Caliber(CWD) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, financial instruments, and significant transactions - Financial statements are unaudited and prepared in accordance with U.S. GAAP[58] - All share and per share amounts have been retroactively adjusted for a 1-for-20 reverse stock split effective May 2, 2025[37] Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 The condensed consolidated balance sheets provide a snapshot of the company's financial position at June 30, 2025, and December 31, 2024, showing a significant decrease in total assets and a shift from stockholders' equity to a deficit Balance Sheet Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :--------- | | Total Assets | $59,260 | $105,535 | $(46,275) | (43.8)% | | Total Liabilities | $76,864 | $94,282 | $(17,418) | (18.5)% | | Total Stockholders' (Deficit) Equity | $(17,604) | $11,253 | $(28,857) | (256.4)% | - Cash decreased significantly from $1,766 thousand at December 31, 2024, to $586 thousand at June 30, 2025[13] - Real estate investments, net, decreased from $45,090 thousand to $10,397 thousand for consolidated funds, while for the Company, it slightly increased from $21,572 thousand to $21,714 thousand[13] Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 The statements of operations show a substantial decrease in total revenues and total expenses for both the three and six months ended June 30, 2025, compared to the prior year, primarily due to deconsolidation of certain funds. Net loss attributable to CaliberCos Inc. increased for both periods Statements of Operations Summary | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Revenues | $5,073 | $8,179 | $(3,106) | (38.0)% | | Total Expenses | $6,901 | $12,655 | $(5,754) | (45.5)% | | Net Loss Attributable to CaliberCos Inc. | $(5,299) | $(4,730) | $(569) | (12.0)% | | Basic and Diluted Net Loss Per Share | $(4.15) | $(4.34) | $0.19 | 4.4% | Statements of Operations Summary | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Revenues | $12,334 | $31,130 | $(18,796) | (60.4)% | | Total Expenses | $16,771 | $39,963 | $(23,192) | (58.0)% | | Net Loss Attributable to CaliberCos Inc. | $(9,706) | $(8,535) | $(1,171) | (13.7)% | | Basic and Diluted Net Loss Per Share | $(8.00) | $(7.87) | $(0.13) | (1.6)% | - The decrease in revenues and expenses was primarily due to the deconsolidation of Caliber Hospitality Trust and Caliber Hospitality, LP and its consolidated subsidiaries in March 2024, and other entities in 2024[264][275] Condensed Consolidated Statements of Changes in Stockholders' (Deficit) Equity for the Three and Six Months Ended June 30, 2025 and 2024 The statements show a significant decrease in total stockholders' equity, moving from a positive balance at December 31, 2024, to a substantial deficit by June 30, 2025, primarily driven by net losses and deconsolidation of VIEs impacting noncontrolling interests Stockholders' Equity Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------ | :------------ | :---------------- | :------- | :--------- | | Total Stockholders' (Deficit) Equity | $(17,604) | $11,253 | $(28,857) | (256.4)% | | Accumulated Deficit | $(66,313) | $(56,607) | $(9,706) | (17.1)% | | Stockholders' Equity Attributable to Noncontrolling Interests | $2,246 | $23,842 | $(21,596) | (90.6)% | - Deconsolidation of VIEs resulted in a $20,349 thousand decrease in noncontrolling interests for the three months ended June 30, 2025[20] - Issuance of common stock and equity-based compensation contributed to increases in paid-in capital[20] Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 The cash flow statements indicate a net decrease in cash and restricted cash for both periods, with operating activities consistently using cash. Investing activities showed a reduced outflow in 2025 compared to 2024, while financing activities provided more cash in 2025 Cash Flow Summary | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | | Net Cash Used in Operating Activities | $(2,908) | $(125) | $(2,783) | | Net Cash Used in Investing Activities | $(4,206) | $(15,508) | $11,302 | | Net Cash Provided by Financing Activities | $5,668 | $2,548 | $3,120 | | Net Change in Cash and Restricted Cash | $(1,446) | $(13,085) | $11,639 | - The decrease in net cash used in investing activities was primarily due to the deconsolidation of VIEs, offset by a decrease in payments received on notes receivable - related parties[328] - Financing activities increased cash provided due to higher net proceeds from notes payable and issuance of common and redeemable preferred stock[329] Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures on the company's organization, significant accounting policies, financial instruments, related party transactions, and other critical financial information, essential for understanding the condensed consolidated financial statements Note 1 – Organization and Liquidity CaliberCos Inc. is an alternative asset manager focused on real estate. The company underwent a 1-for-20 reverse stock split in May 2025. Significant liquidity concerns exist due to recurring operating losses and maturing corporate notes, raising substantial doubt about its ability to continue as a going concern, despite ongoing financing and cost reduction efforts - CaliberCos Inc. is an alternative asset manager of private syndication and direct investment real estate funds, primarily operating in Arizona with a focus on hospitality, multifamily, and multi-tenant industrial real estate[29] - A one-for-twenty (1-for-20) reverse stock split became effective on May 2, 2025, reducing Class A Common Stock from 15,127,516 to 931,202 shares and Class B Common Stock from 7,416,414 to 370,822 shares[32][33] - The company faces substantial doubt about its ability to continue as a going concern due to recurring operating losses, negative cash flow, and $26.3 million in corporate and convertible