Prior to the Business Combination, the Board of Directors of GSH approved and adopted the Great Southern Homes Inc. 2022 Equity Incentive Plan (the "2022 Plan"), under which GSH employees were granted equity-based awards. Effective as of March 30, 2023, in connection with the Business Combination, the Company’s Board of Directors adopted the United Homes Group, Inc. 2023 Equity Incentive Plan (the “2023 Plan”). The 2023 Plan defines awards to include incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance compensation awards, and provides that the number of shares reserved and available for issuance under the 2023 Plan will automatically increase each January 1, beginning on January 1, 2024, by 4% of the number of outstanding shares of Common Stock on the immediately preceding December 31, or such lesser amount as determined by the Company's Board of Directors. As of December 31, 2024, 7,591,326 common shares are authorized to be issued under the 2023 Plan.

As part of the 2023 Plan, options previously held by GSH employees under the 2022 Plan were cancelled in exchange for substantially equivalent options to acquire shares of Common Stock of the Company based on the Exchange Ratio for the UHG common shares in the Business Combination. No further grants can be made under the 2022 Plan. Each replacement stock option is subject to the same terms and conditions as were applicable under the 2022 Plan. The Company concluded that the replacement stock options issued in connection with the Business Combination did not require accounting for effects of the modification under ASC 718 as it was concluded that a) the fair value of the replacement award is the same as the fair value of the original award immediately before the original award was replaced, b) there were no changes in the vesting terms, and c) the classification of awards did not change.


	Stock options	Weighted-Average per Share Exercise Price
Outstanding, December 31, 2022	870,567	$	2.81
Granted	3,350,000	11.38
Exercised	(2,053)	2.81
Forfeited	(332,266)	8.37
Outstanding, December 31, 2023	3,886,248	$	9.72
Granted	1,806,000	6.97
Exercised	(25,954)	2.81
Forfeited	(634,991)	8.54
Outstanding, December 31, 2024	5,031,303	$	8.92
Options exercisable at December 31, 2024	1,052,383	$	8.67

The aggregate intrinsic value of the stock options outstanding was $968,886 and $4,435,957 as of December 31, 2024 and 2023, respectively. The aggregate intrinsic value of the stock options exercisable was $487,203 and $1,065,595 as of December 31, 2024 and 2023, respectively. The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the price of the option. The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value.

On February 16, 2024, the Company granted 50,000 performance-based stock options to a non-employee consultant that would vest upon the occurrence of a specified event. The grant date fair value of the options was $1.80, which was determined using the Black-Scholes option-pricing model. In the first quarter, the Company determined the performance condition would not be met and the options were forfeited. No compensation expense related to these stock options was recorded.

On February 26, 2024, the Company granted 272,000 stock options to directors that vest annually in equal installments over three years. The options also include a clause which accelerates the vesting of the options on the date, if any, that the VWAP of the Company’s Class A common stock for 20 out of the preceding 30 consecutive trading days is greater than or equal to $12.00. The grant date fair value of the options was $3.65 and was determined using the Black-Scholes and Monte Carlo models. As of December 31, 2024, the accelerator had not been triggered.

The Company recognizes stock compensation expense resulting from the equity-based awards over the requisite service period. Stock compensation expense is recorded based on the estimated fair value of the equity‑based award on the grant date using the Black‑Scholes valuation model. Stock compensation expense is recognized in the Selling, general and administrative expense line item in the Consolidated Statements of Operations. Stock compensation expense included in the Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 was $5,575,259 and $2,539,057, respectively. As of December 31, 2024, there was unrecognized stock compensation expense related to non-vested stock option arrangements totaling $13,255,546. The weighted average period over which the unrecognized stock compensation expense is expected to be recognized is 2.58 years.

Prior to the Business Combination, Legacy UHG’s common stock was not publicly traded, and it estimated the fair value of common stock based on the combination of the three methods: (i) the discounted cash flow method of the income approach; (ii) the guideline company method of the market approach; and (iii) the subject transaction method of the market approach.

Legacy UHG considered numerous objective and subjective factors to determine the fair value of the Company’s common stock. The factors considered included, but were not limited to: (i) the results of periodic independent third-party valuations; (ii) nature of the business and history of the enterprise from its inception; (iii) the economic outlook in general and for the specific industry; (iv) the book value of the stock and financial condition of the business; (v) earning and dividend paying capacity of the business; (vi) the market prices of stocks of corporations engaged in the same or similar lines of business having their stock actively traded in a free and open market, either on an exchange or over-the-counter.

