and one home from our residential fund.

(2) Credit FV AUM represents loans made to Caliber’s investment funds by our diversified credit fund.

(3) Other FV AUM represents undeployed capital held in our diversified funds.

(4) Assets acquired during the six months ended June 30, 2024 include land for one commercial asset in Colorado.

### Assets Under Development

We have a number of development, redevelopment, construction, and entitlement projects that are underway or are in the planning stages, which we define as AUD. This category includes projects to be built on undeveloped land and projects to be built and constructed on undeveloped lands, which are not yet owned by our funds. Completing these development activities may ultimately result in income-producing assets, assets we may sell to third parties, or both. As of June 30, 2024, we are actively developing 1,940 multifamily units, 1,942 single family units, 2.6 million square feet of commercial and industrial, and 0.8 million square feet of office and retail. If all of these projects are brought to completion, the total cost capitalized to these projects, which represents total current estimated costs to complete the development and construction of such projects by us or a third party, is $2.1 billion, which we expect would be funded through a combination of undeployed fund cash, third-party equity, project sales, tax credit financing and similar incentives, and secured debt financing. We are under no obligation to complete these projects and may dispose of any such assets at any time. There can be no assurance that AUD will ultimately be developed or constructed because of the nature of the cost of the approval and development process and market demand for a particular use. In addition, the mix of residential and commercial assets under development may change prior to final development. The development of these assets will require significant additional financing or other sources of funding, which may not be available.

### Non-GAAP Measures

We use non-GAAP financial measures to evaluate operating performance, identify trends, formulate financial projections, make strategic decisions, and for other discretionary purposes. We believe that these measures enhance the understanding of ongoing operations and comparability of current results to prior periods and may be useful for investors to analyze our financial performance because they provides investors a view of the performance attributable to CaliberCos Inc. When analyzing our operating performance, investors should use these measures in addition to, and not as an alternative for, their most directly comparable financial measure calculated and presented in accordance with U.S. GAAP. Our presentation of non-GAAP measures may not be comparable to similarly identified measures of other companies because not all companies use the same calculations. These measures may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which amounts are further adjusted to reflect certain other cash and non-cash charges and are used by us to determine compliance with financial covenants therein and our ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

### Fee-Related Earnings and Related Components

Fee-Related Earnings is a supplemental non-GAAP performance measure used to assess our ability to generate profits from fee-based revenues, focusing on whether our core revenue streams, are sufficient to cover our core operating expenses. Fee-Related Earnings represents the Company’s net income (loss) before income taxes adjusted to exclude depreciation and amortization, stock-based compensation, interest expense and extraordinary or non-recurring revenue and expenses, including performance allocation revenue and gain (loss) on extinguishment of debt, public registration direct costs related to aborted or delayed offerings and our Reg A+ offering, the share repurchase costs related to the Company’s Buyback Program, litigation settlements, and expenses recorded to earnings relating to investment deals which were abandoned or closed. Fee-Related Earnings is presented on a basis that deconsolidates our consolidated funds (intercompany eliminations) and eliminates noncontrolling interest. Eliminating the impact of consolidated funds and noncontrolling interest provides investors a view of the performance attributable to CaliberCos Inc. and is consistent with performance models and analysis used by management.

### Distributable Earnings

Distributable Earnings is a supplemental non-GAAP performance measure equal to Fee-Related Earnings plus performance allocation revenue and less interest expenses and provision for income taxes. We believe that Distributable Earnings can be useful as a supplemental performance measure to our GAAP results assessing the amount of earnings available for distribution.

### Caliber Adjusted EBITDA

Caliber Adjusted EBITDA represents the Company’s Distributable Earnings adjusted for interest expense, the share repurchase costs related to the Company’s Buyback Program, other income (expense), and provision for income taxes on a basis that deconsolidates our consolidated funds (intercompany eliminations) and eliminates noncontrolling interest. Eliminating the impact of consolidated funds and noncontrolling interest provides investors a view of the performance attributable to CaliberCos Inc. and is consistent with performance models and analysis used by management.

