cwd-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2024


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

For the transition period from ______ to ______

Commission file number 001-41703

CALIBERCOS INC.

(Exact name of registrant as specified in its charter)


Delaware						47-2426901
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

8901 E. Mountain View Rd. Ste. 150, Scottsdale, AZ						85258
(Address of Principal Executive Offices)						(Zip Code)


			(480) 295-7600
			Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.001 par value per share	CWD	Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

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

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

There were 22,472,770 shares of common stock, comprised of 15,056,356 shares of Class A Common Stock and 7,416,414 shares of Class B Common Stock of CaliberCos Inc. as of November 8, 2024.

Explanatory Note

In this report, the term “Company” refers to CaliberCos Inc. and its wholly-owned subsidiaries. The “Consolidated Funds” refers to the Companies consolidated variable interest entities. The “Consolidated Company”, “Caliber”, “we”, “us”, and “our” refers to the Company and the Consolidated Funds collectively.

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of the federal securities laws. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the operating results and financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, statements about:

•estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

•our estimates of the size of our market opportunities;

•our ability to effectively manage our growth;

•our ability to successfully enter new markets, manage our growth expansion and comply with any applicable laws and regulations;

•the effects of increased competition from our market competitors;

•significant disruption in, or breach in security of, our information technology systems and resultant interruptions in service and any related impact on our reputation;

•the attraction and retention of qualified employees and key personnel;

•the effectiveness of our internal controls;

•changes in laws and government regulation affecting our business;

•the impact of adverse economic conditions;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs and service our indebtedness; and

•outcomes of legal or administrative proceedings.

In addition, in this report, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to our Company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Forward-looking statements speak only as of the date of this report. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

You should read this report and the documents that we reference in this report and have filed with the Securities and Exchange Commission (“SEC”) as exhibits to this report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

Table of Contents


						Page
Part I - Financial Information						4
Item 1. Financial Statements						4
Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023						4
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023						6
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023						7
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023						9
Notes to Consolidated Financial Statements						11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						41
Item 3. Quantitative and Qualitative Disclosures About Market Risk						81
Item 4. Controls and Procedures						81
Part II - Other Information						82
Item 1. Legal Proceedings						82
Item 1A. Risk Factors						82
Item 2. Unregistered Sales of Equity Securities						82
Item 3. Defaults Upon Senior Securities						82
Item 4. Mine Safety Disclosures						82
Item 5. Other Information						82
Item 6. Exhibit Index						83
Signatures						84

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)


	September 30, 2024		December 31, 2023
Assets
Cash	$	516	$	940
Restricted cash	2,534		2,569
Real estate investments, net	21,515		21,492

Notes receivable - related parties	—		50
Due from related parties	12,305		9,709
Investments in unconsolidated entities	12,723		3,338
Operating lease - right of use assets	159		193

Prepaid and other assets	2,808		2,781
Assets of consolidated funds
Cash	1,053		2,865
Restricted cash	—		11,266
Real estate investments, net	46,084		185,636

Accounts receivable, net	184		1,978
Notes receivable - related parties	58,233		34,620

Operating lease - right of use assets	—		10,318

Prepaid and other assets	469		11,677
Total assets	$	158,583	$	299,432

Liabilities and Stockholders’ Equity
Notes payable	$	49,673	$	53,799

Accounts payable and accrued expenses	8,638		8,886

Due to related parties	210		257
Operating lease liabilities	100		119

Other liabilities	763		420
Liabilities of consolidated funds
Notes payable, net	33,752		129,684
Notes payable - related parties	—		12,055
Accounts payable and accrued expenses	1,444		11,736
Due to related parties	35		101
Operating lease liabilities	—		13,957

Other liabilities	687		2,400
Total liabilities	95,302		233,414

Commitments and Contingencies

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)


	September 30, 2024		December 31, 2023

Common stock Class A, $0.001 par value; 100,000,000 shares authorized, 14,967,702 and 13,872,671 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	$	15	$	14
Common stock Class B, $0.001 par value; 15,000,000 shares authorized, 7,416,414 shares issued and outstanding as September 30, 2024 and December 31, 2023	7		7
Paid-in capital	41,348		39,432

Accumulated deficit	(45,219)		(36,830)
Stockholders’ (deficit) equity attributable to CaliberCos Inc.	(3,849)		2,623
Stockholders’ equity attributable to noncontrolling interests	67,130		63,395
Total stockholders’ equity	63,281		66,018
Total liabilities and stockholders’ equity	$	158,583	$	299,432

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

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues
Asset management revenues	$	6,530	$	2,316	$	12,926	$	6,246
Performance allocations	175		36		357		2,474
Consolidated funds – hospitality revenues	2,494		12,526		23,533		52,008
Consolidated funds – other revenues	2,103		2,147		5,616		6,264
Total revenues	11,302		17,025		42,432		66,992

Expenses
Operating costs	4,592		4,881		15,389		16,205
General and administrative	1,441		1,672		5,460		4,914
Marketing and advertising	174		210		507		888
Depreciation and amortization	149		140		439		409
Consolidated funds – hospitality expenses	3,097		18,644		23,191		59,676
Consolidated funds – other expenses	975		2,883		5,405		6,757
Total expenses	10,428		28,430		50,391		88,849