notes maturing within the next 12 months, with insufficient cash on hand[46][64] - Management plans to address liquidity issues by raising $20.0 million through a Reg A+ preferred stock offering (raised $1.2 million as of August 14, 2025), refinancing 12-month notes into 36-month terms ($4.8 million refinanced year-to-date), reducing operating costs, collecting receivables, and potentially selling assets[48][49][50] Note 2 – Summary of Significant Accounting Policies This note details the accounting principles used, including basis of presentation, consolidation policies for Variable Interest Entities (VIEs) and Voting Interest Entities (VOEs), interim financial data, use of estimates, and specific policies for cash, restricted cash, investments, depreciation, impairment, revenue recognition, and leases. It also covers recent accounting pronouncements - The company consolidates entities where it is the primary beneficiary of a VIE or has a controlling financial interest in a VOE[53][57] - Revenue recognition follows ASC 606, applying a five-step framework to identify contracts, performance obligations, transaction price, allocation, and timing of revenue recognition for various services like fund set-up, management, financing, development, brokerage, and performance allocations[75][76][77] - Recent accounting pronouncements adopted include ASU 2020-06 (simplifying convertible instruments, no material impact), ASU 2023-07 (improving segment disclosures, adopted December 31, 2024), and ASU 2023-09 (enhancing income tax disclosures, evaluating impact)[120][121][122] Note 3 – VIEs The company consolidates Variable Interest Entities (VIEs) where it is the primary beneficiary, having the power to direct activities and absorb losses. Several VIEs, including DoubleTree by Hilton Tucson Convention Center and Caliber Hospitality, LP, were deconsolidated in 2024 and 2025 as the company ceased to be the primary beneficiary, primarily due to loan refinancings removing the company's debt guarantees - The Company consolidates VIEs where it is the primary beneficiary, having the power to direct activities and the right to absorb losses, often through debt guarantees[126][127] - DoubleTree by Hilton Tucson Convention Center (TCC) was deconsolidated during the six months ended June 30, 2025, after refinancing a loan, removing the Company's debt guarantee[128] - Caliber Hospitality, LP, Caliber Hospitality Trust, Elliot, DT Mesa, and CFIF III were deconsolidated during 2024 due to changes in economics, primarily related to loan refinancings that removed the Company's significant obligation to absorb losses[129] Note 4 – Real Estate Investments There were no material asset acquisitions or dispositions by the Company or its consolidated funds during the three and six months ended June 30, 2025, and 2024 - No material asset acquisitions or dispositions occurred for the Company or consolidated funds during the three and six months ended June 30, 2025 and 2024[131] Note 5 – Prepaid and Other Assets Prepaid and other assets for the Company decreased from $3,501 thousand at December 31, 2024, to $2,708 thousand at June 30, 2025, mainly due to a reduction in pursuit costs. Consolidated funds also saw a significant decrease in these assets Key Financial Table | Company Prepaid and Other Assets (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :---------------------------------------------- | :------------ | :---------------- | :------- | :--------- | | Pursuit costs | $730 | $1,335 | $(605) | (45.3)% | | Total prepaid and other assets | $2,708 | $3,501 | $(793) | (22.6)% | Key Financial Table | Consolidated Funds Prepaid and Other Assets (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------------------------- | :------------ | :---------------- | :------- | :--------- | | Total prepaid and other assets | $28 | $447 | $(419) | (93.7)% | - Pursuit costs, related to new fund formation, are reimbursed by respective funds as they raise equity investments and operating cash flow[133] Note 6 – Notes Payable The Company's total notes payable, net, remained relatively stable at $50.5 million at June 30, 2025, with corporate notes and real estate loans being the largest components. Consolidated funds' notes payable, net, significantly decreased from $29.2 million to $11.6 million, primarily due to the deconsolidation of DoubleTree by Hilton Tucson Convention Center Notes Payable Summary | Company Notes Payable (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------- | :------------ | :---------------- | :------- | :--------- | | Corporate notes | $30,586 | $31,763 | $(1,177) | (3.7)% | | Convertible corporate notes | $2,421 | $1,050 | $1,371 | 130.6% | | Real estate loans | $16,978 | $15,934 | $1,044 | 6.6% | | Other loans | $1,738 | $2,175 | $(437) | (20.1)% | | Total notes payable, net | $50,518 | $50,450 | $68 | 0.1% | - $26.3 million of the Company's corporate and convertible notes mature within the 12-month period subsequent to August 14, 2025[141] Notes Payable Summary | Consolidated Funds Notes Payable (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :---------------------------------------------- | :------------ | :---------------- | :------- | :--------- | | Real Estate Loans | $6,134 | $23,789 | $(17,655) | (74.2)% | | Member notes | $5,600 | $5,600 | $0 | 0.0% | | Total notes payable, net | $11,631 | $29,172 | $(17,541) | (60.1)% | - The significant decrease in consolidated funds' real estate loans is primarily due to the deconsolidation of DoubleTree by Hilton Tucson Convention Center, which paid off its old loan and secured a new one not guaranteed by the Company[148][152][153] Note 7 – Related Party Transactions The Company generates significant revenue from related party Platform services, with fund management and development fees increasing, while brokerage fees decreased. Notes receivable from related parties increased