### Consolidated Adjusted EBITDA

Consolidated Adjusted EBITDA represents the Company’s and the consolidated funds’ earnings before net interest expense, income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, transaction fees, expenses and other public registration direct costs related to aborted or delayed offerings and our Reg A+ offering, the share repurchase costs related to the Company’s Buyback Program, litigation settlements, expenses recorded to earnings relating to investment deals which were abandoned or closed, any other non-cash expenses or losses, as further adjusted for extraordinary or non-recurring items.

The following table presents a reconciliation of net (loss) income attributable to CaliberCos Inc. to Fee-Related Earnings, Distributable Earnings, Caliber Adjusted EBITDA, and Consolidated Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023 (in thousands):

| 2024 | Three Months Ended June 30, 2023 | 2024 | Six Months Ended June 30, 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| **Net loss attributable to CaliberCos Inc.** | $(4,730) | $(5,726) | $(8,535) | $(6,933) |
| Net loss attributable to noncontrolling interests | (586) | (5,854) | (2,043) | (4,352) |
| **Net loss** | (5,316) | (11,580) | (10,578) | (11,285) |
| Provision for income taxes | — | — | — | — |
| **Net loss before income taxes** | (5,316) | (11,580) | (10,578) | (11,285) |
| Depreciation and amortization | 119 | 137 | 302 | 269 |
| Consolidated funds’ impact on fee-related earnings | 491 | 5,781 | 1,852 | 5,176 |
| Stock-based compensation | 584 | 1,922 | 984 | 2,624 |
| Severance | 171 | — | 178 | 13 |
| Performance allocations | (16) | (12) | (182) | (2,438) |
| Other income, net | (318) | (546) | (590) | (1,065) |
| Interest expense, net | 1,145 | 763 | 2,155 | 1,343 |
| **Fee-Related Earnings** | (3,140) | (3,535) | (5,879) | (5,363) |
| Performance allocations | 16 | 12 | 182 | 2,438 |
| Interest expense, net | (1,145) | (763) | (2,155) | (1,343) |
| Provision for income taxes | — | — | — | — |
| **Distributable Earnings** | (4,269) | (4,286) | (7,852) | (4,268) |
| Interest expense | 1,315 | 1,261 | 2,609 | 2,092 |
| Share buy-back | — | — | — | 183 |
| Other income, net | 318 | 546 | 590 | 1,065 |
| Consolidated funds’ impact on Caliber Adjusted EBITDA | 185 | 152 | 533 | (365) |
| **Caliber Adjusted EBITDA** | (2,451) | (2,327) | (4,120) | (1,293) |
| Consolidated funds' EBITDA Adjustments | 1,485 | 1,070 | 5,341 | 8,121 |
| **Consolidated Adjusted EBITDA** | $(966) | $(1,257) | $1,221 | $6,828 |

52

The following tables present a reconciliation of unconsolidated revenues, expenses and net income to the most comparable GAAP measure for the three and six months ended June 30, 2024 and 2023 (in thousands):

| Revenues | Three Months Ended June 30, 2024 Unconsolidated | Impact of Consolidated Funds | Consolidated |
| --- | ---: | ---: | ---: |
| Asset management | $4,179 | $(953) | $3,226 |
| Performance allocations | 33 | (17) | 16 |
| Consolidated funds – hospitality revenue | — | 2,894 | 2,894 |
| Consolidated funds – other revenue | — | 2,043 | 2,043 |
| Total revenues | 4,212 | 3,967 | 8,179 |
| **Expenses** |  |  |  |
| Operating costs | 5,760 | (225) | $5,535 |
| General and administrative | 2,091 | (12) | 2,079 |
| Marketing and advertising | 227 | — | 227 |
| Depreciation and amortization | 119 | 25 | 144 |
| Consolidated funds – hospitality expenses | — | 3,312 | 3,312 |
| Consolidated funds – other expenses | — | 1,358 | 1,358 |
| Total expenses | 8,197 | 4,458 | 12,655 |
| Other income (loss), net | 490 | (172) | $318 |
| Interest income | 170 | (13) | 157 |
| Interest expense | (1,315) | — | (1,315) |
| **Net loss before income taxes** | (4,640) | (676) | (5,316) |
| Provision for income taxes | — | — | — |
| **Net loss** | (4,640) | (676) | (5,316) |
| Net loss attributable to noncontrolling interests | — | (586) | (586) |
| **Net loss attributable to CaliberCos Inc.** | $(4,640) | $(90) | $(4,730) |