Other income, net	425		414		1,015		1,479

Interest income	51		85		325		279
Interest expense	(1,349)		(1,316)		(3,958)		(3,408)
Net income (loss) before income taxes	1		(12,222)		(10,577)		(23,507)
Benefit from income taxes	—		—		—		—
Net income (loss)	1		(12,222)		(10,577)		(23,507)
Net loss attributable to noncontrolling interests	(145)		(8,813)		(2,188)		(13,165)
Net income (loss) attributable to CaliberCos Inc.	$	146	$	(3,409)	$	(8,389)	$	(10,342)
Basic net income (loss) per share attributable to common stockholders	$	0.01	$	(0.16)	$	(0.38)	$	(0.53)
Diluted net income (loss) per share attributable to common stockholders	$	0.01	$	(0.16)	$	(0.38)	$	(0.53)
Weighted average common shares outstanding:
Basic	22,128		21,238		21,828		19,688
Diluted	24,867		21,238		21,828		19,688

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

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(AMOUNTS IN THOUSANDS)


	Common Stock					Paid in Capital								Accumulated Deficit	Noncontrolling Interests				Total Stockholders’ Equity
		Class A			Class B
		Shares	Par Value		Shares			Par Value
Balances as of December 31, 2023		13,873	$	14	7,416			$	7			$	39,432				$	(36,830)			$	63,395			$	66,018

Issuance of common stock		25	—		—	—				37					—				—				37


Equity based compensation		413	—		—	—				400					—				—				400
Contributions from noncontrolling interest holders		—	—		—	—				—					—				6,388				6,388
Redemptions of noncontrolling interest holders		—	—		—	—				—					—				(670)				(670)
Distributions to noncontrolling interest holders		—	—		—	—				—					—				(1,604)				(1,604)

Deconsolidation of VIEs		—	—		—	—				—					—				21,183				21,183

Net loss		—	—		—	—				—					(3,805)				(1,457)				(5,262)
Balances as of March 31, 2024		14,311	$	14	7,416	$	7			$	39,869				$	(40,635)			$	87,235			$	86,490

Issuance of common stock, net of issuance costs		163	—		—	—				146					—				—				146


Equity based compensation		155	1		—	—				584					—				—				585
Contributions from noncontrolling interest holders		—	—		—	—				—					—				5,478				5,478

Distributions to noncontrolling interest holders		—	—		—	—				—					—				(2,969)				(2,969)

Deconsolidation of VIEs		—	—		—	—				—					—				10,790				10,790

Net loss		—	—		—	—				—					(4,730)				(586)				(5,316)
Balances as of June 30, 2024		14,629	$	15	7,416	$	7			$	40,599				$	(45,365)			$	99,948			$	95,204

Issuance of common stock, net of issuance costs		17	—		—	—				12					—				—				12


Equity based compensation expense		322	—		—	—				737					—				—				737
Contributions from noncontrolling interest holders		—	—		—	—				—					—				3,059				3,059
Redemptions of noncontrolling interest holders		—	—		—	—				—					—				(1,350)				(1,350)
Distributions to noncontrolling interest holders		—	—		—	—				—					—				(1,128)				(1,128)

Deconsolidation of VIEs		—	—		—	—				—					—				(33,254)				(33,254)

Net (loss) income		—	—		—	—				—					146				(145)				1
Balances as of September 30, 2024		14,968	$	15	7,416	$	7			$	41,348				$	(45,219)			$	67,130			$	63,281

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

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(AMOUNTS IN THOUSANDS)


	Preferred Stock			Common Stock						Paid in Capital		Treasury Stock		Accumulated Deficit		Noncontrolling Interests		Total Stockholders’ Equity
				Class A			Class B
	Shares	Par Value		Shares	Par Value		Shares	Par Value
Balances as of December 31, 2022	1,651	$	—	10,791	$	11	7,416	$	7	$	33,108	$	(13,626)	$	(22,709)	$	80,398	$	77,189


Repurchases of common stock	—	—		(42)	—		—	—		—		—		—		—		—

Equity based compensation expense	—	—		—	—		—	—		702		—		—		—		702
Contributions from noncontrolling interest holders	—	—		—	—		—	—		—		—		—		7,629		7,629
Redemptions of noncontrolling interest holders	—	—		—	—		—	—		—		—		—		(295)		(295)
Distributions to noncontrolling interest holders	—	—		—	—		—	—		—		—		—		(1,752)		(1,752)
Consolidation of VIEs	—	—		—	—		—	—		—		—		—		(20,805)		(20,805)
Deconsolidation of VIEs	—	—		—	—		—	—		—		—		—		9,539		9,539
Retirement of treasury stock	—	—		—	—		—	—		—		1,418		(1,418)		—		—
Net (loss) income	—	—		—	—		—	—		—		—		(1,207)		1,502		295
Balances as of March 31, 2023	1,651	$	—	10,749	$	11	7,416	$	7	$	33,810	$	(12,208)	$	(25,334)	$	76,216	$	72,502

Issuance of common stock	—	—		1,200	1		—	—		3,247		—		—		—		3,248

Conversions of common stock	(1,651)	—		1,651	2		—	—		—		—		—		—		2
Equity based compensation expense	—	—		221	—		—	—		1,922		—		—		—		1,922
Contributions from noncontrolling interest holders	—	—		—	—		—	—		—		—		—		6,787		6,787
Redemptions of noncontrolling interest holders	—	—		—	—		—	—		—		—		—		(995)		(995)
Distributions to noncontrolling interest holders	—	—		—	—		—	—		—		—		—		(1,482)		(1,482)


Other	—	—		—	—		—	—		—		12,208		—		—		12,208
Net loss	—	—		—	—		—	—		—		—		(5,726)		(5,854)		(11,580)
Balances as of June 30, 2023	—	$	—	13,821	$	14	7,416	$	7	$	38,979	$	—	$	(31,060)	$	74,672	$	82,612