for the Company but decreased significantly for consolidated funds due to deconsolidation Related Party Transactions Summary | Company Related Party Platform Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :---------------------------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------- | | Fund management fees | $2,647 | $2,532 | $115 | 4.5% | | Development and construction fees | $962 | $201 | $761 | 378.6% | | Brokerage fees | $85 | $442 | $(357) | (80.8)% | | Total related party Platform revenue | $3,768 | $3,242 | $526 | 16.2% | Related Party Transactions Summary | Company Notes Receivable - Related Parties (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------------------------ | :------------ | :---------------- | :------- | :--------- | | Total Notes Receivable - Related Parties | $384 | $105 | $279 | 265.7% | Related Party Transactions Summary | Consolidated Funds Notes Receivable - Related Parties (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------------------------------------- | :------------ | :---------------- | :------- | :--------- | | Total Notes Receivable - Related Parties | $994 | $6,848 | $(5,854) | (85.5)% | - The decrease in consolidated funds' notes receivable from related parties is primarily due to the deconsolidation of TCC, which was the lender of a promissory note with Caliber Hospitality, LP[172] Note 8 – Leases The Company's rental revenue from its commercial office property decreased slightly, with future minimum lease payments totaling $5.5 million. Consolidated funds' rental revenue also decreased significantly, with much lower future lease payments, reflecting changes in their property portfolio Lease Revenue Summary | Company Rental Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Fixed | $421 | $443 | $(22) | (5.0)% | | Variable | $57 | $71 | $(14) | (19.7)% | | Total | $478 | $514 | $(36) | (7.0)% | Lease Revenue Summary | Consolidated Funds Rental Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :----------------------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------- | | Fixed | $170 | $339 | $(169) | (49.9)% | | Variable | $(5) | $143 | $(148) | (103.5)% | | Total | $165 | $482 | $(317) | (65.8)% | - The Company's future minimum lease payments due under non-cancellable operating leases total $5.455 million as of June 30, 2025[179] Note 9 – Other Liabilities The Company's other liabilities increased from $750 thousand to $1,049 thousand, primarily due to an increase in "Other" liabilities. Consolidated funds' other liabilities significantly decreased from $639 thousand to $54 thousand, mainly due to reductions in deposits and sales tax payable Other Liabilities Summary | Company Other Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :--------------------------------------- | :------------ | :---------------- | :------- | :--------- | | Deposits | $196 | $154 | $42 | 27.3% | | Other | $690 | $429 | $261 | 60.8% | | Total other liabilities | $1,049 | $750 | $299 | 39.9% | Other Liabilities Summary | Consolidated Funds Other Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------------------ | :------------ | :---------------- | :------- | :--------- | | Deposits | $35 | $171 | $(136) | (79.5)% | | Sales tax payable | $0 | $97 | $(97) | (100.0)% | | Other | $19 | $371 | $(352) | (94.9)% | | Total other liabilities | $54 | $639 | $(585) | (91.5)% | Note 10 – Supplemental Cash Flow Disclosures This note provides supplemental cash flow information, including cash paid for interest and non-cash investing and financing activities. Significant non-cash activities include corporate note rollovers and conversions, and the impact of deconsolidation of VIEs on various balance sheet items Supplemental Cash Flow Information | Supplemental Cash Flow Information (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | | Cash paid for interest (Company) | $2,926 | $2,569 | | Cash paid for interest (Consolidated Funds) | $841 | $4,595 | - Non-cash investing and financing activities for the Company included $4,760 thousand in corporate note rollovers and $350 thousand from conversion of corporate note to preferred stock[188] - Deconsolidation of VIEs significantly impacted the balance sheet, with real estate investments, net, decreasing by $33,319 thousand and notes payable, net, decreasing by $22,033 thousand for the six months ended June 30, 2025[190] Note 11 – Commitments and Contingencies The Company faces potential liabilities related to environmental matters and guarantees for its Caliber Tax Advantaged Opportunity Funds (CTAF and CTAF II) to ensure a minimum 6% IRR for limited partners. Consolidated funds, previously party to franchise agreements, had recognized franchise fees but are no longer party to such agreements as of June 30, 2025 - The Company may be liable for environmental matters but believes it is in material compliance with laws and regulations[191] - The Company's subsidiaries, CTAF Fund Manager and CTAF II Fund Manager, are obligated to contribute funds to CTAF and CTAF II, respectively, if limited partners do not achieve a 6% IRR upon dissolution, winding-up, or termination[192][193] - Consolidated funds recognized $0.1 million and $0.4 million in franchise fees for the three and six months ended June 30, 2025, respectively, but are no longer party to any franchise agreements as of June 30, 2025[194] Note Income (Loss) Per Share Basic and diluted net loss per share attributable to common stockholders was $(4.15) for the three months and $(8.00) for the six months ended June 30, 2025. The calculation retroactively reflects the reverse stock split, and potential dilutive shares (stock options, warrants, convertible debt, preferred stock) were excluded as they were antidilutive due to net losses Net Loss Per Share Summary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Loss Attributable to CaliberCos Inc. (in