53

| Revenues | Six Months Ended June 30, 2024 Unconsolidated | Impact of Consolidated Funds | Consolidated |
| --- | ---: | ---: | ---: |
| Asset management | $8,734 | $(2,338) | $6,396 |
| Performance allocations | 204 | (22) | 182 |
| Consolidated funds – hospitality revenue | — | 21,039 | 21,039 |
| Consolidated funds – other revenue | — | 3,513 | 3,513 |
| Total revenues | 8,938 | 22,192 | 31,130 |
| **Expenses** |  |  |  |
| Operating costs | 11,244 | (447) | $10,797 |
| General and administrative | 4,040 | (21) | 4,019 |
| Marketing and advertising | 333 | — | 333 |
| Depreciation and amortization | 302 | (12) | 290 |
| Consolidated funds – hospitality expenses | — | 20,094 | 20,094 |
| Consolidated funds – other expenses | — | 4,430 | 4,430 |
| Total expenses | 15,919 | 24,044 | 39,963 |
| Other income (loss), net | 942 | (352) | $590 |
| Interest income | 455 | (181) | 274 |
| Interest expense | (2,610) | 1 | (2,609) |
| **Net loss before income taxes** | (8,194) | (2,384) | (10,578) |
| Provision for income taxes | — | — | — |
| **Net loss** | (8,194) | (2,384) | (10,578) |
| Net loss attributable to noncontrolling interests | — | (2,043) | (2,043) |
| **Net loss attributable to CaliberCos Inc.** | $(8,194) | $(341) | $(8,535) |

54

| Revenues | Three Months Ended June 30, 2023 Unconsolidated | Impact of Consolidated Funds | Consolidated |
| --- | ---: | ---: | ---: |
| Asset management | $3,348 | $(1,454) | $1,894 |
| Performance allocations | 24 | (12) | 12 |
| Consolidated funds – hospitality revenue | — | 16,273 | 16,273 |
| Consolidated funds – other revenue | — | 2,266 | 2,266 |
| Total revenues | 3,372 | 17,073 | 20,445 |
| **Expenses** |  |  |  |
| Operating costs | 6,731 | 89 | 6,820 |
| General and administrative | 1,398 | 28 | 1,426 |
| Marketing and advertising | 326 | (1) | 325 |
| Depreciation and amortization | 92 | 45 | 137 |
| Consolidated funds – hospitality expenses | — | 20,749 | 20,749 |
| Consolidated funds – other expenses | — | 1,949 | 1,949 |
| Total expenses | 8,547 | 22,859 | 31,406 |
| Other income, net | 297 | 249 | 546 |
| Interest income | 497 | (401) | 96 |
| Interest expense | (1,260) | (1) | (1,261) |
| **Net loss before income taxes** | (5,641) | (5,939) | (11,580) |
| Provision for income taxes | — | — | — |
| **Net loss** | (5,641) | (5,939) | (11,580) |
| Net loss attributable to noncontrolling interests | — | (5,854) | (5,854) |
| **Net loss attributable to CaliberCos Inc.** | $(5,641) | $(85) | $(5,726) |