Issuance of common stock	—	—		—	—		—	—		(649)		—		—		—		(649)


Equity based compensation expense	—	—		27	—		—	—		393		—		—		—		393
Contributions from noncontrolling interest holders	—	—		—	—		—	—		—		—		—		6,870		6,870
Redemptions of noncontrolling interest holders	—	—		—	—		—	—		—		—		—		(480)		(480)
Distributions to noncontrolling interest holders	—	—		—	—		—	—		—		—		—		(1,768)		(1,768)



Net loss	—	—		—	—		—	—		—		—		(3,409)		(8,813)		(12,222)
Balances as of September 30, 2023	—	$	—	13,848	$	14	7,416	$	7	$	38,723	$	—	$	(34,469)	$	70,481	$	74,756

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

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)


	Nine Months Ended September 30,
	2024		2023
Cash Flows From Operating Activities
Net income (loss)	$	(10,577)	$	(23,507)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization	439		392
Non-cash lease expense and gain on lease extinguishment	15		(285)
Non-cash performance allocations	—		(2,382)
Equity-based compensation	1,723		3,017

Loss on disposal of furniture, fixtures and equipment	5		—


Gain on investments in unconsolidated entities	(231)		—
Impairment	(10)		—
Amortization of above-market/below market leases and straight-line rent, net	181		178
Amortization of deferred financing costs	47		25
Changes in operating assets and liabilities:

Due from related parties	923		1,364
Prepaid expenses, right-of-use assets and other assets	25		3,307
Accounts payable and accrued expenses	121		464
Due to related parties	(47)		(84)
Lease liabilities and other liabilities	120		248
Adjustments to reconcile net income (loss) to net cash from operating activities of consolidated funds:
Depreciation	4,841		7,926
Non-cash lease expense	(9)		(80)

Loss on extinguishment of debt	—		2
Gain on derivative instruments	(311)		(114)
(Gain) loss on disposal of furniture, fixtures and equipment	(9)		687

Amortization of advanced key money	(12)		(56)
Amortization of above-market/below market leases and straight-line rent, net	(164)		(333)
Amortization of deferred financing costs	334		1,147
Changes in operating assets and liabilities of consolidated funds:
Accounts receivable, net	(1,277)		533
Due from related parties	(197)		(12)
Prepaid expenses, right-of use assets and other assets	1,929		(4,939)
Accounts payable and accrued expenses	996		849
Due to related parties	984		327
Lease liabilities and other liabilities	(38)		184
Net cash used in the Company's operating activities	(199)		(11,142)

Cash Flows From Investing Activities
Investments in real estate assets	(686)		(224)
Acquisition of real estate assets	—		(19,472)

Investments in unconsolidated entities	(267)		(134)
Funding of notes receivable - related parties	(184)		(980)
Payment received on notes receivable - related parties	7,765		930

CALIBERCOS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)


	Nine Months Ended September 30,
	2024		2023
Cash Flows From Investing Activities of consolidated funds
Consolidation of VIEs	$	—	$	12,927
Deconsolidation of VIEs	(17,641)		(12,418)
Investments in real estate assets	(5,015)		(12,040)
Acquisition of real estate assets	—		(6,643)

Funding of notes receivable - related parties	(17,529)		(11,986)
Payment received on notes receivable - related parties	19,193		6,085
Net cash used in the Company's investing activities	(14,364)		(43,955)
Cash Flows From Financing Activities
Payment of deferred financing costs	(31)		(253)
Proceeds from notes payable	1,399		43,010
Repayments of notes payable	(5,541)		(3,181)
Proceeds from notes payable - related parties	—		4,000
Repayments of notes payable - related parties	—		(4,365)

Proceeds from the issuance of common stock, net of issuance costs	—		2,599
Payments of treasury stock - buyback obligation	—		(183)

Cash Flows From Financing Activities of consolidated funds

Payment of deferred financing costs	(1,342)		(2,522)
Proceeds from notes payable	16,567		61,681
Repayments of notes payable	(17,230)		(58,734)
Proceeds from notes payable - related parties	511		5,647
Repayments of notes payable - related parties	(511)		(4,633)
Contributions from noncontrolling interest holders	14,925		21,286
Redemptions of noncontrolling interests	(2,020)		(1,770)
Distributions to noncontrolling interest holders	(5,701)		(5,002)
Net cash provided by the Company's financing activities	1,026		57,580
Net Change in Cash and Restricted Cash	(13,537)		2,483
Cash and Restricted Cash at Beginning of Period	17,640		15,934
Cash and Restricted Cash at End of Period	$	4,103	$	18,417

Reconciliation of Cash and Restricted Cash
Cash at beginning of period	$	3,805	$	7,657
Restricted cash at beginning of period	13,835		8,277
Cash and restricted cash at beginning of period	17,640		15,934

Cash at end of period	1,569		5,531
Restricted cash at end of period	2,534		12,886
Cash and restricted cash at end of period	$	4,103	$	18,417

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

Table of Contents

CALIBERCOS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization and Liquidity

Organization

CaliberCos Inc., a Delaware corporation, and its wholly-owned subsidiaries (the “Company”), is an alternative asset manager of private syndication and direct investment real estate funds and provider of a full suite of traditional real estate services. The Company was formed in November 2014, and originally began as Caliber Companies, LLC, an Arizona limited liability company, which commenced operations in January 2009. The Company provides various support services, under its asset management platform segment (“Platform”) to the investments it manages, including asset management services, fund set-up services, lending support, construction and development management, and real estate brokerage. As of September 30, 2024, we had operations in Alaska, Arizona, Colorado, Kansas, Texas, and Virginia.