thousands) | $(5,299) | $(4,730) | $(9,706) | $(8,535) | | Basic and Diluted Net Loss Per Share | $(4.15) | $(4.34) | $(8.00) | $(7.87) | | Weighted Average Common Shares Outstanding (in thousands) | 1,278 | 1,091 | 1,212 | 1,084 | - All share and per share amounts have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split for all periods presented[199] - Potential common shares from stock options, warrants, preferred shares, and convertible debt (totaling 534 thousand for 3 months and 540 thousand for 6 months ended June 30, 2025) were excluded from diluted EPS calculation as they were antidilutive due to net losses[199] Note 13 – Fair Value of Financial Instruments The fair values of the Company's fixed-rate debt, such as Saddleback Ranch, LLC and Gateway II, LLC loans, were estimated using discounted future cash-flow models (Level 2 inputs). Consolidated funds also estimated fair values for their fixed-rate debt, including Southpointe Fundco, LLC and West Frontier, LLC, using similar methodologies - Fair values of financial instruments are estimated using available market information and established valuation methodologies, with fixed-rate debt measured using Level 2 inputs (discounted future cash-flow model)[201][202][203][204] Fair Value of Fixed Rate Debt | Company Fixed Rate Debt (in thousands) | June 30, 2025 Carrying Value | June 30, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :------------------------------------- | :--------------------------- | :----------------------- | :------------------------------- | :--------------------------- | | Saddleback Ranch, LLC | $1,189 | $1,273 | $0 | $0 | | Gateway II, LLC | $15,789 | $13,052 | $15,934 | $12,604 | Fair Value of Fixed Rate Debt | Consolidated Funds Fixed Rate Debt (in thousands) | June 30, 2025 Carrying Value | June 30, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :------------------------------------------------ | :--------------------------- | :----------------------- | :------------------------------- | :--------------------------- | | Southpointe Fundco, LLC | $1,050 | $1,024 | $1,050 | $1,023 | | West Frontier, LLC | $5,084 | $2,609 | $4,796 | $3,701 | Note 14 – Derivative Instruments The consolidated funds use derivative instruments like interest rate caps and swaps to manage interest rate risk but had no derivatives designated as hedging instruments or non-designated derivatives as of June 30, 2025, and December 31, 2024. A gain from interest rate swaps was recognized in 2024, but none in 2025 - Consolidated funds use derivatives (interest rate caps and swaps) to reduce interest rate risk but do not hold them for trading or speculative purposes[205] - As of June 30, 2025, and December 31, 2024, there were no derivatives designated as hedging instruments or non-designated derivatives[206][207] Derivative Instrument Gains/Losses | Type of Derivative (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Interest rate swap (gain) | $0 | $152 | $0 | $346 | | Interest rate cap (gain/loss) | $0 | $0 | $0 | $(35) | Note 15 – Preferred Stock The Company has Series A Convertible Preferred Stock with a $400 stated value and 12% annual dividend, convertible into Class A Common Stock. It also qualified a Reg A+ offering for Series AA Cumulative Redeemable Preferred Stock, with a $25 stated value and 9.5% cumulative monthly cash dividend, classified as a liability due to mandatory redemption. Warrants to purchase Class A Common Stock were also outstanding, adjusted for the reverse stock split - Series A Convertible Preferred Stock has a stated value of $400 per share, a 12% annual non-cumulative dividend, and is convertible into Class A Common Stock in tranches[210][211] - Series AA Cumulative Redeemable Preferred Stock (Reg A+ offering) has a stated value of $25 per share, a 9.5% cumulative monthly cash dividend (increasing to 18% upon default), and is classified as a liability due to mandatory redemption on the third anniversary[213][214][215] - As of June 30, 2025, the Company had 36,770 shares of Series AA Preferred issued and outstanding, representing $0.8 million raised[215] - Warrants outstanding to purchase Class A Common Stock were adjusted for the 1-for-20 reverse stock split, with 139,040 warrants outstanding at June 30, 2025, at a weighted average exercise price of $18.00[218][219][220] Note 16 – Segments The Company operates through one segment, its "Platform," which focuses on asset management. The Chief Executive Officer, as CODM, assesses performance based on Platform operations, excluding consolidated funds. Platform revenues decreased by 2.0% for the three months and 14.1% for the six months ended June 30, 2025, compared to 2024, primarily due to reduced fund set-up fees and active development projects - The Company operates through a single segment, its "Platform," which is its asset management platform[221] - The CODM (CEO) evaluates Platform performance by assessing revenue, operating costs, and key operating statistics, excluding the impact of consolidated funds and noncontrolling interests[222] Platform Revenues Summary | Platform Revenues (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Platform revenue | $4,126 | $4,212 | $(86) | (2.0)% | Platform Revenues Summary | Platform Revenues (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Platform revenue | $7,675 | $8,938 | $(1,263) | (14.1)% | - Platform payroll and payroll related costs were $3.1 million and $4.9 million for the three months ended June 30, 2025 and 2024, respectively, and $6.8 million and $9.7 million for the six months ended June 30, 2025 and 2024, respectively[222] Note 17 – Subsequent Events Management evaluated events and transactions through August 14, 2025, and found no material events or transactions beyond those discussed in Note 1 (Organization and Liquidity) and Note 6 (Notes Payable) - No material subsequent events or transactions occurred between June 30, 2025, and