The following table presents the assumptions used in the Black-Scholes option-pricing model to determine the grant date fair value of stock options issued during the years ended December 31, 2024 and 2023 and the fair value of stock options replaced on the replacement date adjusted by the Exchange Ratio:


Inputs	Year Ended December 31, 2024		Year Ended December 31, 2023		March 30, 2023
Risk-free interest rate	4.50% - 4.68%		3.97% - 4.83%		3.77	%
Expected volatility	47	%	40	%	40	%
Expected dividend yield	—%		—	%	—	%
Expected life (in years)	6.00 - 6.25		6.25		5.10
Fair value of options	$3.35 - $3.65		$2.96 - $5.38		$10.41

Risk-Free Interest Rate – The risk-free interest rate is based on the U.S. Treasury zero coupon bond issued in effect at the time of the grant for the periods corresponding with the expected term of the stock option.

Expected Dividend Yield – The dividend yield is based on the history and expectation of dividend payouts. The Company does not expect to pay cash dividends to shareholders during the term of options, therefore the expected dividend yield is determined to be zero.

Expected Life – The expected term represents the period the options granted are expected to be outstanding in years. As the Company does not have sufficient historical experience for determining the expected term, the expected term has been derived based on the SAB 107 simplified method for awards that qualify as plain-vanilla options.

Certain stock options issued under the 2023 Plan are issued to individuals who are not employees of the Company and who are not providing goods or services to the Company. These options are recognized in accordance with ASC 815 as a derivative liability and marked to market at each reporting period end. The derivative liability of stock options amounts to $275,150 and $414,260, and is included within Derivative liability on the Consolidated Balance Sheet as of December 31, 2024 and 2023.

The Company grants time-based RSUs to certain participants under the 2023 Plan that are stock-settled with UHG Class A Common Shares. As RSUs vest for employees, a portion of the award may be withheld to cover employee tax withholding. The time-based restricted stock units granted under the 2023 Plan typically vest annually over four years. On February 26, 2024 the Company separately granted 14,000 RSUs to certain members of the Board of Directors that immediately vested on the date of the grant.

Stock-based compensation expense included in Selling, general and administrative expense in the Consolidated Statements of Operations for time-based restricted stock units was $273,963 and $32,049 for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was unrecognized pre-tax compensation expense of $539,791 related to time-based restricted stock units that is expected to be recognized over a weighted-average period of 2.91 years.


	Shares	Weighted-Average Grant Date Fair Value Per Unit
Outstanding, December 31, 2022	—	$	—
Granted	73,992	6.59
Exercised	—	—
Forfeited	(9,399)	6.59
Outstanding, December 31, 2023	64,593	$	6.59
Granted	65,700	7.02
Exercised	(29,260)	6.86
Forfeited	(6,033)	6.74
Outstanding, December 31, 2024	95,000	$	6.79

On February 16, 2024, the Company granted PSUs to certain employees. The Company granted a total of 478,000 PSUs, which will vest upon the date, if any, that the volume weighted average price of the Company’s Class A common stock for 20 out of the preceding 30 consecutive trading days is greater than or equal to $18.00 during the period through March 30, 2028. Certain of the PSUs are also subject to an acceleration clause in which 100% of the grantholders’ PSUs may become vested and settled upon the occurrence of certain termination events. As PSUs vest for employees, a portion of the award may be withheld to cover employee tax withholding.

The grant date fair value of each such PSU was $3.45, which was determined using the Monte Carlo simulation method. Stock-based compensation expense included in the Consolidated Statements of Operations for PSUs was $626,427 and zero for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was unrecognized pre-tax compensation expense of $932,973 related to PSUs that is expected to be recognized over a weighted-average period of 1.37 years.

In January 2022, Legacy UHG granted an option to non-employee directors to purchase 1,867,368 stock warrants for $150,000. Each warrant represents one non-voting common share. The warrants are exercisable at $4.05 per warrant and can be exercised for 10 years starting from July 1, 2022. The outstanding stock warrants prior to the Business Combination were converted into warrants to acquire a number of shares of Common Stock of the Company based on the Exchange Ratio for the UHG common shares in the Business Combination. In addition, the exercise price for each converted stock warrant was also adjusted using the Exchange Ratio. Each converted stock warrant is subject to the same terms and conditions as were applicable prior to the conversion.

On April 28, 2023, a warrant holder of the stock warrants exercised their warrants. 1,120,421 stock warrants were exercised in a cashless exercise whereby the Company issued 748,020 UHG Class A Common Shares in accordance with the conversion terms. As of December 31, 2024 and 2023, there are 746,947 stock warrants outstanding. There were no additional warrants granted, and no compensation expense recorded, during the years ended December 31, 2024 and 2023.

The Earnout Shares issuable to holders of equity stock options as of the Closing Date are accounted for as equity classified stock compensation and do not have a requisite service period. During the year ended December 31, 2023, the Company recognized a one-time stock-based compensation expense related to the Earnout of $4,448,077, which is excluded from the above stock-based compensation expense table. See Note 16 - Earnout shares for the assumptions and inputs used in the valuation of the Earnout Shares.