55

| Revenues | Six Months Ended June 30, 2023 Unconsolidated | Impact of Consolidated Funds | Consolidated |
| --- | ---: | ---: | ---: |
| Asset management | $7,273 | $(3,343) | $3,930 |
| Performance allocations | 2,450 | (12) | 2,438 |
| Consolidated funds – hospitality revenue | — | 39,482 | 39,482 |
| Consolidated funds – other revenue | — | 4,117 | 4,117 |
| Total revenues | 9,723 | 40,244 | 49,967 |
| **Expenses** |  |  |  |
| Operating costs | 11,188 | 136 | 11,324 |
| General and administrative | 3,008 | 234 | 3,242 |
| Marketing and advertising | 679 | (1) | 678 |
| Depreciation and amortization | 124 | 145 | 269 |
| Consolidated funds – hospitality expenses | — | 41,032 | 41,032 |
| Consolidated funds – other expenses | — | 3,874 | 3,874 |
| Total expenses | 14,999 | 45,420 | 60,419 |
| Other income, net | 145 | 920 | 1,065 |
| Interest income | 749 | (555) | 194 |
| Interest expense | (2,092) | — | (2,092) |
| **Net loss before income taxes** | (6,474) | (4,811) | (11,285) |
| Provision for income taxes | — | — | — |
| **Net loss** | (6,474) | (4,811) | (11,285) |
| Net loss attributable to noncontrolling interests | — | (4,352) | (4,352) |
| **Net loss attributable to CaliberCos Inc.** | $(6,474) | $(459) | $(6,933) |

### Liquidity and Capital Resources

At June 30, 2024, the Company had a portfolio of corporate notes, whose composition and characteristics are similar to those reported in prior fiscal periods. At June 30, 2024, the portfolio consists of 213 unsecured notes with an aggregate principal balance of $33.6 million, of which $31.2 million mature within the 12-month period subsequent to August 14, 2024. Each note generally has a 12-month term with an option to extend for an additional 12-month term.

Because the Company incurred operating losses and negative cash flow from operations for the six months ended June 30, 2024, and could experience additional future operating losses and negative cash flow in the near term, combined with the fact that the Company does not have sufficient cash on hand to satisfy the total of the notes that mature within the next 12 months, these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In response to these conditions, management considered the impact of these near-term maturities on the Company.

Since the note program began, these notes have demonstrated a high rate of extension of their terms. Subsequent to the issuance of its 2023 10-K, the Company has continued its discussions with various lenders in pursuit of extending or refinancing its unsecured loans. Through June 30, 2024, the rate of extension of the current notes is consistent with or greater than prior reported fiscal periods. Management plans to continue seeking and granting extensions on an ongoing basis consistent with prior reported fiscal periods.

Additionally, management evaluated the impact a default of one or many of these notes might have on the Company. As these notes are unsecured, the terms in the agreements do not afford the note holder avenues of recourse in a default that could or would impact the Company adversely in the normal course of business, as the terms lack provisions for rights or claims against the Company’s assets, nor is there a scenario where a default could force liquidation of the Company. Management believes that even in the event of default of one or many of these notes, the Company would be able to negotiate a waiver of the default either through an extension of the maturity or principal repayment schedule.

In addition, management has implemented various plans to address operating losses and near-term maturities or demands for repayment of its notes. Consistent with reported actions taken in prior fiscal periods, management plans to continue to i) negotiate extensions of such loans or refinance such debt, ii) obtain new financing, iii) reduce operating costs, iv) collect all or part of its $14.8 million in receivables, v) collect all or part of its $18.8 million investments from its managed funds, vi) increase capital raise through continued expansion of fundraising channels, vii) sell or accept investment into its corporate headquarters, viii) place debt on unencumbered assets, and/or ix) generate planned cash from operations.

In the execution of our aforementioned plans, during the six months ended June 30, 2024, we collected $7.3 million of notes receivable and $2.2 million of accounts receivable. The Company also executed a reduction in force of approximately 10% of its employees in May 2024, with an expected annual saving of compensation and benefits expenses of $4.0 million. The Company has also executed on cost reduction plans with estimated annual savings of $2.5 million.