August 14, 2025, beyond those already disclosed in Note 1 and Note 6[239] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting key trends, business environment factors, and financial measures. It discusses the impact of deconsolidations, revenue and expense changes, and liquidity challenges, including the going concern doubt Overview CaliberCos Inc. is a diversified alternative asset management firm with over $2.8 billion in AUM and AUD, focused on enhancing wealth for accredited investors through real estate, private equity, and debt facilities. It employs a vertically integrated approach, offering support services like development, construction management, and fund formation, and aims to earn significant performance allocations from its development projects - CaliberCos Inc. is a diversified alternative asset management firm with over $2.8 billion in Assets Under Management (AUM) and Assets Under Development (AUD)[241] - The company's primary goal is to enhance wealth for accredited investors through middle-market investment funds, private syndications, and direct investments in real estate, private equity, and debt facilities[241] - The company employs a vertically integrated approach, offering support services including development and construction management, acquisition/disposition expertise, and fund formation, which differentiate it from competitors[244] - If all AUD projects are completed and sold, the company estimates it could earn up to $84.8 million in performance allocations[242] Trends Affecting Our Business The business is influenced by capital formation, investment acquisition, and project execution trends. Capital raising is sensitive to economic conditions and investor appetite for alternative assets. The company actively seeks new investment opportunities despite increased asset valuations and competition. Technology, including AI, is being leveraged for project execution, while regional conflicts introduce market volatility - Business performance is driven by trends in capital formation (investor knowledge, desire, and access to alternative investments), investment acquisition (supply of middle-market projects, accessibility of developments or incentives), and project execution (costs of materials, labor, governmental delays)[249] - Total capital raised through June 30, 2025, is $750.0 million, but future fundraising success is not assured and is sensitive to overall economic conditions and investor behaviors[250][251] - The company leverages local market intelligence and real-time data to identify strategic acquisitions and anticipates continued success in finding off-market opportunities[252] - The company is incorporating artificial intelligence (AI) into its technology stack to enhance project execution[254] Business Environment Global markets are volatile due to inflation and elevated interest rates, with the Federal Reserve adjusting rates. While inflation historically favors real estate, rising interest rates pressure asset sales and increase construction costs. The recently enacted One Big Beautiful Bill Act (OBBBA) indefinitely extends the Qualified Opportunity Zone (QOZ) program, potentially impacting real estate investment strategy, though its full effects are still being evaluated - Global markets are experiencing significant volatility due to inflation (2.7% in June 2025, down from 9.1% in June 2022) and fluctuating interest rates (Federal funds rate 4.25%-4.50% at June 30, 2025)[256] - Rising interest rates are pressuring existing real estate owners to sell assets, shifting markets towards buyers, which the company believes its business model can leverage[256] - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, indefinitely extends the Qualified Opportunity Zone (QOZ) program, which could impact the company's real estate investment strategy and investor demand[257][258] Key Financial Measures and Indicators The company's key financial measures include total revenue (primarily asset management fees and performance allocations, impacted by consolidated VIEs), total expenses (operating, G&A, marketing, D&A, also impacted by consolidated VIEs), and other (loss) income (rental, interest expense/income) - Key financial measures include Total Revenue (asset management fees, performance allocations, consolidated funds' revenues), Total Expenses (operating, G&A, marketing, D&A, consolidated funds' expenses), and Other (Loss) Income (rental, interest expense/income)[260][261][262] - Consolidated results are impacted by the timing of consolidation, deconsolidation, and operating performance of consolidated and previously consolidated funds[264] Results of Operations This section analyzes the consolidated and unconsolidated (Platform) results of operations for the three and six months ended June 30, 2025 and 2024, highlighting the impact of deconsolidations on overall revenue and expense trends, and detailing changes in specific revenue and expense categories for the Platform Comparison of the Consolidated Results of Operations for the Three Months Ended June 30, 2025 and 2024 Total consolidated revenues decreased by 38.0% and total expenses decreased by 45.5% for the three months ended June 30, 2025, compared to 2024, primarily due to the deconsolidation of several funds. Net loss attributable to CaliberCos Inc. increased by 12.0% Consolidated Results (Three Months) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Revenues | $5,073 | $8,179 | $(3,106) | (38.0)% | | Total Expenses | $6,901 | $12,655 | $(5,754) | (45.5)% | | Other (loss) income, net | $(2,164) | $318 | $(2,482) | (780.5)% | | Net Loss Attributable to CaliberCos Inc. | $(5,299) | $(4,730) | $(569) | (12.0)% | - The decrease in revenues and expenses was primarily due to the deconsolidation of Caliber Hospitality Trust, Caliber Hospitality, LP, Elliot, DT Mesa, and CFIF III[264][265] - Other (loss) income, net, decreased