In general, our private equity real estate funds are organized as operating partnerships, in which multiple unrelated passive investors own partnership interests. In addition, we are designated as the manager and/or general partner of the partnership. Depending on the legal structure and arrangements between us and the funds, we may or may not consolidate the partnerships for financial reporting purposes. For funds in which we are determined to be the controlling party or primary beneficiary for financial reporting purposes, the fund is consolidated, and the passive investors’ ownership is presented as noncontrolling interest in the accompanying consolidated financial statements (“Consolidated Funds”, and collectively with the Company, the “Consolidated Company”, “Caliber”, “we”, “our”, and “us”). For funds in which we are not determined to be the controlling party for financial reporting purposes, the fund is not consolidated, and any fees earned from the fund are included in fund management revenue in the accompanying consolidated financial statements. See Note 2 – Summary of Significant Accounting Policies for more detail.

Liquidity and Going Concern

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

At September 30, 2024, the Company had a portfolio of corporate notes, whose composition and characteristics are similar to those reported in prior periods. At September 30, 2024, the portfolio consists of 211 unsecured notes with an aggregate principal balance of $33.0 million, of which $32.4 million mature within the 12-month period subsequent to November 13, 2024. Each note generally has a 12-month term with an option to extend for an additional 12-months.

Because the Company incurred operating losses and negative cash flow from operations for the nine months ended September 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 Form 10-K, the Company has continued its discussions with various lenders in pursuit of extending or refinancing its unsecured loans. Through September 30, 2024, the rate of extension of the current notes is consistent with or greater than reported in prior periods. Management plans to continue seeking and granting extensions on an ongoing basis consistent with prior 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.

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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 $13.3 million in receivables, v) collect all or part of its $19.7 million in 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 nine months ended September 30, 2024, we collected $8.2 million of notes receivable and $2.7 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 compensation and benefits expense savings 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 consolidated financial statements are issued.

Note 2 – Summary of Significant Accounting Policies

Accounting Policies of the Company

Basis of Presentation and Consolidation

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements include our accounts, our consolidated subsidiaries, and legal entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. The equity and net income or loss attributable to noncontrolling interests in subsidiaries is shown separately in the accompanying consolidated balance sheets, statements of operations, and statements of changes in stockholders’ equity. All intercompany balances and transactions have been eliminated in consolidation.

Variable Interest Entities

We determine if an entity is a variable interest entity (“VIE”) based on several factors, including whether the equity holders, as a group, lack the characteristics of a controlling financial interest. We analyze any investments in VIEs to determine if we are the primary beneficiary. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in a VIE.

Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative analysis focused on identifying which reporting entity has both (i) the power to direct the activities of the entity that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment. We consolidate any VIEs for which we are the primary beneficiary, and we disclose our maximum exposure to loss related to the consolidated VIEs. See Note 3 – VIEs for more detail.

Voting Interest Entities

Entities that do not qualify as VIEs are generally assessed for consolidation as voting interest entities (“VOEs”). For VOEs, we consolidate an entity if we have a controlling financial interest. We have a controlling financial interest in a VOE if (i) for legal entities other than partnerships, we own a majority voting interest in the entity or, for limited partnerships and similar entities, we own a majority of the entity’s kick-out rights through voting limited partnership interests and (ii) non-controlling shareholders or partners do not hold substantive participating rights, and no other conditions exist that would indicate that we do not control the entity.

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Interim Unaudited Financial Data

Our consolidated financial statements reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. These consolidated financial statements, including notes, are unaudited, exclude some of the disclosures required for annual consolidated financial statements, and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2023.

Reclassification

The asset management fees and transaction and advisory fees, previously presented in their own line items for prior periods presented, have been combined into one line item, asset management revenues in the accompanying consolidated statements of operations, to be consistent with the current year presentation. The reclassification does not affect prior period’s total revenues or net income (loss).

Use of 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 significantly from those estimates.

Cash

Cash includes cash in bank accounts. The Company deposits cash with several high-quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (“FDIC”) up to an insurance limit of $250,000. At times, the Company’s cash balances may exceed FDIC limits. Although the Company bears risk on amounts in excess of those insured by the FDIC, it has not experienced and does not anticipate any losses due to the high quality of the institutions where the deposits are held.

Restricted Cash

Restricted cash consists of cash held in escrow accounts by contractual agreement with lenders as part of financial loan covenant requirements.

Investments in Unconsolidated Entities

If an entity is not a VIE, our determination of the appropriate accounting method with respect to our investments in limited liability companies and other investments is based on voting control. For our managing member interests in limited liability companies, we are presumed to control (and therefore consolidate) the entity, unless the other limited partners have substantive rights that overcome this presumption of control. These substantive rights allow the limited partners to remove the general partner with or without cause or to participate in significant decisions made in the ordinary course of the entity’s business. We account for our non-controlling investments in these entities under the equity method. Our investments in unconsolidated subsidiaries in which we have the ability to exercise significant influence over operating and financial policies, but do not control, or entities which are VIE in which we are not the primary beneficiary are accounted for under the equity method. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the equity method investment’s earnings and distributions. Our share of the earnings or loss from equity method investments is included in other income (expenses), net on the accompanying consolidated statements of operations.