After consideration of the implemented and planned actions, in particular continuing to renew maturing unsecured corporate notes, there are no assurances that management’s actions will alleviate substantial doubt about the company’s ability to continue as a going concern beyond one year from the date that the condensed consolidated financial statements are issued.

Each of our funds and the related assets that are acquired or own equity interest in those funds are established as separate legal entities with limited liability. Therefore, the cash flows generated by these entities, whether through operations or financing, are unavailable for general corporate purposes, except as payment to the Company for services performed by the Company.

We have historically financed our operations primarily through a combination of operating cash flows, private offerings of our equity securities, and secured and unsecured debt. In addition, due to the consolidation of CFIF III, we recognize a revolving line of credit with a maximum borrowing amount of $4.5 million.

We hold our excess unrestricted cash in bank accounts with several high-quality financial institutions.

### Corporate Debt

As of June 30, 2024, we have issued and outstanding unsecured promissory notes of $33.6 million with an average outstanding principal balance of $0.2 million, a weighted average interest rate of 11.38%, and maturity dates ranging from January 2024 to April 2026. The purpose of this financing program is to provide the Company with flexible, short-term capital to be used to grow its assets under management and assist funds in a fast-moving acquisition or investment, as well as general corporate purposes. Additionally, the program provides customers of Caliber’s funds access to a short-term lending opportunity. Management actively manages each relationship to determine if the respective customer would like to redeem upon maturity or extend for an additional period of time. Management has historically been successful at extending these note programs and, as a result, continues to expect similar outcomes. This outstanding debt resulted in $1.0 million and $2.1 million of interest expense for the three and six months ended June 30, 2024, respectively, and $1.0 million and $1.7 million of interest expense for the three and six months ended June 30, 2023, respectively.

### Cash Flows Analysis

The section below discusses in more detail the Company’s primary sources and uses of cash and primary drivers of cash flows within the Company’s consolidated statements of cash flows (in thousands).

| 2024 Net cash provided by (used in): | Six Months Ended June 30, 2023 | $ Change |  |
| --- | ---: | ---: | ---: |
| Operating activities | $(125) | $(3,459) | $3,334 |
| Investing activities | (15,508) | (42,920) | 27,412 |
| Financing activities | 2,548 | 51,857 | (49,309) |
| **Net change in cash and cash equivalents** | **$(13,085)** | **$5,478** | **$(18,563)** |

57

The assets of our consolidated funds, on a gross basis, can be substantially larger than the assets of our core business and, accordingly could have a substantial effect on the accompanying statements of cash flows. The table below summarizes our consolidated statements of cash flow by activity attributable to the Company and to our consolidated funds (in thousands).

| 2024 | Six Months Ended June 30, 2023 | $ Change |  |
| --- | ---: | ---: | ---: |
| Net cash used in the Company's operating activities | $(3,868) | $(1,101) | $(2,767) |
| Net cash provided by (used in) the consolidated funds' operating activities | 3,743 | (2,358) | 6,101 |
| Net cash used in the Company's operating activities | **(125)** | **(3,459)** | **3,334** |
| Net cash provided by (used in) the Company's investing activities | 5,458 | (20,189) | 25,647 |
| Net cash used in the consolidated funds' investing activities | (20,966) | (22,731) | 1,765 |
| Net cash used in the Company's investing activities | **(15,508)** | **(42,920)** | **27,412** |
| Net cash (used in) provided by the Company's financing activities | (3,657) | 43,026 | (46,683) |
| Net cash provided by the consolidated funds' financing activities | 6,205 | 8,831 | (2,626) |
| Net cash provided by the Company's financing activities | **2,548** | **51,857** | **(49,309)** |
| **Net change in cash and cash equivalents** | **$(13,085)** | **$5,478** | **$(18,563)** |