significantly due to investment impairment charges and unrealized losses on certain investments[266] Comparison of the Platform (Unconsolidated) Results of Operations for the Three Months Ended June 30, 2025 and 2024 Total unconsolidated Platform revenues decreased by 2.0% for the three months ended June 30, 2025, primarily due to a decrease in fund set-up fees, partially offset by increased development and construction fees. Total expenses decreased by 34.8% due to reduced payroll and bonus expenses. Net loss before income taxes increased by 6.5% Platform Results (Three Months) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Platform Revenues | $4,126 | $4,212 | $(86) | (2.0)% | | Total Platform Expenses | $5,345 | $8,197 | $(2,852) | (34.8)% | | Net Loss Before Income Taxes | $(4,941) | $(4,640) | $(301) | (6.5)% | Platform Results (Three Months) | Platform Revenue Components (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :----------------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------- | | Fund management fees | $2,739 | $3,330 | $(591) | (17.7)% | | Development and construction fees | $979 | $328 | $651 | 198.5% | | Brokerage fees | $93 | $441 | $(348) | (78.9)% | - The decrease in fund management fees was due to no new funds set-up, partially offset by an increase in asset management fees earned[270] Comparison of the Consolidated Results of Operations for the Six Months Ended June 30, 2025 and 2024 Total consolidated revenues decreased by 60.4% and total expenses decreased by 58.0% for the six months ended June 30, 2025, compared to 2024, primarily due to the deconsolidation of multiple funds. Net loss attributable to CaliberCos Inc. increased by 13.7% Consolidated Results (Six Months) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Revenues | $12,334 | $31,130 | $(18,796) | (60.4)% | | Total Expenses | $16,771 | $39,963 | $(23,192) | (58.0)% | | Other (loss) income, net | $(2,530) | $590 | $(3,120) | (528.8)% | | Net Loss Attributable to CaliberCos Inc. | $(9,706) | $(8,535) | $(1,171) | (13.7)% | - The significant decrease in revenues and expenses was primarily due to the deconsolidation of DoubleTree by Hilton Tucson Convention Center in 2025, and Caliber Hospitality, LP, Caliber Hospitality Trust, and Elliot in 2024[275][276] - Other (loss) income, net, decreased significantly due to investment impairment charges and unrealized losses on investments[277] Comparison of the Platform (Unconsolidated) Results of Operations for the Six Months Ended June 30, 2025 and 2024 Total unconsolidated Platform revenues decreased by 14.1% for the six months ended June 30, 2025, primarily due to decreases in fund set-up fees, development and construction fees, and brokerage fees. Total expenses decreased by 28.2% due to reduced payroll and bonus expenses. Net loss before income taxes increased by 10.5% Platform Results (Six Months) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :--------- | | Total Platform Revenues | $7,675 | $8,938 | $(1,263) | (14.1)% | | Total Platform Expenses | $11,432 | $15,919 | $(4,487) | (28.2)% | | Net Loss Before Income Taxes | $(9,051) | $(8,194) | $(857) | (10.5)% | Platform Results (Six Months) | Platform Revenue Components (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :----------------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------- | | Fund management fees | $5,483 | $5,899 | $(416) | (7.1)% | | Development and construction fees | $1,507 | $1,982 | $(475) | (24.0)% | | Brokerage fees | $289 | $701 | $(412) | (58.8)% | - The decrease in development and construction fees was primarily due to a decrease in active development projects[281] Balance Sheets - Asset Management Platform (Unconsolidated) The unconsolidated Platform balance sheet shows a decrease in total assets from $57.1 million at December 31, 2024, to $51.8 million at June 30, 2025, primarily driven by reductions in due from related parties and investments in unconsolidated entities. Total liabilities remained stable, while stockholders' deficit increased Platform Balance Sheet Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------ | :------------ | :---------------- | :------- | :--------- | | Total Assets | $51,772 | $57,077 | $(5,305) | (9.3)% | | Total Liabilities | $66,820 | $65,521 | $1,299 | 2.0% | | Total Stockholders' (Deficit) Equity | $(15,048) | $(8,444) | $(6,604) | (78.2)% | - Due from related parties decreased from $11,143 thousand to $7,111 thousand[285] - Investments in unconsolidated entities decreased from $16,061 thousand to $12,297 thousand[285] Investment Valuations The company values its illiquid fund investments based on estimated fair value using forecasting models, primarily discounted cash flow analysis, and aims to increase asset value through repositioning, development, and active management. Management's discretion in asset sales is crucial for preserving value during market disruptions - Fund investments are illiquid and valued based on estimated fair value using forecasting models, primarily discounted cash flow analysis, and independently sourced market parameters[286] - The core business model involves acquiring undervalued/underperforming assets, adding value through development, and increasing free cash flow through proper management[287] - Management's discretion to decide when to sell assets is critical to preserving asset value, carried interest, and client capital, especially during market disruptions[288] Assets Under Management The company monitors Managed Capital (total capital fundraised, including corporate notes) and Fair Value (FV) AUM (aggregate fair value of managed real estate assets). Managed Capital increased to $498.6 million at June 30, 2025, while FV AUM increased to $803.2 million, with changes driven by originations, returns of capital, acquisitions, construction, and market appreciation/depreciation Managed Capital Managed