Our determination of the appropriate accounting treatment for an investment in a subsidiary requires judgment of several factors including the size and nature of our ownership interest and the other owners’ substantive rights to make decisions for the entity. If we were to make different judgments or conclusions as to the level of our control or influence, it could result in a different accounting treatment. Consolidating an investment generally would have no impact on our net income or stockholders’ deficit attributable to CaliberCos Inc. in any accounting period, but a different treatment would impact individual income statement and balance sheet line items, as consolidation would effectively “gross up” our statement of operations and balance sheet.

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As of September 30, 2024 and December 31, 2023, the carrying amount of our investments in unconsolidated entities was $12.7 million and $3.3 million, respectively. During the nine months ended September 30, 2024, the Company deconsolidated the Caliber Hospitality Trust, Inc. (the “Caliber Hospitality Trust”) and Caliber Hospitality, LP, which included activity from six hospitality funds, Elliot & 51st St LLC (“Elliot”) and DT Mesa Holdco II, LLC (“DT Mesa”). At which time, the Company’s investment in the Caliber Hospitality Trust, Caliber Hospitality, LP, Elliot, and DT Mesa, were no longer eliminated and are included in investments in unconsolidated entities in the accompanying consolidated balance sheet as of September 30, 2024. See Note 3 – VIEs.

In certain situations, the Company has invested only a nominal amount of cash, or no cash at all, into a venture. As the manager of the venture, we are entitled to 15.0% – 35.0% of the residual cash flow produced by the venture after the payment of any priority returns. Under the equity method, impairment losses are recognized upon evidence of other-than-temporary losses of value. For the three and nine months ended September 30, 2024 and 2023, the Company had no impairment losses related to its investments in unconsolidated entities.

Depreciation and Amortization Expense

Depreciation expense includes costs and costs associated with building and building improvements, which are depreciated over the estimated useful life of the respective asset, generally 15 to 40 years. Depreciation expense also includes costs associated with the purchase of furniture and equipment and office leasehold improvements which are recorded at cost. Furniture and equipment costs are depreciated using the straight-line method over the estimated useful life of the asset, generally three to seven years beginning in the first full month the asset is placed in service. Intangible lease assets are amortized using the straight-line method over the shorter of the respective estimated useful life or the lease term.

For the three and nine months ended September 30, 2024, depreciation expense for the Company was $0.1 million and $0.4 million, respectively. For the three and nine months ended September 30, 2023, depreciation expense for the Company was $0.1 million and $0.4 million, respectively.

Impairment of Long-Lived Assets

Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is determined not to be recoverable. If events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted net future cash flows resulting from the use of the asset, excluding interest charges. If the carrying amount exceeds the aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the asset.

For the nine months ended September 30, 2024 and 2023, the Company had no impairment losses related to its real estate and other long-lived assets.

Concentration of Credit Risk

Substantially all of the Company’s revenues are generated from activities completed through its Platform, including the management, ownership and/or operations of real estate assets located in Alaska, Arizona, Colorado, Kansas, Texas, and Virginia. 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.

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Noncontrolling Interests in Consolidated Real Estate Partnerships

We report the unaffiliated partners’ interests in the net assets of our consolidated real estate partnerships as noncontrolling interests within the accompanying consolidated statements of changes in stockholders’ equity. Noncontrolling interests consist of equity interests held by limited partners in consolidated real estate partnerships. We attribute to noncontrolling interests their share of income or loss of the consolidated partnerships based on their proportionate interest in the results of operations of the partnerships, including their share of losses even if such attribution results in a deficit noncontrolling interest balance within our equity and partners’ capital accounts.

The terms of the partnership agreements generally require the partnerships to be liquidated following the sale of the underlying real estate assets. As the general partner in these partnerships, we ordinarily control the execution of real estate sales and other events that could lead to the liquidation, redemption or other settlement of noncontrolling interests. The terms of certain partnership agreements outline differing classes of equity ownership, some of which are redeemable by the partnership at the partnership manager’s discretion.

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 the Company’s revenue recognition policy related to the fees the Company earns from providing services under its 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.

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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 when 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 ratably over time as the performance obligation(s) is 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.

Leases

Lessor

At the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses the terms and conditions to determine the proper lease classification. When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as a sales-type lease. When a lease does not effectively transfer control of the underlying asset to the lessee, but the Company obtains a guarantee for the value of the asset from a third party, the Company classifies the lease as a direct financing lease. All other leases are classified as operating leases. The Company did not have any sales-type or direct financing leases as of September 30, 2024 and December 31, 2023. For operating leases with minimum scheduled rent increases, the consolidated funds recognize rental revenue on a straight-line basis, including the effect of any free rent periods, over the lease term when collectability of lease payments is probable. Variable lease payments are recognized as rental revenue in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

The Company identified two separate lease components as follows: i) land lease component, and ii) single property lease component comprised of building, land improvements and tenant improvements. The Company’s leases also contain provisions for tenants to reimburse the consolidated funds for maintenance and other property operating expenses, which are considered to be non-lease components. The Company elected the practical expedient to combine lease and non-lease components and the non-lease components will be included with the single property lease component as the predominant component.

Lessee

To account for leases for which the Company is the lessee, contracts must be analyzed upon inception to determine if the arrangement is, or contains, a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification tests and measurement procedures are performed at the lease commencement date.

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The lease liability is initially measured as the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the lessee’s incremental borrowing rate is used. The incremental borrowing rate is determined based on the estimated rate of interest that the lessee would pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. The lease term is the noncancelable period of the lease and includes any renewal and termination options the Company is reasonably certain to exercise. The lease liability balance is amortized using the effective interest method. The lease liability is remeasured when the contract is modified, upon the resolution of a contingency such that variable payments become fixed or if the assessment of exercising an extension, termination or purchase option changes.