#### Operating Activities

Our net cash flows from operating activities are generally comprised of asset management revenues and performance allocations, less cash used for operating expenses, including interest paid on our debt obligations. Net cash flows used in operating activities of the Company increased during the six months ended June 30, 2024 as compared to the same period in 2023. The increase primarily related to increased interest payments related to the Company’s corporate notes during the six months ended June 30, 2024 as compared to the same period in 2023. Net cash flows provided by operating activities of the consolidated funds increased from the six months ended June 30, 2024, as compared to net cash flows used in operating activities of the consolidated funds during the same period in 2023. The increase was primarily due to increased interest payments related to the consolidated funds notes payable and the consolidation and deconsolidation of VIEs.

#### Investing Activities

Net cash flows provided by investing activities of the Company increased during the six months ended June 30, 2024 as compared to the net cash flows used in investing activities of the Company for the same period in 2023. The increase primarily relates to an decrease in the acquisition of real estate assets. The decrease in net cash flows used in investing activities of the consolidated funds during the six months ended June 30, 2024 as compared to the same period in 2023 is primarily due to the consolidation and deconsolidation of VIEs, offset by a decrease in the acquisition of and investment in real estate assets and an increase in the net proceeds from notes receivable - related parties.

#### Financing Activities

Net cash flows used in financing activities of the Company increased during the six months ended June 30, 2024 as compared to the net cash flows provided by financing activities of the Company for the same period in 2023. The increase was primarily due to an decrease of $41.9 million of proceeds on notes payable. The decrease in net cash flows provided by financing activities of the consolidated funds during the six months ended June 30, 2024 as compared to the same period in 2023 is primarily due to a decrease in contributions from noncontrolling interest holders of $2.6 million during the six months ended June 30, 2024 as compared to the same period in 2023.

### Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in adverse ways, and those estimates could be different under different assumptions or conditions.

### Accounting Estimates of the Company

We believe the following critical accounting policies affect the Company’s more significant estimates and judgements used in the preparation of our consolidated financial statements.

### Revenue Recognition

In accordance with the Accounting Standards Codification (“ASC”) 606, *Revenue from Contracts with Customers (“*ASC 606”), management applies the five-step framework in determining the timing and amount of revenue to recognize. This framework requires an entity to: (i) identify the contract(s) with customers, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract, and (v) recognize revenue when or as the entity satisfies a performance obligation.

Revenues from contracts with customers includes fixed fee arrangements with related party affiliates to provide certain associated activities which are ancillary to and generally add value to the assets we manage, such as set-up and fund formation services associated with marketing, soliciting, and selling member interests in the affiliated limited partnerships, brokerage services, construction and development management services, loan placement and guarantees. The recognition and measurement of revenue is based on the assessment of individual contract terms. For performance obligations satisfied at a point in time, there are no significant judgments made in evaluating when the customer obtains control of the promised service.

For performance obligations satisfied over time, significant judgment is required to determine how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on appropriate measurement of the Company’s progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. Transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Variable consideration is included in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information that is reasonably available to the Company. Revenues are recognized when control of the promised services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The following describes revenue recognition for the fees the Company earns from providing services under its asset management platform:

Fund set-up fees are a one-time fee for the initial formation, administration, and set-up of the private equity real estate fund. These fees are recognized at the point in time when the performance under the contract is complete and are included in asset management revenues in the accompanying consolidated statements of operations. Fund set-up fees replaced fund formation fees that are earned at a point in time at a fixed rate based on the amount of capital raised into certain managed funds.

Fund management fees are generally based on 1.0% to 1.5% of the unreturned capital contributions in a particular fund and include reimbursement for costs incurred on behalf of the fund, including an allocation of certain overhead costs. These customer contracts require the Company to provide management services, representing a performance obligation that the Company satisfies over time. With respect to the Caliber Hospitality Trust, the Company earns a fund management fee of 0.7% of the Caliber Hospitality Trust’s enterprise value and is reimbursed for certain costs incurred on behalf of the Caliber Hospitality Trust. These revenues are included in asset management revenues in the accompanying consolidated statements of operations.