Capital increased from $492.5 million at December 31, 2024, to $498.6 million at June 30, 2025, driven by originations in residential and commercial funds, partially offset by returns of capital Managed Capital Summary | Managed Capital (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------- | :------------ | :---------------- | :------- | :--------- | | Balance | $498,567 | $492,542 | $6,025 | 1.2% | - Managed capital for residential investment funds increased by $2.0 million, and for commercial investment funds by $5.3 million, during the six months ended June 30, 2025[292][294] - Managed Capital includes capital raised from investors through corporate note issuances that was further invested in funds ($12.3 million at June 30, 2025)[291] FV AUM Fair Value (FV) AUM increased from $794.9 million at December 31, 2024, to $803.2 million at June 30, 2025. This was influenced by asset acquisitions, construction, and net market appreciation, partially offset by construction and net market depreciation and asset sales Fair Value AUM Summary | FV AUM (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------- | :------------ | :---------------- | :------- | :--------- | | Balances | $803,176 | $794,923 | $8,253 | 1.0% | - Activities impacting FV AUM for the six months ended June 30, 2025, included $10.3 million in assets acquired, $25.8 million in construction and net market appreciation, and $25.3 million in construction and net market depreciation[296] - Real Estate FV AUM increased from $716.6 million to $725.9 million, with residential and commercial segments showing growth, while hospitality and Caliber Hospitality Trust decreased[297] Assets Under Development The company has various development, redevelopment, construction, and entitlement projects (AUD) underway or planned, totaling 1,776 multifamily units, 697 single-family units, 3.7 million sq ft of commercial/industrial, and 3.6 million sq ft of office/retail. The estimated total cost to complete these projects is $2.0 billion, expected to be funded through a combination of fund cash, third-party equity, sales, tax credits, and debt financing - As of June 30, 2025, the company is actively developing 1,776 multifamily units, 697 single-family units, 3.7 million square feet of commercial and industrial, and 3.6 million square feet of office and retail[298] - The total estimated cost to complete these AUD projects is $2.0 billion, expected to be funded through undeployed fund cash, third-party equity, project sales, tax credit financing, and secured debt financing[298] - The company estimates it could earn up to $84.8 million in performance allocations if all AUD projects are completed through sale[298] Non-GAAP Measures This section defines and reconciles several non-GAAP financial measures used by management to evaluate performance, including Fee-Related Earnings, Distributable Earnings, Platform Earnings, Platform Earnings per Share, Platform Adjusted EBITDA, and Consolidated Adjusted EBITDA. These measures aim to provide a clearer view of the company's core operational performance by excluding non-recurring items and the impact of consolidated funds - Non-GAAP measures are used to evaluate operating performance, identify trends, formulate projections, and make strategic decisions, providing a view of performance attributable to CaliberCos Inc[299] - Fee-Related Earnings (FRE) assesses the ability to generate profits from fee-based revenues, excluding depreciation, stock-based compensation, interest expense, and extraordinary items[302] - Distributable Earnings (DE) is FRE plus performance allocation revenue, less interest expenses and income taxes, indicating earnings available for distribution[303] - Platform Adjusted EBITDA and Consolidated Adjusted EBITDA are presented to show earnings before various non-cash and non-recurring adjustments, with Platform Adjusted EBITDA specifically excluding the impact of consolidated funds[306][307] Non-GAAP Financial Metrics | Non-GAAP Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Fee-Related Earnings | $(1,048) | $(3,140) | $(2,432) | $(5,879) | | Distributable Earnings | $(2,734) | $(4,269) | $(5,695) | $(7,852) | | Platform Adjusted EBITDA | $(54) | $(2,451) | $(1,406) | $(4,120) | | Consolidated Adjusted EBITDA | $57 | $(966) | $(85) | $1,221 | Liquidity and Capital Resources The company faces substantial doubt about its ability to continue as a going concern due to recurring operating losses and $26.3 million in corporate notes maturing within 12 months, with insufficient cash. Management is pursuing a $20.0 million preferred stock offering and refinancing existing notes, alongside cost reductions and asset monetization, but these plans are not deemed probable to alleviate the doubt - The company has $33.0 million in unsecured corporate notes outstanding, with $26.3 million maturing within the next 12 months, and insufficient cash to satisfy these maturities[315] - Recurring operating losses and negative cash flow, combined with maturing debt, raise substantial doubt about the company's ability to continue as a going concern[316][322] - Management plans include raising $20.0 million through a Reg A+ preferred stock offering, refinancing 12-month notes into 36-month terms ($4.8 million refinanced year-to-date), reducing operating costs (annualized savings of $3.9 million from workforce reductions), and collecting receivables/investments[318][319][320][321] - Despite management's plans, they are not deemed probable to alleviate the substantial doubt about the company's going concern ability[322] Cash Flows Analysis For the six months ended June 30, 2025, net cash used in operating activities increased significantly for the Company, while consolidated funds' operating cash flows decreased due to deconsolidations. Investing activities showed a reduced outflow, and financing activities provided more cash, primarily