The right-of-use (“ROU”) asset balance is initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.

The Company’s impairment assessment for ROU assets is consistent with the impairment analysis for the Company's other long-lived assets and is reviewed quarterly.

Segments

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 Platform 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.

Accounting Policies of Consolidated Funds

Accounting for Real Estate Investments

Upon the acquisition of real estate properties, a determination is made as to whether the acquisition meets the criteria to be accounted for as an asset acquisition or a business combination. The determination is primarily based on whether the assets acquired, and liabilities assumed meet the definition of a business. The determination of whether the assets acquired, and liabilities assumed meet the definition of a business includes a single or similar asset threshold. In applying the single or similar asset threshold, if substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets acquired, and liabilities assumed are not considered a business. Most of our consolidated fund acquisitions meet the single or similar asset threshold, due to the fact that substantially all the fair value of the gross assets acquired is attributable to the real estate assets acquired.

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Acquired real estate properties accounted for as asset acquisitions are recorded at cost, including acquisition and closing costs. Our consolidated funds allocate the cost of real estate properties to the tangible and intangible assets and liabilities acquired based on their estimated relative fair values. Our consolidated funds determine the fair value of tangible assets, such as land, building, furniture, fixtures and equipment, using a combination of internal valuation techniques that consider comparable market transactions, replacement costs and other available information and fair value estimates provided by third-party valuation specialists, depending upon the circumstances of the acquisition. Our consolidated funds determine the fair value of identified intangible assets or liabilities, which typically relate to in-place leases, using a combination of internal valuation techniques that consider the terms of the in-place leases, current market data for comparable leases, and fair value estimates provided by third-party valuation specialists, depending upon the circumstances of the acquisition.

If a transaction is determined to be a business combination, the assets acquired, liabilities assumed, and any identified intangibles are recorded at their estimated fair values on the transaction date, and transaction costs are expensed in the period incurred.

Cost Capitalization and Depreciation

Our consolidated funds capitalize costs, including certain indirect costs, incurred in connection with their development and construction activities. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with capital addition activities at the asset level. Interest, property taxes and insurance are also capitalized during periods in which redevelopment, development and construction projects are in progress. Capitalization of costs, including certain indirect costs, incurred in connection with our capital addition activities, commence at the point in time when activities necessary to get the assets ready for their intended use are in progress. This includes when assets are undergoing physical construction, as well as when apartment homes are held vacant in advance of planned construction, provided that other activities such as permitting, planning and design are in progress. Our consolidated funds cease the capitalization of costs when the assets are substantially complete and ready for their intended use, which is typically when construction has been completed and apartment homes or other properties are available for occupancy. Cost of ordinary repairs, maintenance and resident turnover are charged to operating expense, as incurred.

Depreciation for all tangible real estate assets is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of our building and building improvements are generally 15 to 40 years. The estimated useful lives of our furniture, fixtures and equipment are generally three to seven years beginning in the first full month the asset is placed in service.

For the three and nine months ended September 30, 2024, depreciation expense was $1.2 million and $4.5 million, respectively. For the three and nine months ended September 30, 2023, depreciation expense was $2.8 million and $7.9 million, respectively.

Impairment of Long-Lived Assets

Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is determined to not be recoverable. If events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted net future cash flows resulting from the use of the asset, excluding interest charges. If the carrying amount exceeds the aggregate undiscounted future cash flows, our consolidated funds recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the asset.

For the nine months ended September 30, 2024 and 2023, our consolidated funds did not record an impairment loss related to its real estate and other long-lived assets.

Cash

Cash includes cash in bank accounts. The consolidated funds deposit cash with several high-quality financial institutions. These deposits are guaranteed by the FDIC up to an insurance limit of $250,000. At times, cash balances may exceed FDIC limits. Although the consolidated funds bear risk on amounts in excess of those insured by the FDIC, they have not experienced and do not anticipate any losses due to the high quality of the institutions where the deposits are held.

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Restricted Cash

Restricted cash consists of tenant security deposits and cash reserves required by certain loan agreements for capital improvements and repairs. As improvements and repairs are completed, related costs incurred by the consolidated funds are funded from the reserve accounts. Restricted cash also includes cash held in escrow accounts by mortgage companies on behalf of the consolidated funds for payment of property taxes, insurance, and interest.

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 includes rental revenue of $0.4 million and $1.3 million for the three and nine months ended September 30, 2024, respectively, and $1.2 million and $3.5 million, for the three and nine months ended September 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.

Upon adoption of ASC 842, Leases (“ASC 842”), effective January 1, 2022, at the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses the terms and conditions to determine the proper lease classification. When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as a sales-type lease. When a lease does not effectively transfer control of the underlying asset to the lessee, but the Company obtains a guarantee for the value of the asset from a third party, the Company classifies the lease as a direct financing lease. All other leases are classified as operating leases. The consolidated funds did not have any sales-type or direct financing leases as of September 30, 2024. For operating leases with minimum scheduled rent increases, the consolidated funds recognize rental revenue on a straight-line basis, including the effect of any free rent periods, over the lease term when collectability of lease payments is probable. Variable lease payments are recognized as rental revenue in the period when the changes in facts and circumstances on which the variable lease payments are based occur.