Financing fees are earned for services the Company performs in securing third-party financing on behalf of our private equity real estate funds. These fees are recognized at the point in time when the performance under the contract is complete, which is essentially upon closing of a loan. In addition, the Company earns fees for guaranteeing certain loans, representing a performance obligation that the Company satisfies over time. These revenues are included in asset management revenues in the accompanying consolidated statements of operations.

Development and construction revenues from contracts with customers include fixed fee arrangements with related party affiliates to provide real estate development services as their principal developer, which include managing and supervising third-party developers and general contractors with respect to the development of the properties owned by the funds. Revenues are generally based on 4.0% of the total expected costs of the development or 4.0% of the total expected costs of the construction project. Prior to the commencement of construction, development fee revenue is recognized at a point in time as the related performance obligations are satisfied and the customer obtains control of the promised service, including negotiation, due diligence, entitlements, planning, and design activities. During the construction period, development fee revenue is recognized over time as the performance obligations are satisfied. These revenues are included in asset management revenues in the accompanying consolidated statements of operations.

Brokerage fees are earned at a point in time at fixed rates for services performed related to acquisitions, dispositions, leasing, and financing transaction, and are included in asset management revenues in the accompanying consolidated statements of operations.

Performance allocations are an arrangement in which we are entitled to an allocation of investment returns, generated within the investment funds which we manage, based on a contractual formula. We typically receive 15.0% to 35.0% of all cash distributions from (i) the operating cash flow of each fund, after payment to the related fund investors of any accumulated and unpaid priority preferred returns and repayment of preferred capital contributions; and (ii) the cash flow resulting from the sale or refinance of any real estate assets held by each fund, after payment to the related fund investors of any accumulated and unpaid priority preferred returns and repayment of initial preferred capital contributions. Our funds’ preferred returns range from 6.0% to 12.0%, typically 6.0% for common equity or 10.0% to 12.0% for preferred equity, which does not participate in profits. Performance allocations are related to services which have been provided and are recognized when it is determined that they are no longer probable of significant reversal, which is generally satisfied when an underlying fund investment is realized or sold. These revenues are included in performance allocations in the accompanying consolidated statements of operations.

### Income Taxes

The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, *Accounting for Income Taxes*. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured by applying enacted tax rates and laws and are released in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided against deferred tax assets when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

A valuation allowance is required to reduce the balance of a deferred tax asset if it is determined that it is more-likely-than-not that all or some portion of the deferred tax asset will not be realized due to the lack of sufficient taxable income or other limitation on the Company’s ability to utilize the loss carryforward.

We recognize the impact of an income tax position, if that position is more-likely-than-not of being sustained on audit, based on the technical merits of the position. Related interest and penalties are classified as income taxes in the financial statements.

### Accounting Estimates of Consolidated Funds

We believe the following critical accounting policies affect the consolidated funds’ more significant estimates and judgements used in the preparation of our consolidated financial statements.

### Consolidated Fund Revenues

In accordance with ASC 606, our consolidated funds apply the five-step framework in determining the timing and amount of revenue to recognize. This framework requires an entity to: (i) identify the contract(s) with customers, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract, and (v) recognize revenue when or as the entity satisfies a performance obligation. Our consolidated funds’ revenues primarily consist of hospitality revenues, rental income and interest income.

#### Consolidated funds – hospitality revenue

Hospitality revenues are comprised of charges for room rentals, food and beverage sales, and other hotel operating activities. Revenues are recognized as earned, which is defined as the date upon which a guest occupies a room or utilizes the hotel’s services. Revenues are recorded net of sales tax.