from notes payable and stock issuances Cash Flow Summary | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | | Net cash used in operating activities | $(2,908) | $(125) | $(2,783) | | Net cash used in investing activities | $(4,206) | $(15,508) | $11,302 | | Net cash provided by financing activities | $5,668 | $2,548 | $3,120 | | Net change in cash and cash equivalents | $(1,446) | $(13,085) | $11,639 | - Net cash used in the Company's operating activities remained relatively constant, while consolidated funds' operating cash flows decreased primarily due to deconsolidation of VIEs[327] - Net cash provided by the Company's financing activities increased due to higher net proceeds from notes payable and issuance of common and redeemable preferred stock[329] Critical Accounting Policies and Estimates This section outlines the critical accounting policies and estimates, including revenue recognition (following ASC 606 for various fee types and performance allocations), income taxes (asset and liability method, valuation allowances), and consolidated fund accounting estimates (hospitality, rental, and interest income recognition, and fair value of financial instruments) - Critical accounting policies include revenue recognition (ASC 606), income taxes (ASC 740), and fair value of financial instruments (ASC 825)[331][332][341][345][353] - Revenue recognition involves a five-step framework for identifying contracts, performance obligations, transaction price, allocation, and timing, with significant judgment required for variable consideration and over-time recognition[332][333][334] - Income taxes are accounted for using the asset and liability method, with valuation allowances provided against deferred tax assets when realization is not probable[341][342] - Consolidated funds' revenues primarily consist of hospitality revenues (recognized as earned), rental income (straight-line basis), and interest income (accrual basis)[345][346][347][348][349][350][351] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from variable-rate borrowings, which it may mitigate using hedge contracts. As of June 30, 2025, it had fixed-rate debt, so changes in market rates impact fair value but not interest incurred. Credit risk is mitigated by diversifying real estate investments across asset types, geographies, and stabilization points, and maintaining diverse financing relationships - The primary market risk is interest rate risk related to variable-rate borrowings, which the company may mitigate with hedge contracts (swaps, caps, collars, etc)[354] - As of June 30, 2025, the company had $57.5 million in fixed-rate debt (fair value) and $62.7 million (carrying value); changes in market rates impact fair value but not interest incurred or cash flow[355] - Credit risk is mitigated by diversifying real estate investments across asset types (hospitality, commercial, residential), multiple geographic locations, and different stages of stabilization, as well as maintaining diverse financing relationships[356] Item 4. Controls and Procedures Management, under the supervision of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of June 30, 2025[358] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[359] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity, defaults on senior securities, mine safety disclosures, other information, and the exhibit index Item 1. Legal Proceedings The company is occasionally involved in legal claims and proceedings arising from its ordinary course of business but does not anticipate any material effect on its business, financial condition, or results of operations - The company is party to various claims and legal proceedings in the ordinary course of business[360] - Management does not believe these legal matters will have a material effect on the business, consolidated financial condition, or results of operations[360] Item 1A. Risk Factors Investors should carefully consider the risk factors previously disclosed in the company's Annual Report on Form 10-K filed March 31, 2025, and its Quarterly Report on Form 10-Q filed May 15, 2025, as additional unknown or immaterial risks could also adversely affect the business - Investors should review risk factors from the Annual Report on Form 10-K (March 31, 2025) and prior Quarterly Report on Form 10-Q (May 15, 2025)[361] - Additional unknown or currently immaterial risks could materially and adversely affect the business[361] Item 2. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the quarter ended June 30, 2025 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025[362] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the quarter ended June 30, 2025 - No defaults upon senior securities occurred during the quarter ended June 30, 2025[363] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to CaliberCos Inc[364] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[365] Item 6. Exhibit Index This section lists all exhibits filed with the Form 10-Q, including various corporate governance documents, stock certificates, agreements, and certifications, with references to their original SEC filings - The exhibit index includes corporate governance documents (Certificate of Incorporation, Bylaws), preferred stock designations, stock purchase agreements, warrants, and certifications[366] - Certifications of Principal Executive Officer and Principal Financial Officer (31.1*, 31.2*, 32.1*, 32.2*) are filed or furnished with the report[366] SIGNATURES The report is signed by John C. Loeffler, II (Chairman and Chief Executive Officer), Jade Leung (Chief Financial Officer), and Jennifer Schrader (President and Vice-Chairperson) on August 14, 2025, certifying its submission - The Quarterly Report on Form 10-Q was signed by John C. Loeffler, II (Chairman and CEO), Jade Leung (CFO), and Jennifer Schrader (President and Vice-Chairperson) on August 14, 2025[369][370][371]