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In addition, consolidated funds - other revenue includes interest income of $1.7 million and $4.3 million for the three and nine months ended September 30, 2024, respectively, and $0.9 million and $2.7 million for the three and nine months ended September 30, 2023, respectively, which is generated by a consolidated fund’s lending activity. Interest income is recognized on the accrual basis of accounting in accordance with the lending agreements over the term of the respective loan agreement.

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.

Accounts Receivable

Accounts receivable primarily consists of amounts due from guests or groups for hotel rooms and services provided by the hotel properties. Accounts receivable also include due, but unpaid, rental payments. Our consolidated funds continually review receivables and determine collectability by taking into consideration the history of past write-offs, collections, current credit conditions, tenant payment history, the financial condition of the tenants, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. If the collectability of a receivable is uncertain, our consolidated funds will record an increase in the allowance for doubtful accounts. Amounts that are determined to be uncollectible with a high degree of certainty are written-off through bad debt expense, which is included in consolidated funds – hospitality expenses and consolidated funds – other expenses on the accompanying consolidated statements of operations. Our consolidated funds had no allowance for doubtful accounts as of September 30, 2024 and December 31, 2023.

Derivative Instruments

The consolidated funds record all derivative instruments on the consolidated balance sheets at fair value. The accounting for changes in the fair value of the derivative and the effect on the financial statements depends on its hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair value of cash flows of the asset or liability hedged. If the consolidated fund elects not to apply hedge accounting treatment, any changes in the fair value of the derivative instruments is recognized immediately in consolidated funds - hospitality expenses in the consolidated statements of operations. If the derivative is designated and qualifies for hedge accounting treatment, the change in fair value of the derivative is recorded in other comprehensive income (loss).

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

Fair value measurements and disclosures consist of a three-level valuation hierarchy. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the ability to observe the inputs employed in the measurement using market participant assumptions at the measurement date. An asset’s or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

•Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.

•Level 2 – Inputs include quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

•Level 3 – Unobservable inputs for the asset or liability. These unobservable inputs reflect assumptions about what market participants would use to price the asset or liability and are developed based on the best information available in the circumstances (which might include the reporting company’s own data)

Recent Accounting Pronouncements

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses and subsequent amendments (collectively, “Topic 326”), effective January 1, 2023. Topic 326 was intended to improve financial reporting by requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income and required that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that was deducted from the amortized cost basis. The amendments in Topic 326 required the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminated the “incurred loss” methodology under current U.S. GAAP. Loans and receivables between entities under common control are not within the scope of this guidance. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

The Company adopted the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), effective January 1, 2024, which simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock, removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and also simplifies the diluted earnings per share calculation in certain areas. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which serves to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The guidance does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments into reportable segments and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2023-07 on our consolidated financial statements; however, adoption will not impact our consolidated balance sheets and statements of operations.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740, Income Taxes). ASU 2023-09, which serves to enhance income tax disclosures by requiring a tabular rate reconciliation and additional information on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2023-09 on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – VIEs

During the nine months ended September 30, 2023, the Company (i) deconsolidated five hospitality funds that were contributed to Caliber Hospitality, LP, whose sole general partner is the Caliber Hospitality Trust and (ii) consolidated Caliber Hospitality, LP and the Caliber Hospitality Trust, which included activity from the five previously consolidated hospitality funds and one previously unconsolidated fund because the Company was determined to be the primary beneficiary as it had the power to direct the activities and the obligation to absorb their losses through its guarantee of the indebtedness secured by the hospitality assets, which was significant to the Caliber Hospitality Trust and Caliber Hospitality, LP.

In addition, the Company consolidated West Frontier Holdco, LLC (“West Frontier”) during the nine months ended September 30, 2023, as the Company was determined to be the primary beneficiary as the Company has the power to direct the activities of West Frontier and the obligation to absorb their losses through its guarantee of their indebtedness, which is significant to the fund. No additional VIEs were consolidated during the nine months ended September 30, 2024. The consolidation of the Caliber Hospitality Trust, Caliber Hospitality, LP, and West Frontier consisted of the following, excluding intercompany eliminations at the time of consolidation (in thousands):


Assets
Real estate investments, net	$	87,897
Cash	3,667
Restricted cash	9,260
Accounts receivable, net	4,348
Notes receivable - related parties	10,411
Due from related parties	40
Investments in unconsolidated entities	84,076
Operating lease - right of use assets	8,775
Prepaid and other assets	5,953
Total assets	$	214,427

Liabilities
Notes payable, net	$	80,278
Notes payable - related parties	34,786
Accounts payable and accrued expenses	7,858
Due to related parties	10,302
Operating lease liabilities	12,441
Other liabilities	2,158
Total liabilities	147,823

Stockholders’ equity	66,604
Total liabilities and stockholders’ equity	$	214,427

On March 7, 2024, L.T.D. Hospitality Group LLC (“L.T.D.”) contributed the first of nine committed hotels from L.T.D.’s portfolio to Caliber Hospitality, LP in exchange for $4.9 million in cash, net of closing costs, $9.6 million in operating partnership units, and a new $14.1 million loan facility. Upon this reconsideration event, the Company reconsidered its consolidation conclusion, given the change in economics, and concluded that it was no longer the primary beneficiary, as its potential obligation to absorb the losses, through its guarantee of the indebtedness secured by the hospitality assets, were no longer significant to Caliber Hospitality, LP or the Caliber Hospitality Trust. As such, during the nine months ended September 30, 2024, the Company deconsolidated Caliber Hospitality, LP, the Caliber Hospitality Trust, and their consolidated subsidiaries. In addition, the Company deconsolidated Elliot, a VIE that is developing a multi-family property, and DT Mesa, a VIE that is redeveloping commercial properties, as the Company was no longer determined to be the primary beneficiary upon refinancing the loan agreements. The Company aggregates and reports the results of operations of these VIEs in consolidated fund revenues and consolidated fund expenses within the accompanying consolidated statements of operations through the date of deconsolidation.