Our consolidated funds have performance obligations to provide accommodations and other ancillary services to hotel guests. As compensation for such goods and services, the consolidated funds are typically entitled to a fixed nightly fee for an agreed upon period and additional fixed fees for any ancillary services purchased. These fees are generally payable at the time the hotel guest checks out of the hotel. The consolidated funds generally satisfy the performance obligations over time and recognize the revenue from room sales and from other ancillary guest services on a daily basis, as the rooms are occupied, and the services have been rendered.

For food and beverage, revenue is recognized upon transfer of promised products or services to customers in an amount that reflects the consideration the consolidated funds received in exchange for those services, which is generally when payment is tendered at the time of sale.

The consolidated funds receive deposits for events and rooms. Such deposits are deferred and included in other liabilities on the accompanying consolidated balance sheets. The deposits are credited to consolidated funds – hospitality revenue when the specific event takes place.

#### Consolidated funds – other revenue

Consolidated funds – other revenue primarily consists of rental revenue of $0.5 million and $0.9 million for the three and six months ended June 30, 2024, respectively, and $1.4 million and $2.3 million for the three and six months ended June 30, 2023, respectively. Rental revenue includes the revenues generated primarily by the rental operations of the residential (multi-family and single-family) and commercial properties of our consolidated funds.

### Consolidated Fund Expenses

Consolidated fund expenses consist primarily of costs, expenses and fees that are incurred by, or arise out of the operation and activities of or otherwise related to, our consolidated funds, including, without limitation, operating costs, depreciation and amortization, interest expense on debt held by our consolidated funds, gain on extinguishment of debt, gain on derivative instruments, insurance expenses, professional fees and other costs associated with administering and supporting those funds.

### Fair Value of Financial Instruments

The fair value of financial instruments is disclosed in accordance with ASC 825, *Financial Instruments*. The fair value of our financial instruments is estimated using available market information and established valuation methodologies. The estimates of fair value are not necessarily indicative of the amounts the consolidated funds could realize on disposition of the financial instruments. The use of different market assumptions and/or valuation methodologies may have a material effect on the estimated fair value amounts.

## Market risk

As filed, 2,863 characters.

### Market Risk

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable-rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, caps, collars, treasury locks, options and forwards in order to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes.

### Interest Rate Risk

As of June 30, 2024, our debt included fixed-rate debt with a fair value and carrying value of $53.7 million and $61.1 million, respectively. Changes in market interest rates on our fixed rate debt impact the fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points, and the fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise.

As of June 30, 2024, our debt included variable-rate debt with a fair value and carrying value of $25.4 million. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their June 30, 2024 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate debt would increase or decrease our interest expense by $0.3 million annually.

### Credit Risk

Substantially all of the Company’s revenues are generated from the management, ownership and/or operations of real estate assets located in Alaska, Arizona, Colorado, and Texas. The Company mitigates the associated risk by:

- diversifying our investments in real estate assets across multiple asset types, including hospitality, commercial, single-family, multi-family, and self-storage properties;
- diversifying our investments in real estate assets across multiple geographic locations including different markets and sub-markets in which our real estate assets are located;
- diversifying our investments in real estate assets across assets at differing points of stabilization, and in varying states of cash flow optimization; and
- maintaining financing relationships with a diversified mix of lenders (differing size and type), including large national banks, local community banks, private equity lenders, and insurance companies.

## Controls and procedures

As filed, 1,668 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“the Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that no controls and procedures, no matter how well designed and operated, can provide absolute assurance of achieving the desired control objectives.

In accordance with Rules 13a-15(b) and 15d-15(b) of the Exchange Act, management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2024 and determined that the disclosure controls and procedures were effective at a reasonable assurance level as of that date.

### Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d -15(f) of the Exchange Act) during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 186 characters.

There have been no material changes to the risk factors previously disclosed in the Risk Factors section in the Company’s annual report on Form 10-K filed with the SEC on April 15, 2023.

Filed Aug 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001627282-24-000101. Last ingested by Listed: Nov 4, 2026, 13:34 ET. No prices; not investment advice.