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Management has determined that the equity holders in our consolidated entities, as a group, lack the power to direct the activities that most significantly impact the entity’s economic performance and/or have disproportionate voting rights relative to their equity. The Company was determined to be the primary beneficiary of each of these 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 entities.

Generally, the assets of the individual consolidated VIEs can be used only to settle liabilities of each respective individual consolidated VIE and the liabilities of each respective individual consolidated VIE are liabilities for which creditors or beneficial interest holders do not have recourse to the general credit of the Company. When the VIE is consolidated, we eliminate any Platform revenues that are generated from that VIE or investments made by the Platform into the VIE and we reflect the assets, liabilities, revenues, expenses and cash flows of the consolidated funds on a gross basis, and the interests in the VIEs are included in non-controlling interest in the consolidated financial statements. The Company has provided financial support to certain of its consolidated VIEs in the form of short-term financing and guarantees of the debts of certain VIEs. In general, our maximum exposure to loss due to involvement with the consolidated VIEs is limited to the amount of capital investment in the VIE, if any, or the potential obligation to perform on the guarantee of debts.

See Note 11 – Commitments and Contingencies for additional information related to the commitments and contingencies of these VIEs.

Note 4 – Real Estate Investments

Real Estate Investments of the Company

Asset Acquisitions

There were no asset acquisitions by the Company during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the Company acquired its headquarters office building for an aggregate purchase price of $19.5 million with the acquisition being accounted for as an asset acquisition under U.S. GAAP.

The allocation of the purchase price among the assets acquired at their relative fair value as of the acquisition date, consisted of the following for the nine months ended September 30, 2023 (in thousands):


	Nine Months Ended September 30, 2023

Real estate investments, at cost
Land and land improvements	$	9,131
Building and building improvements	9,332
Furniture, fixtures and equipment	959

Intangible lease assets	398
Intangible lease liabilities	(348)
Total purchase price of assets acquired	$	19,472

Real Estate Investments of the Consolidated Funds

Asset Acquisitions by Consolidated Funds

There were no asset acquisitions by the consolidated funds during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the consolidated funds acquired one multi-family residential property for an aggregate purchase price of $6.6 million with the acquisition being accounted for as an asset acquisition under U.S. GAAP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Nine Months Ended September 30, 2023

Real estate investments, at cost
Land and land improvements	$	599
Building and building improvements	6,044


Total purchase price of assets acquired	$	6,643

Note 5 – Prepaid and Other Assets

Prepaid and Other Assets of the Company

Prepaid and other assets consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Pursuit costs (1)	$	1,136	$	1,081
Prepaid expenses	648		981
Accounts receivable, net	403		205
Deposits	63		63





Other assets	558		451
Total prepaid and other assets	$	2,808	$	2,781

(1)

Pursuit costs represent expenses incurred related to new fund formation, primarily for professional, legal, consulting, accounting and tax services. As the funds raise equity investments and operating cash flow, as applicable, these costs are reimbursed by the respective funds to the Company. The Company assesses collectability and expenses any amounts in which collectability is not reasonably assured.

Prepaid and Other Assets of the Consolidated Funds

Prepaid and other assets of the consolidated funds consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Derivative assets	$	—	$	1,216
Prepaid expenses	103		1,735
Deposits	57		669
Pursuit costs (1)	—		1,102
Deferred franchise fees, net	63		278
Intangibles, net	—		184
Inventory	41		142

Other assets (2)	205		6,351
Total prepaid and other assets	$	469	$	11,677

__________________________________

(1) Pursuit costs represent expenses incurred related to new fund formation, primarily for professional, legal, consulting, accounting and tax services. As the funds raise equity investments and operating cash flow, as applicable, these costs are reimbursed by the respective funds to the Company. The Company assesses collectability and expenses any amounts in which collectability is not reasonably assured.

(2) Other assets as of December 31, 2023, primarily represents incremental costs, including professional, legal, consulting, accounting and tax services, directly attributable to Caliber Hospitality Trust that are deferred and will be charged against the gross proceeds of the planned public offering.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 – Notes Payable

Notes Payable of the Company

Notes payable consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):


Notes Payable	September 30, 2024		December 31, 2023		Weighted Average Interest Rate (1)		Maturity Date (1)
Corporate notes	$	31,768	$	36,442	11.41	%	January 2024 - April 2026
Convertible corporate notes	1,274		1,324		8.25	%	April 2024 - May 2025
Real estate and other loans	16,835		16,252		7.43	%	August 2024 - November 2029
Total notes payable	49,877		54,018
Deferred financing costs, net	(204)		(219)
Total notes payable, net	$	49,673	$	53,799

__________________________________

(1) As of September 30, 2024.

Real Estate Loans

The terms of the loan agreements described below include, among other things, certain financial covenants, as defined in the respective loan agreements, including key financial ratios and liquidity requirements.

Gateway II HoldCo, LLC

On January 31, 2023, Caliber assumed a loan which is secured by the Company’s headquarters office building (see Note 4 – Real Estate Investments). The terms of the note require monthly principal and interest payments, with a balloon payment due at maturity. The loan has a fixed interest